Hotel revenue-management executives shared their industry outlooks for the coming year as well as their revenue strategies for 2019.
REPORT FROM THE U.S.—As revenue managers look ahead to 2019, steady but slowing performance growth lingers on the horizon, which emphasizes the need for both smart and creative decision-making to continue to generate revenue.
While their hotel industry outlooks for the coming year were all positive, three revenue-management executives shared their biggest priorities for 2019, including plans to generate additional revenue and work within tighter budgets.
Optimistic about 2019
STR, parent company of Hotel News Now, projects full-year U.S. revenue per available room to increase 2.4%, mostly fueled by average-daily-rate growth of 2.3% with occupancy growth mostly flat (0.1%).
Cassie Bond, VP of revenue management at Chesapeake Hospitality, said as part of an email interview that her company is bullish on 2019, but it’s better to be proactive and “stay one step ahead at all times.”
“Overall, we are expecting RevPAR growth in most of our markets next year, and it’s going to be through ADR,” Bond said. “As Chesapeake budgets are designed by day and market segment, this provides the framework for our revenue-management strategies. We have to be thoughtful about our mix of business in order to achieve our goals.
“This means consistently analyzing booking windows, length of stay, day-of-week patterns and overall spend by rate plan for each segment. It will also mean being able to adapt and adjust strategies when necessary if market dynamics change.”
Vickie Callahan, VP of revenue management at Atrium Hospitality, said she, too, expects ADR growth to be the foundation of a healthy year with occupancy “at peak levels.”
“The new supply in certain markets might temporarily threaten occupancy of existing hotels, but demand is strong, and we expect new supply to be a short-term challenge,” Callahan said via email.
Callahan added her company intends to fine-tune the revenue strategy that was so successful in 2018.
“The effective strategies from 2018 will remain, and the team will continue to find new and creative ways of managing high-demand days, upselling premium room types and being flexible during low-demand periods,” she said.
Terry Daum, VP of revenue optimization for Vision Hospitality Group, said while 2019 should be “another record year,” there’s always room for improvement.
“With the growth anticipating to slow, we will continue to look at optimizing our mix and supporting our sales teams’ efforts to layer in additional business,” Daum said via an email interview.
Vision Hospitality plans to open six new properties in 2019, Daum added.
Creating a culture and developing team members ranks high on Bond’s 2019 priority list.
“Our biggest priority for 2019 is fostering our revenue-management culture throughout all of our hotels and developing our team members,” Bond said. “Over the years, Chesapeake has created a strong culture and revenue-management team. We want to maintain this high level and be able to build on it next year. This will be critical in a tight labor market and will give us the edge over our competitors.”
Distribution and automation
As distribution channels continue to emerge and automation takes a bigger hold in the revenue-management discipline, sources said they recognize how things are changing and have strategies in place to come out ahead. That’s even more critical as profit margins are expected to tighten in the year ahead.
“Tighter profit margins place an even higher importance on shrinking distribution costs,” Bond said. “In order to drive the most profitable business into the hotel, revenue managers must truly understand the costs (and hidden fees) associated with each channel/booking. Then a thoughtful, actionable strategy is determined by channel and becomes the basis of the budget and marketing plan for the hotel. All disciplines within the hotel have to understand this revenue strategy and work in tandem to make it achievable.”
Callahan said Atrium has optimized its approach whether targeting group or transient customers.
“For years, we have challenged the company’s revenue-management leaders to review group and larger pieces of transient business down to the profit line,” she said. “This has changed their way of thinking about business and challenges the team to make better decisions. The team stays up to date on the cost of sale by channel (or) source.”
Revenue-management tools have become more intuitive, Daum said, which gives revenue managers freedom to think long term.
“The revenue-management systems our brand partners have rolled out over the last seven to 10 years have helped revenue managers spend less time on keystroking and become more proactive and strategic,” Daum said. “… We no longer just monitor our rates versus our competitors, but also our own rates and rate products across our channels to maintain parity.”
Chesapeake’s Bond described the data as more “actionable,” but stressed automation isn’t taking over the discipline anytime soon.
“Almost all brands have implemented a type of automated revenue-management system,” she said. “However you can’t let this system blindly lead you into battle. Instead, Chesapeake revenue managers become experts with these systems and manage them daily to ensure that our goals, as well as our owner expectations, are always at the forefront of every strategy decision.”
Generating additional revenue
Finding new sources of revenue to supplement rooms revenue requires some creative and collaborative thinking, Callahan said.
“With more than 2.3 million square feet of function space, Atrium Hospitality’s revenue-management leaders spend just as much time on event-space maximization as they do on room revenue,” she said. “Decisions on what business to take starts with the total revenue and total profit contribution before considering the impact to the STAR report or budgeted ADR goals.
“Additionally, our leaders are encouraged to be creative, looking for the aggregation of marginal improvements. We study market details of incidental revenues and ensure we are actively leveraging these revenue streams.”
Daum said Vision has similar goals to generate additional spend by guests.
“Going forward, it will be interesting to see how revenue management continues to develop beyond optimizing top-line room revenues into profitability metrics—(gross operating profit per available room)—and optimizing the guest mix to drive total revenues from meeting space, catering and ancillary outlet revenues,” Daum said. “The collection, consolidation and sharing of data and performance metrics is also key.”
Chesapeake’s revenue-management team is equally invested in driving additional food-and-beverage revenue, Bond said.
“(We) are focused on understanding our target guests and their spend at our hotels,” Bond said. “This includes catering and food and beverage by outlet. We work very closely with sales to ensure we are going after the right pieces of business that will not only maximize top-line revenues but also drive our GOP projections.”