Revenue management sharpens focus as groups segment grows

Group Travel

As the end of the current cycle approaches, hotels are investigating as many avenues as possible to remain successful in the event of an economic downturn. According to a recent North American Hospitality Review released by TravelClick, the lifeline for many hotels appears to be the group segment, which is showing booking numbers up nearly 7 percent in March compared to the same period in 2015, meanwhile new commitments added in March 2016 are down 0.2 percent.

The group segment might be one of the safest to invest in right now, according to John Hach, TravelClick’s senior industry analyst, who remains cautiously optimistic about the segment’s steady growth. “It was the last segment to come back around two years ago, and it’s showing signs of the most stabilized growth over the last [six to nine] months,” Hach said.

According to Hach, the pressure to spend less on corporate travel could be the source of transient’s shrink, as the economics are behind large groups traveling less frequently. This switch was unexpected for the analysts at TravelClick, but at the same time it makes sense. Travel is the second largest expense for many companies, following employment.

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“It’s a very sophisticated process for them right now,” Hach said. “I see an austerity and more of a rationalization when it comes to justifying the costs.”

Kalahari

Getting the group

To Dom Beveridge, EVP of demand generation for the Rainmaker Group, a provider of profit optimization solutions, calling modern corporate travel strategy sophisticated is an understatement. The process for corporations to issue group travel requests for proposals to hotels has gradually become easier over the past 10 years, though it hasn’t become any easier for hotels to process them. 

“If you are a meeting planner, it’s trivial now to send RFPs to dozens of hotels because it’s all electronic,” Beveridge said. “For hotels though, you now have a huge accumulation of work that has to be done.”

The level of work associated with group business and revenue management is directly rooted in the level of accuracy hotels are striving for in modern revenue management. According to Beveridge, choosing the best rate for groups and processing RFPs in hotels has not kept pace with the speed at which they can be generated, a problem that so far has no solution. But it may be a necessary problem created as a result of better understanding revenue management and the way groups are booking, though there are some ways technology can assist with the process.

“The thoroughness to which [a hotel] responds to an RFP is key,” Beveridge said. “We can use historical data for forecasting group booking activity as a way to prioritize different RFP responses.”

Kalahari

Aim high

The biggest barrier to the success of proper revenue management in hotels, according to Beveridge, is training and application. First, Beveridge said, hotels need to recognize that guests arrive and leave at different times, creating a displacement effect that will leave a mark on your business. Second, all too often giving a hotel’s sales department a minimum rate to sell on can backfire, something Kevin Shanley, chief revenue strategist and yield director for Kalahari Resorts & Conventions, can substantiate.

“Revenue management in the past was very manual, and in the end your sales managers used to quote the lowest number they could,” Shanley said. “Hotels weren’t looking at space management and [food-and-beverage] revenue. Today’s technology takes these and so many other factors under concern.”

The best advice Shanley can offer to hoteliers looking to take control of their revenue management options is to take a segmented approach to group bookings and work at it diligently. “Even using a [minimum available rates] calendar, pick one that is strong with your segment,” he said. “Should sales quote the same rate to a corporate business that it would to a large family? No. You can solve this with segmentation.”

The next steps

Shanley also said to be sure your sales managers are adopting new technology and following up on trends and education. As for future expectations, he said he expects technology to further narrow the focus provided by revenue management until hotels are able to quote rates directly to individuals, all based on data.

“That’s the holy grail,” Shanley said. “And it’s absolutely feasible. There won’t be an out-of-the-box solution that will do it all, but a few systems working in concert will make this a reality in the near future by combining data through our [customer relationship management systems], Google, historical data and more.”

“So many of the next big advances in technology will use data to smooth the interaction between supply and demand,” Beveridge said. “They will get these systems talking to each other so we can enjoy the benefits.”

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