The discipline of revenue management will inevitably get tougher and require more data, cooperation and knowledge of segmentation and the real value of different price points.
NASHVILLE, Tennessee— The drop in group bookings due to segmentation shift and guests looking for unique experiences are two of the major changes affecting pricing and the role revenue managers play in increasing average daily rate, according to sources.
As revenue managers become more essential, they need more tools at their disposal especially as more of them are moving into the C-suite, said Kathy Hood, VP of sales and revenue management at Davidson Hotels & Resorts, during the “The art of a hotel’s most important science” panel discussion at the recent Hotel Data Conference.
“We need to continue to embrace revenue-management systems,” Hood said.
Raul Moronta, SVP of revenue management at Crescent Hotels & Resorts, said revenue managers need to continue to use creative methods.
“Transient business is down, and in the last three years, the majority of group business has gone to brand-new hotels,” he said. “That drop in group due to segmentation shift allows time to make revenue management work. … One of the things we have to change is changing the segmentation. If we cannot change the pricing, we need to change the customers.”
Look at yield
Nicole Young, corporate director of revenue management at Rosewood Hotel Group, said there is currently a lot of noise around the ability to shift channels and have guests book in a different way to how they originally intended.
“But we have to be real: You are saying yes to one customer and no to another, although they are the same,” she said. “This loses sight of some aspects of the consumer.”
Hood said it’s important to first build a customer base before moving existing customers up the price-point curve.
Angie Dobney, VP of gaming and casino sales at The Rainmaker Group, said thorough consumer analysis must precede changing rates.
“It is of course sound to know what you’ll get on the front end, but do not neglect looking at what is the in-hotel spend,” Dobney said.
In the airline industry, passengers spend upwards of $82.2 billion outside of ticket sales, panelists said, and if the hotel industry aims to reach those heights, all departments must work together.
“We’re all trying to drive total (earnings before interest, tax, depreciation and amortization),” Hood said. “Yes, it is easy to say rooms revenue is mine, but you have to work for other departments, too. The back end, I feel, is where we really have the opportunity.”
Hood said she thought revenue management was in fine shape, although she is concerned about the possibility of Booking.com, Amazon and Google disrupting the discipline.
“The hotel industry roughly follows the airline industry by about 10 years,” said moderator Rick Pastorino, CEO and principal of RevPAR International, who added airlines use “total revenue optimization” to mean revenue management.
Young said revenue-management decisions also should be guest-focused.
“This is a big portion of our business,” she said. “In a hotel, there is a lot to do and to spend on. Am I giving my guests the opportunity to experience everything on-property and spend in it? We tend to concentrate on getting rooms revenue right, while a lot of the other spend still is marketed manually.”
One example is F&B, Young said.
“Restaurants are limited by appetite,” she added.
But while guests agree to pay the room rate as soon as they make the booking, F&B and ancillary spend is not guaranteed, Moronta said.
“There are opportunities to soft-sell guests into other areas, especially in resorts,” he said. “The $300 rate was spent a long time before arrival.”
Panelists said the conversation at revenue meetings has increasingly centered on net rate, rather than what rate ends up in the top-line revenue column.
Hood said to get there, revenue managers must understand the cost of distribution and the big picture of the individual hotel or the parent company.
“Then you can drill down. Net rate is the conversation at all our meetings,” Hood said.
“It is not at ours. Not quite yet.,” Moronta replied. “Data needs to be widely available on net rate, not just revenue.”
Moronta said the conversation is more difficult in branded hotels.
“Independents have a far better digital presence,” he said. “They display themselves better, have better personality and merchandising, and their other benefit is they have fewer people they have to please in the decisions they make. On the other side, distribution will also be for them an issue.”
Young said anything that added to revenue managers’ awareness of operational tactics would increasingly bear fruit, while Moronta added he favored placing experienced revenue managers into hotels that might require a bit more help.
“We must gather far more data that derives outside of the booking window, and you need to trust your (revenue management) system 100%,” he said. “Back to airlines, they have full control of their pricing, and their inventory is centralized, while in the hotel industry pricing is fragmented.”
Young said there is a danger in chasing every last penny.
“That can be a detriment to customer confidence and trust,” she said. “It is just not worth if there are only a few last rooms,” Young said, adding 2018 will be a good year for the top line, if not the bottom line.