The 10 Steps to Successful Revenue Management in a Hotel Revenue - - PowerPoint PPT Presentation

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the 10 steps to successful revenue management in a hotel
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The 10 Steps to Successful Revenue Management in a Hotel Revenue - - PowerPoint PPT Presentation

Mar 20, 2023 287 likes •625 views

The 10 Steps to Successful Revenue Management in a Hotel Revenue Management Fundamentals What is Revenue Management ? Revenue Management is the art and science of predicting real-time customer demand at the micro level and optimizing

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Revenue Management Fundamentals

The 10 Steps to Successful Revenue Management in a Hotel

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Revenue Management Fundamentals

What is Revenue Management ?

  • “Revenue Management is the art and science
  • f predicting real-time customer demand at

the micro level and optimizing the price and availability of products.”

– Robert G Cross – The Founder of Revenue Management in Travel for American Airlines

  • Suggested better way of pricing and inventory management
  • Created a more discipline approach at est, $3M cost to generate an est. $30M in

incremental revenue

  • Program actually generated $100M incremental revenue in first year.

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Revenue Management Fundamentals

The 10 Steps to a Successful Revenue Management Strategy

1. Calendar Analysis 2. Competitor Analysis 3. Pricing Matrix 4. Segment Analysis 5. Demand Creation 6. Forecasting 7. Price Planning 8. Distribution Planning 9. Communication 10. Measuring Success

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Revenue Management Fundamentals

STEP 1

Calendar Analysis

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Revenue Management Fundamentals

Calendar Analysis

  • Review past 2 years Occupancy and ADR by DAY

– What dates did the market and hotel run high occupancies – WHY? – What dates did the market and hotel run low occupancies – WHY – What dates did the market and hotel run at a high ADR – WHY? – What dates did the market and hotel run at a low ADR– WHY – Look for trends across two-three years – This may indicate a demand impacting scenario

  • Identify HIGH and LOW demand patterns

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Revenue Management Fundamentals

STEP 2

Competitor Analysis

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Revenue Management Fundamentals

Competitor Analysis

  • Twice a year a hotel should do a full

Competitor analysis.

– Site inspection – Rate Analysis – Channel Analysis – Brand.com Analysis – Service, Product & reputation Review

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Revenue Management Fundamentals

STEP 3

Pricing Matrix

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Revenue Management Fundamentals

The Great Distribution Merge

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OTA Channels Public Rates Travel Agent Channels Wholesale Rates

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Revenue Management Fundamentals

STEP 4

Segment Analysis

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Revenue Management Fundamentals

Segment Analysis

  • All Hotels & Hotel Groups work with different

segments but the Main Market Segments used

  • are. You need to know how you perform

compared to your Comp Set.

– Transient – Discount & Retail – Corporate – Dynamic & Contracted – Wholesale – Dynamic & Contracted – Corporate Group – Leisure Group – Aircrew

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Revenue Management Fundamentals

STEP 5

Demand Generation

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Revenue Management Fundamentals

Demand Creation

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Demand Creation (Marketing) Demand Management (Revenue Mgmt.) Demand Capture (Sales)

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Revenue Management Fundamentals

STEP 6

Forecasting

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Revenue Management Fundamentals

Forecasting

  • A hotels forecast ties all the previous elements

together.

  • Forecasts SHOULD be done 12 months ahead

– Daily – For next 30 days plus any LOW or HIGH demand days over the next 90 days – Weekly – Review the next 3 months – Monthly – Review the next 12 months and Add a forecast for the month just past for next year

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Revenue Management Fundamentals

Why do we need to know demand?

  • Positive – HIGH DEMAND – We focus on the rate

side of the REVPar. Occupancy will look after itself.

  • Negative – LOW DEMAND – We focus on the
  • ccupancy side of the REVPar. We need to take

business out of our competitor hotels. Hotels need to FORECAST DEMAND 12 months in advance - Many hotels in Asia do this just 3 weeks ahead.

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Revenue Management Fundamentals

What are some causes demand changes

  • Public holidays in a city or in the hotels main

emitting countries

  • School holidays in a city and in the main emitting

countries

  • Events – The days before and after large events
  • Weather
  • Transport issues – lack of flights, flight

cancellations,

  • Price

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Revenue Management Fundamentals

Forecasting

  • Steps to Forecasting

– Input Calendar dates from your calendar analysis – Review Last year Hotel and comp set results. Highlight any LOW or HIGH demand generators – Review Booking Pace – Current pace vs last years pace, comp set pace vs last year – Forecast using DEMAND inidcators plus changes on Year on Year on Booking Pace. The closer you get to the date, the more important OTB information is. Further out use your DEMAND inidcators

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Revenue Management Fundamentals

Forecasting

  • Steps to Forecasting

– Review Pricing of your hotel and your comp set. – Using all possible data points at hand, the hotel then should forecast

  • Occupancy by day
  • ADR by Day
  • Segments by day ( rarely done )
  • Channels by day ( rarely done )

TIP: Forecast the same month next year at the end of the

  • month. Ie: Beginning of August 2016 forecast July 2017

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Revenue Management Fundamentals

STEP 7

Price Planning

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Revenue Management Fundamentals

Price Planning

  • Price planning is now the MAIN KEY ELEMENT in
  • ptimising revenues.

– Lower prices “can” help to generate demand for a hotel, even in periods of low demand for the area. You “steal” business out of competition, BUT YOU MUST NOT DO THIS WHERE IT IS EASY FOR YOUR COMPETITORS TO SEE or you can push a markets rates down. Use qualified rates / CRM – Higher Prices are used to maximise price in a period of High Demand – Packages help to sell your Unique selling points. Can be used for both High and low demand times

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Revenue Management Fundamentals

STEP 8

Distribution Planning

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Revenue Management Fundamentals

Distribution Planning

  • Main elements of Distribution Planning

– Close segments (X) – MLOS – Minimum length of stay ( 2 / 3 / 4 ) – CTA – Closed to arrival ( CTA ) – Close Room Types ( X ) – Close out low rate levels – Close out Distributors / Channels

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Revenue Management Fundamentals

Distribution Planning

Please remember that Distribution planning is a

RESTRICTIVE

approach and is designed to TURN AWAY / DENY bookings. These practices should only be used usually when forecasting high / full occupancy

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Revenue Management Fundamentals

STEP 9

Communication

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Revenue Management Fundamentals

Communication

  • Meetings

– Daily – Review Pick up for next 30-60 days and + &

  • event periods for next 90 days. Review

Competitor pricing changes. Adjust pricing accordingly – Duration 15 minutes

  • Revenue Manager,
  • DOS,
  • Reservations Mgr,
  • GM

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Revenue Management Fundamentals

Communication

  • Meetings

– Weekly Revenue Meeting : Review next 90 days. Duration 60-90 minutes

  • General Manager
  • Revenue Manager
  • Reservations Manager
  • Front Office Manager
  • Financial Controller
  • DOSM
  • Marketing
  • E-Commerce

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Revenue Management Fundamentals

Communication

  • Meetings

– Monthly Revenue Meeting : Review next 12 months . Duration 90 minutes

  • Forecast previous month for next year
  • Review top account productivity
  • Review OTA & Direct web performance compared to

comp set.

  • Review segments for previous month compared to

comp set.

  • Review Country of Residence for previous month
  • Review Source Reports for previous month
  • Review Return Guest Numbers

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Revenue Management Fundamentals

STEP 10

Measuring Success

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What are the best measurements

  • RGI – This measures your performance against
  • competitors. It balances ADR & OCC %. The ideal is to

have this by segment and by channel.

  • Just having total RGI of the hotel creates more

questions than answers and does not help a hotel to improve.

  • FORECAST VARIANCE – This measure how accurate

your forecasting is. Should be measured by day 12 months out, 3 months out, one month out.

  • Inaccurate forecast creates negative revenue
  • utcomes.

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Revenue Management Fundamentals

Measuring Success

How to Calculate

– ARI - Average rate Index - (Average rate is Rooms Revenue/Rooms Sold)

  • Your ADR/Comp set ADR

– MPI – Market Penetration Index ( Occupancy is Rooms Sold/# of Rooms )

  • Actual Share/Fair Share

– RGI – Revenue Generation Index ( REVpar is Rooms revenue / Ttl # of Rooms )

  • Your REVpar/Comp set REVpar

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Revenue Management Fundamentals

The 10 Steps to a Successful Revenue Management Strategy

1. Calendar Analysis 2. Competitor Analysis 3. Pricing Matrix 4. Segment Analysis 5. Demand Creation 6. Forecasting 7. Price Planning 8. Distribution Planning 9. Communication 10. Measuring Success

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Maria Taylor Regional Vice President SEA TravelClick mtaylor@travelclick.com +65 9647 0391

Thank You