February 14, 2012

Yield and Revenue Management: the right path...

Hoteliers in Dubai, Sharjah and Abu Dhabi claimed a strong demand during January 2012 due to a market mix of Individuals leisure and corporate, along with MICE Groups demand to the Emirates. While reviewing our independent properties, they still focus on "we were 100% occupancy for 24 days in the month". So what hoteliers are running for? Filling up all the rooms at the price the market want? Or organizing a yield management methods to control their destiny?

Revenue per available room (REVPAR) is a definitive measure of a hotel's performance, complementing the traditional measurements of occupancy (Occ%) and average room rate (ARR). And yet, too often, few people in a hotel fully understand the significance of this measurement. This is where the revenue culture should start.

So many people think that REVPAR and yield are the same measurement. Many hotels which claim to perform yield management are simply measuring REVPAR on a daily basis and staff are not able of explaining to a guest why different rates are charged on different days for the same room. 

The usual front office discussion would be "I am sorry, we are almost full" instead of advising "we are experiencing high demand, due to xxx events in town, therefore the best rate available would be.....". 

Yield management and revenue management are one and the same thing. Essentially they are an approach to maximizing profit by responding to what we know about the past, what we know about the present and what we think will happen in the future. 

In other words we are trying to sell the right room at the right time, at the right price to the right person. You could say that this is nothing new, but on the other hand many hotels are focussed either on occupancy or average rate and make most decisions on a very short-term basis. 

Revenue management apply to all types of hotels boutique, big, city, airport, resorts, 

Hoteliers should want to work with yield management because you don't want to accept low-rate groups at the expense of high-paying individuals, because you want to know what rate to quote before the telephone rings, because booking lead times vary by segment, because demand from different market segments fluctuates and because you need help in deciding which business to convert or accept and at which rate. 

Consequently you need to deeply analyze your bookings transactions to understand, discuss and elaborate strategic decisions.

Yield management consists of taking decisions based upon the actual business that you already have on the books, past business and booking patterns, future trends and most importantly very recent trends. 

We see the levels of knowledge of revenue management in the wider independent hotels is the hardest and finding good people that just have a real passion for the number is hard.

There are also lots of confusion between what revenue management is a discipline and data analysts. Some people think that being a data analyst is being a revenue manager and it's absolutely not. Anyone can crunch the numbers even an income auditor, a restaurant supervisor or a purchasing manager. 

We have seen revenue people, across different hotels, that think that putting these great colorful spreadsheets along with macro setup together is revenue management. But unless you're setting a price point for decisions, there's no value. 

Yield management is about forecasting, managing inventory, pricing, discounting, booking pace, pickup trends, overbooking, evaluating group enquiries, redirecting demand and rational pricing. 

Hotels should be able to understand different customers who are prepared to pay high prices from those who are prepared to change their travel plans to secure low prices, or make a commitment well in advance for secure low price (payment conditions, special cancellations...).

Yield Management works well for airlines carrier such as Emirates, Etihad, Qatar Airways, Fly Dubai, but for hoteliers it is still a hard concept to understand.

Customers should segment themselves

As Robert G. Cross define, it is all about selling the same room at a different price depending upon demand and most critically, all of your staff being able to explain to a guest why they have paid a certain price, without having to fall back on a 'roomtype' argument. It's time to educate staffs and clients too.

This will only happen if clear direction has come from General Manager or Owners, if everyone has been trained in yield management, if information is up-dated regularly and if weekly yield/revenue meetings take place to agree and modify the strategy for the next 06-12 months. 

With UAE set for 9 millions tourists in 2012 (Source: http://www.arabianbusiness.com/uae-set-for-9-million-tourists-in-2012-445216.html), it's time for people to change their approach, if they  would like to increase their double digit growth in Revenues and Profit.

Maxime @ RSVP Hospitality

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