4 revenue-management tips that will drive profitability

(dollar sign)

The revenue-management field is changing rapidly and becoming more important than ever. Because of that rapid change, evolution needs to happen in several ways, according to experts in the field.

“There’s a couple different things you can focus on, but our perspective tends to be different than some, with a heavy focus on total hotel revenue management and how that’s evolving in revenue management right now,” said Lily Mockerman, president and CEO of Total Customized Revenue Management, a provider of revenue-management services.

Looking for new ways to drive profitability from your hotel asset? Introducing Hotel ROI: An innovative one-day event series brought to you by Hotel Management and in partnership with the Asian American Hotel Owners Association (AAHOA). Hotel ROI focuses on the critical issues in local markets and delivers actionable insights for immediate implementation. Discover our 2017 cities at www.hotelroi.com.

Calvin Anderson, senior VP and chief of revenue optimization at RLHC, said that because the field is changing so fast, revenue managers need to look beyond the old way of thinking to meet today’s needs.

The two experts offered revenue-management tips to drive profitability at hotels.

1. Implement Upselling and Cross-Selling

One of the easiest things to implement is an upselling and cross-selling process at hotels, according to Mockerman. This goes beyond just upselling from a standard king to a deluxe, for example. Instead, the focus should also be on offering profitable packages—such as securing spa, restaurant and golf reservations—while still on the phone with customers in order to spread revenue throughout the property.

“It’s going to bring in more profit from somebody who perhaps made a room reservation and then they went on Google and found a bunch of restaurants nearby when you could have secured them by doing a little cross-selling of your own restaurant,” Mockerman said.

Related Story: How to maximize revenue at your hotel

She said it’s important for revenue managers to “own” the upsell program.

“A lot of times this is still owned by the front-office manager, and they definitely should be involved, but this should happen through front office and reservations and every department,” she said. “Even in the restaurant, a server can have a conversation with a guest … and it gives them a chance to suggest the spa to capture every piece of that guest’s travel budget.”

2. Manage Time Effectively

Mockerman and Anderson said revenue managers’ time is valuable, and they need to be managing it effectively.

“You have to be really hungry,” Mockerman said. “You have to be willing to come in an hour before everyone else to set up your day, manage reports and emails and [be] ready to work to capture every drop of revenue.”

If revenue managers struggle with managing their schedules, they will leave little time to analyze data, sources said.

Related Story: Occupancy not the metric to focus on to maximize revenue

“Revenue managers need to know what makes them money and what doesn’t,” Anderson said. “They need to constantly say no to things that take away their time because then the entire practice struggles.”

That’s why Anderson’s team members dedicate the first two hours of their time every morning to yielding and pricing, and not doing tasks such as checking emails. Then, team members engage in a call with a vice president of revenue management for an hour. Once all of that is finished, they can spend time answering emails and completing other tasks.

“It’s about doing things that are the most impacting first,” Anderson said.

3. Understand the Booking Curve and Channels

“You’re really going to drive the bottom line by driving a smart top line,” Anderson said. “Understand what channels drive business into your markets at the highest volume and at the best rates.”

For example, high compression periods in New York City are changing due to new supply. If guests didn’t have a room one week out from an event, it was likely they would be staying in New Jersey or Connecticut. Now, that’s not the case. Thus, revenue managers should understand that channels—such as online travel agencies, wholesalers or marketing campaigns—have the potential to drive a better piece of business where the market will end up, and capitalize on it.

Related Story: Hoteliers grapple with rising fees

“Pretend the market rate is $500 for the first two weekends of Christmas in New York City. You know that by looking at the comp set’s average rate they ended at $350,” Anderson said. “That means in order to get an average $350 at your property, you’re probably pricing around $400.”

That means, he said, that the market is priced an average of $100 higher than where it’s most likely to land. Revenue managers can say they are getting their fair share of business from advanced booking windows, so there is potential to bring in a small amount of business at $500. However, they can undercut the comp set and price at $450 to be of value to the market but still price higher than where they know the comp set will actualize.

“Really understand who has the ability to deliver business relative to where the entire market is going to end,” he said. “That puts you in a position to absorb more of your fair share by channel according to the booking window you’re targeting.”

However, the flip side to managing this process is that guests can see the $350 rate the day before the stay and cancel to rebook with another hotel.

“It’s a huge mistake to think you can change consumer behavior,” Anderson said. “Never look to change it, but think ahead of it. Understand where you want to land and overbook like crazy to make sure you can handle that wash.”

4. Change the Way You Think About Data

“Old world says that our data is constantly rolled up. We’re looking at monthly pace or daily pace,” Anderson said. “You have a little bit of segmentation to look at, but all of that roll-up reporting uses averages in order to deliver takeaways.”

He said most revenue managers are looking at their bookings as net versus cancellations of bookings. Thus, every booking is a net number, which is an average. Rather than looking at reservations on the books, Anderson said revenue managers should look at all bookings and cancellations of bookings to understand the consumer, channel and segment behavior in order to leverage appropriately.

“Revenue managers need to go into much better data-visualizing models to really understand and see their business as it’s actually occurring versus rolling up reporting,” he said.

Related Story: Opportunities to control costs abound