5 things to know about revenue managing into a downturn
5 things to know about revenue managing into a downturn
22 SEPTEMBER 2016 8:15 AM

Revenue managers must creatively use data and help find trends and avenues to new business in order to grow the bottom and top lines during downturns, according to panelists at the recent Hotel Data Conference.

NASHVILLE, Tennessee—There are as many opinions on where the hotel industry is in the current cycle as there are hoteliers, but no matter how close or far away we might be from the next downturn, almost everyone agrees it’s best to be prepared when it hits.

That means revenue managers will have to be in top form and ready to make the most of the limited opportunities in a downturn, according to panelists on the “Effective revenue management into a downturn” panel at the Hotel Data Conference.

Here are a few of their suggestions on how to quickly and correctly adjust to a shifting hotel environment.

1. Understand your data
Sherry Marek, co-founder and VP of Datavision Technologies, said revenue managers need to be able to dive into their data to figure out what works best for them to refine their strategies.

She cited a resort she works with that observed a drop in average length of stay from 4.5 days to 2.5 days from 2015 to 2016.

“That meant massive increases in labor (costs) in housekeeping,” Marek said. “At the front desk, not so much, but still it made a difference. So, average rates were going up 1% or 2%, but the labor costs of the short length of stay really impacted the bottom line of the property. They didn’t see that trend coming, and they had all these issues.”

She said one thing to track is where guests come from, because that can have a surprisingly big impact.

“There are a lot of (key performance indicators) to make sure you’re aware of,” Marek said.

Kelly McGuire, VP of advanced analytics for Wyndham Destination Network, said it comes down to “establishing the discipline of carefully looking at your data against your strategy.”

“You’re measuring what it is that is making you effective and maintaining that discipline in your organization,” she said.

Leticia Proctor, SVP of sales, revenue management and digital strategies for PM Hotel Group, said it’s important for revenue managers to vet their data before going all in on what could be an incorrect conclusion based on bad data. She said it’s important to compare data across different sources, including reports from STR and a hotel’s internal property management system. (STR is the parent company of Hotel News Now.)

“I’ve seen it so many times where people have made strategies based on flawed data,” she said.

2. Seek out new guests, but make sure they’re profitable
Panelists talked about the need to balance efforts to seek new guests in new markets, particularly China, without harming existing efforts in various channels.

Proctor said hoteliers should be able to track both their top-line and bottom-line success when venturing into new channels or seeking our new groups of guests like Chinese travelers.

“If you can’t measure that, then why are you bothering?” she said.

She also said hoteliers should ask whether new groups they’re seeking “have the best makeup for profitability” before sinking resources into pursuing them.

3. Build relationships and credibility
Michael Hall, director of revenue management for La Quinta Inns & Suites, said one of the key skills for any revenue manager is “persuasive communication” because owners, general managers and other key stakeholders aren’t always as tuned in or as interested in the data as revenue managers.

Make sure “you’re bringing the right information from the get-go that will help the decision-making process,” Hall said.

Proctor said it’s important for revenue managers to constantly be building credibility with ownership that is “quantitative not qualitative.” She said these relationships help build long-term strategies and also are helpful when revenue managers need to shift from failing strategies.

“If (ownership) doesn’t understand, then that’s when you get resistance,” she said.

4. Keep an eye out for trends
One of the benefits of truly understanding your data is the ability to identify important trends, but panelists warned that trend-spotting is more effective when revenue managers go in with an open mind.

Proctor said it’s important to “always start broad, then get specific” when looking at data; that way it is less likely to come to a conclusion you want or expect to see.

McGuire said this work becomes ever more important as the discipline of revenue management grows in stature and importance within the industry.

“As a discipline we’re in a better position to develop a strategy and get the company to come along with us and not be subject to the same kind of panic we might have seen in the last few (downturns),” she said.

Marek said it’s important to understand different key data points to track trends or to spot anomalies, particularly in booking trends. This includes if certain rate codes or market segments that are performing especially well.

“You should be able to look at your property management system to see the trends as it picks up and maybe graph it as opposed to just looking at numbers,” she said. “Then you can react to it. That’s the key.”

5. Create value to fight price erosion
McGuire said hoteliers need to stop thinking that consumers are solely “deal-driven” and focused on finding the cheapest possible hotel. She said this shift in thinking can help prevent hoteliers from engaging in fruitless price wars with hotels in their markets that do nothing but hurt their own businesses.

“They are very tuned in to all the components that make up the value of that purchase, so it’s about what they’re going to get for what they give,” she said. “So they’re looking at reviews and your rank on TripAdvisor.

“And they’re trying to understand brand and whether they’re going to get loyalty points from staying with you. It’s easy and tempting to just start tracking the price of your competitors and getting worried in this price-transparent world.”

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