As a revenue manager, you are measured by more than just your performance. Also important is your potential. Whether measured against a bank pro forma, the budget, the forecast, last year or the STAR report, setting expectations and exceeding them is really what it is all about.
That’s especially true in suspect economic conditions. Listed below are some ways to help communicate and ultimately manage expectations.
STAR report and market potential
Most owners and investors are becoming much more sophisticated in reading the STAR report and understanding its implications. It is most critical for you to understand what your market is doing and, more importantly, what you can do about it. If your market is losing revenue per available room by 5%, chances are your hotel will be hard-pressed to achieve the national average measured by STR (the parent company of HotelNewsNow.com). The local economy is far more important than the national one, and in that delta the management of expectations is critical.
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Robert Resurgent
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You need to be able to forecast your STAR report for your competitive set and then be able to put together a strategy for your own forecast.
For example, your team might target an index of 105 (a separate discussion entirely, I know), though you might only achieve a 93 index for whatever reason. If your market stays flat, you will need to grow 13% (well above the national and local averages) to get where you need to be.
Now, how to get there. Here are a few suggestions:
Optimal mix exercise
Consider what your optimal mix should be versus what it can be via market conditions and what you can do to effectively change. Demand positioning reports for the comp set are excellent for a look into the future to see what is going on in your markets.
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Resource allocation by distribution channel
You might even consider a few optimal market mixes to ascertain where your resources should be spent. You could look to: direct sales; an aggressive move into a new segment like free and independent travelers, or FIT; a piece of contract or crew business; or your allocation of e-commerce spends from guerrilla marketing or social media spend.
Price point movement
Most hoteliers need to do a better job of the more popular price-point analyses for the various segments and distribution channels, as well as being able to quickly move a lot of share into their hotels. This could include retail, advance purchase, AAA, etc.
Market segmentation
Detail, detail and more detail. Nowhere in segmentation should you have a “miscellaneous/other” place to code business. You should be able to pinpoint your efforts almost exclusively through market segmentation. Should you require more detail on the segmentation piece, the rate codes are where your get the finite detail. The devil is in the details.
Ancillary revenue component
In larger, more complex hotels, food and beverage and other ancillary revenues can at times almost make the room’s portion of the STAR report myopic. In my experience with the segmented detail on the STAR report, it can be a very challenging exercise based on many variables in the comp set. A more palatable view from the owner/investor standpoint is in the analysis of the F&B revenue and profit component and translate that into RevPAR index.
Summary
In closing, start with your comp set/market as the benchmark for your performance and manage the expectations to your potential. If you do this, you will be able to make adjustments in your strategy more quickly and more effectively.
Robert Resurgent is the Founder and CEO of The Revenue Company. He most recently led the revenue management efforts as the Vice-President of Revenue Management for The Procaccianti Group and Sunstone Hotels (NYSE: SHO) where he was responsible for over 60 hotels and over $600 million in total revenue. Robert is also featured in the Cornell Quarterly: Revenue Management's Renaissance - A Rebirth of the Art and Science of Profitable Revenue Generation. Robert holds a MBA from Florida Metropolitan University where he graduated Summa Cum Laude. He also holds a PDP in Advanced Real Estate and Hotel Investment from Cornell University in Ithaca, New York.
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