Moving Beyond Room Rates: How Revenue Management Can Drive Value Across the Total Hotel Property
By Rachel Grier - Exclusive for 4Hoteliers.com
Thursday, 10th October 2019

Revenue Management, Hotel &L, Rate, STRExclusive Interview: The practice of revenue management, and its associated technologies, has been central in helping hotels across Asia price their rooms effectively and maximise guest revenues.

However, there are meaningful benefits hoteliers can obtain through extending revenue management principles (and solutions) beyond the setting of room-rates.

4Hoteliers.com speaks exclusively with Rachel Grier, Area Vice President, Asia Pacific for IDeaS about ways hotels can expand their usage of revenue management today.

Outside of setting room rates, what other areas of a hotel can revenue management be applied to?

Rachel Grier (RG:) Basic revenue management principals of understanding demand and applying pricing and length of stay combined with inventory control can be applied to many different areas of a hotel. For example, restaurants, car parks, internet fees and resort activities can all have revenue management practices applied in order to enhance performance and ultimately revenue outcomes.

In general, there is great opportunity for revenue management processes and insights to drive alignment between operational departments as well as business forecasting which can enable marketing to undertake more effective and targeted campaigns and sales programs.

How can a revenue management system (RMS) help hoteliers understand who their most valuable guests are?

RG: Not all business is worth the same amount, and a full hotel is not necessarily a profitable hotel. Hotels in the APAC region can all too easily fall into the habit of selling out rooms to lower-rated business and then losing higher-rated business—and customers who may be more likely to stay again in the future.

So, it is important for hoteliers to use data to understand who their most valuable customers are. To do this, it is vital that a holistic view of their guests’ lifetime value is obtained, not just their room-rate spend. Data from all transaction systems should be integrated to provide a true picture of a guest’s preferred activities and their overall value to also include ancillary value: food service to the day spa usage, guest rooms to gift shop purchases, the cost of the booking channel, etc.

Through identifying who their most valuable guests are, hoteliers can deploy strategies to make those guests feel welcome and recognised to inspire long-term loyalty. Having VIP check-in counters for hotel guest club members, coupled with free Wi-Fi for return guests, or other offerings—including items such as champagne, chocolates or flowers, special spa treatments, golf rounds, water in the room, mini-bar in the room (the list is endless)—all combine to show a guest their patronage is acknowledged and appreciated by the hotel.

Managing costs is critical to hoteliers today, how can revenue management assist with this?

RG: The fine balance of maximising the guest’s experience whilst keeping labour costs at efficient and profit oriented levels is the ultimate aim of any operator. No hotelier wishes to be caught short-staffed and face disgruntled guests who are dissatisfied due to long wait times. Conversely, it is a waste of money for staff to be sitting around underutilised as a result of not having enough work to do.

Accurate demand forecasting provided by an RMS should be at the foundation of optimal labour scheduling. Through integrating forecasts across a hotel’s operations, hoteliers can use the forecast to inform their staffing decisions and account for periods of higher or lower demand. Once this data is made available, staffing managers can determine which areas are most affected by the number of guests staying in the hotel. For example, looking at how the number of occupants will affect the housekeeping needs, the number of staff needed on the front desk to check guests in and out, the number of servers required in restaurants and valets to park cars, etc.

Another factor to consider is food and beverage, a large source of potential wastage for hotels, especially when it comes to those items that come with an expiration date. Knowing when there will be periods of high and low demand, as well as from which segments will be the key consumers of these perishable items, will help hoteliers ensure they order the right products at the right time and avoid costly spoilage.

Why is an RMS important in scheduling property maintenance?

RG: The sound of loud property maintenance can quickly turn a happy guest into a disgruntled one, leading to increased negative online commentary and reviews. As such, hotels typically schedule these important works in off-peak times, or when rooms are unlikely to be booked. Looking at forecasted demand from various segments will help ensure renovations take place at the right time, and that business doesn’t have to be displaced by out-of-order rooms.

For example, during the week, business travellers may be most likely to rent out executive suites. Looking at demand forecasts could reveal these suites are largely free on the weekends; therefore, Saturdays and Sundays could be a better time for renovations to these suites to take place, even after weekend labour costs are taken into account.

How can an RMS improve the value of a hotel?

RG: The additional revenue that comes from the proper utilisation of an RMS and strategies directly impacts a hotel’s bottom line, making it a valuable tool for increasing a hotel’s valuation—a keystone in any owner or asset manager’s lens, in particular at a time of investment, refinancing or sale. Increased revenue leads to higher cash flow, which has a number of benefits from giving the hotel greater day-to-day liquidity, to having money in the bank generating interest and leveraging return on capital.

It should also not be overlooked that the increased revenue generated by an advanced RMS makes further reinvestment in the hotel possible, or it can be leveraged to make property portfolio expansion possible.

Rachel Grier is the Area Vice President, Asia Pacific for IDeaS (www.IDeaS.com). She will speak at the upcoming Hotel Revenue & Distribution Summit in Singapore on October 15 on the topic of, "Benefits of revenue management system – Driving value across the total hotel organization." For more information on this topic, please contact Rachel via: www.linkedin.com/in/rachelgrier

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