RezStream Webinar: The Benefits of Revenue Management
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Learn the history and benefits of using revenue management at your property to get the most out of your inventory. We'll also provide tips on implementing revenue management to get you off on the right track!
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RezStream Webinar: The Benefits of Revenue Management
- 1. Benefits of Revenue Management… and why you need it
- 2. Josh Wise VP Customer Success
- 3. Location Denver Employees 19 Combined Experience 75+ Years Customer Properties 600+
- 4. What is Revenue Management History of Revenue Management Tips to leverage Revenue Management
- 5. What is Revenue Management? Selling the right room, at the right price, at the right time. Objective: Maximize your profit by applying knowledge about markets and trends. Control your fortune: A room is a perishable product since the # of rooms is limited. It’s imperative that you are proactive in selling those rooms instead of reactive. Keep in mind: If you lower room revenue to aim for higher occupancy, you will lose the opportunity to earn more for each booked room.
- 6. History of Revenue Management? 1. Fixed # of seats 2. Perishable inventory 3. Scheduled flight time Airlines $100 $90 $100 $90 $100 Fenced Pricing Begins Quantitative Analysis - Seasonality - Day of week - Time of day - Destination Yield Management Hotel Revenue Management - Fixed # of rooms - Perishable rooms - Guest willing to pay different $$$ for same room - Use data to predict future demand of rooms
- 7. Tips for Revenue Management? TIP #1 TRACKING - Rooms sold - Occupancy - Average rate - Pace vs. same time prior year
- 8. Tips for Revenue Management? TIP #2 PRICING - Differentiate pricing between your offerings (beginner) - Set an occupancy ceiling and floor (beginner) - Raise rates above your ceiling and lower rates below your floor (beginner) - Look at booking date to understand when pricing needs to be adjusted (advanced)
- 9. Tips for Revenue Management? TIP #3 INVENTORY MGMT - Play Tetris with reservations - High occupancy = closed channels - Adjust min. night stay requirements
- 10. Sign up for future webinars at: www.rezstream.com/webinars Next webinar Thursday, August 24th
Editor's Notes
- Here’s a picture of myself. In looking at this I feel bad from cropping out my friends and family behind me. Hope they aren’t attending today. I’ve been with RezStream going on 9 years now. My role at RezStream is to put smiles on faces, whether it’s clients or co-workers I’ve been with my HS sweetheart for 23 years. 7 year old daughter who just finished summer softball and she’s beast
- Here are the main topics points we’ll be touching on today. What is Revenue Management The history of revenue management Last and most important, tips on how to take advantage of revenue management
- What is revenue management? It’s the concept of selling the right room, at the right price, at the right time. The objective for your property with revenue management is this: Maximize your profits by applying knowledge about markets and trends What specifically does that mean? It means that you have historical data about your town, your area and you know what events, holidays, months, weekends are going to be busy and which of the same is going to be slow. For those of you that have been at your property for multiple years, that means you have multiple years of this data. The purpose of today is to help you make sure you’re utilizing this information to help maximize your profits by selling your perishable rooms at the right price at the right time. 3. We need to start Controlling our own fortune guys……………You’re rooms are perishable, meaning if you have empty rooms today or any day, you don’t get to go back in time and sell them. That opportunity is now lost and we’ve just lost revenue. So let’s start using the historical data we have and be proactive in order to put more heads in beds. 4. If your sole focus is on occupancy, you’ll always leave money on the table. Something to think about here…………..when you run 90+% occupied that means your rates are to high
- First tip is related to Tracking…………The best decisions mix that of your intuition and science or in this case data. So before we start just randomly changing pricing let’s go look at the historical data which you should all have within your PMS. What exactly should you be tracking and reviewing? Rooms sold…….How many rooms were sold What is the occupancy percentage for a specific timeframe……..Start by looking at when your most occupied. Why are you so full? Is it related to the season, is it an event that draws guests, could it be the location that draws people? Now we need to look at our average rate……….What are we charging on average. You can see if you’ve adjusted rates during the same peak times from previous years to see if that impacted your occupancy and/or rooms sold to give you confidence to do it again. Pace is also important. Pace is looking out how we are pacing this year compared to the same time last year. Has anything happened outside of our control that will impact our peak time that we’re used to. These factors could include market conditions, competitive supply, capacity constraints, special events, weather patterns and so on. Now let’s put this to practical use with an exercise. When you get off this webinar, find some time to go look at these metrics for the remainder of July, Aug and September from your reservation software. How are you trending this year compared to last year?
- Tip 2 is related to pricing…………..With the goal being to maximize the price you can obtain for your room at the right time. Similar to the airlines who have perishable seats on a plane with a specific departure date and time, if you don’t sell your rooms you are losing revenue you could have had right……. Let me make this point. If you take nothing else away from today I really want you to focus on this. In my 9 years and 1000’s of small independent properties I’ve worked with, I constantly hear how owners don’t want to alienate their repeat guest by raising pricing. Guys, your repeat guests know your value better than anyone else. They’ve been to your property, they’ve experienced your unique offering and exceptional customer service. The reason they keep coming back is because of those reasons. They are the exact audience that is willing to pay a higher price because they value what you offer so much. DO NOT use that excuse as a crutch that prevents you from raising pricing. So how do you accomplish adjusting pricing? First you need to appropriately price your units that differ from each other. Rooms with larger beds garner a higher rate. Rooms with better views, amenities or location can yield a better price. Make sure that you’re priced reasonable and your selling the value of the difference between these rooms to entice the guest to upgrade. For those of you where this concept is new it’s a good idea to have an occupancy ceiling and a floor. Let’s say your ceiling is 90%. As you begin implementing this new tactic play around with raising pricing when you are 90% full as you’re not going to hurt yourself but you will maximize additional revenue for the remaining limited supply or inventory. This also goes the other way, revenue management isn’t just a one way street of raising pricing, this also applies mid week, shoulder and off season when you need heads in beds to cover expenses right. Have a floor where if you get to the point where you can’t cover costs you lower rates in an attempt to get heads in beds. Lastly here let’s take a look at the booking date of reservations this year vs. last year. Are we seeing on average people are booking 90 days out, or 60 or 14? That’s how we know when to raise rates for a specific period of time to maximize our revenues. I want you to think of this concept as it relates to airlines………………….plane leaves October 27th at 1pm, that isn’t changing. But what will change is when people actually book a seat on that plan to that specific location and based on the historical data trends of when they book and when they don’t is when I know to raise or lower prices so I don’t lose out on that day’s inventory of perishable rooms. Now continuing our first exercise, once you’ve set that ceiling and floor for occupancy percentage, does the end of July, Aug or Sept allow us an opportunity to adjust rates?
- Tip 3 is about inventory management………..At this point we’ve looked at historical trends and pacing for the future. We’ve adjusted pricing to correlate with what we’ve seen and what we’re forecasting for the future. Now we need to manage inventory properly to maximize reservations and revenue. First thing that you’ve all experienced at some time or another is playing Tetris as I call it with reservations on your occupancy map. You need to move reservations around so that you minimize the donut holes of one night reservations so you can get a multiple night stay in there and fill in all the gaps. In today’s market most properties rely on OTAs like Expedia and Booking.com to help get reservations. Most people I speak to are on a “set it and forget it system”, meaning that they turn it on and reservations come in and all is good. Well that’s a poor way of managing your inventory. If you see historically you’re going to be busy in a season, month, week, weekend, etc you need to go in and shut those channels off…………………WHY you ask? Because you don’t want to pay 15-30% in commissions to a 3rd party when you could have gotten a reservation direct and that 15-30% they charge you stays in your pocket. Lastly, you need to adjust minimum night stays accordingly. In peak times the min stay is larger, in off peak the requirement loosens or goes away. In addition, if you’re trying to fill donut holes during peak season you need to have a solution that can reduce your minimum night stay requirements automatically so you don’t have to think twice about it. Go look at your occupancy map in your PMS and if it looks anything like this picture there are surely adjustments that can be made to move reservations, change min night stays or go close out our OTAs channels so you can get those direct bookings and make more money!