The Three Little Pigs help us analyze traditional pricing vs. revenue management pricing for hotels

Yep, story of the three little pigs provide the perfect analogy...

Comparing traditional pricing and Revenue management pricing performance related to the classic story of the three little pigs and really helps to define their fundamental differences in terms of the value each of these metrics mechanisms create.

For the purposes of the comparison, we can use the 2 pigs at the opposite ends of the house building spectrum to provide a relevant analogy to traditional vs. analytical. Many independent hotels focus on Occupancy and ADR metric, means no application of revenue management principles are being understood. The RevPAR is not being present neither in their discussion or reporting line.

So, let's recap the house building (measuring) practices of the "straw house pig" and the "brick house pig". A brief summary of our characters are as follows:

The Straw House Pig
The "Straw house pig" benefits from convenience. In the original story, the straw house was built quickly and easily without much trouble. The problem facing that pig was the lack of security but also the high cost of maintenance over time. When a storm came or the wind blew, this straw house would be damaged if not destroyed and the rebuilding process would begin again. of course, the good news was that it required very little heavy lifting, expertise, or time to build.

The Brick House
The little big that built the brick house camped out for a while, worked hard, planned a permanent structure, and laid down the bricks, one by one, until the structure was complete.
After completion, the brick house would require some light maintenance, but it remained solid and strong, able to provide the little pig a better return on her investment of time and the longer term than the straw house pig. Storms could come and go with little to no effect on the plight of the "brick house pig"and the house at times provided life saving protection and security.

Analysis:
The straw house pig's method compares well with a business owner whose choosing many different strategies, focusing on what the market or what the travel agencies/dmc dictates and adjust his pricing strategies according to its competitive set. When competitors are slashing their rates, the hotel will be damaged and will follow low prices structure of the market. Building market share in those conditions prove to be difficult. Your competitors can jump in the fray and undercut your positions in a matter of hours. Their focus is to practice same pricing than in the last 10 years.

Summary: Straw House Pig = Traditional pricing

In contrast, the "brick house pig" built on a revenue management culture designed for long term, low maintenance benefits. Building it required time, expertise, hard work, and revolutionize thinking process. This compares well to a planned and executed revenue management strategy. Those companies engaging with proper rational pricing, dynamic pricing, single image parity inventory, sell sequencing, demand patterns and deep market segmentation, there are in the best position to grow their revpar and increase their profitability. With pricing understanding being analyzed deeply, they understood how not to be dependent from a single market segment (Wholesale, Online Bookings, Corporate) but be able to define multi market segments.

Summary: Brick House Pig = Revenue Management pricing

Brick House Pigs will grown in a downturn economy. They will have the best chance at growth when they have engage in a process, of not only printing data analysis, but engage in analyzing and establish realistic risk strategies.

Romain @ Profit Therapy Thinking

Banquet, Conference and Group - Revenue Management

After last week release on ancillary Spa revenue management, the topic of the week is Banquet, Conference and Group Revenue Maximization. Are you already optimizing your revenues and profits of your function space? This topic concerns quoting the right price to the right customer at the right time for the right function space (Meetings, cocktail, receptions, weddings, MICE, product launch, gala diner...).

All Independent Hotels should look into their massive ballrooms, foyers and breakout rooms square foot to think out of the box, and drive additional profits. Don't leave money on the table.

What does Function Space yielding consist of?
Function space occupancy is not easy to calculate because a single room can be divided and the appropriate time unit must be determined. As opposed to spa who based in occupancy unit based on per hour basis, we will recommend function space to calculate by day part. The number of day part per day vary from hotel to hotel, but it is related to the number of times each day that a function space can be sold (Rotation).

- Define a revenue management strategy,
- Take ownership of the function space data behaviors,
- Which statistics is the most useful to analyze data?

How can I build interesting reports and statistics?
It is important to attribute market segments for each type of function activities, so you can ensure a minimal tracking for revenues. The revenues could be cross data with your day parts in a more sophisticated progress.


- Develop a banquet demand calendar (Weddings, Social Gatherings, Corporate Meeting, MICE Meeting....)
- Build meeting rooms turn-aways statistics,
- Align your room forecast with your a function space forecast

How can I possibly implement dynamic pricing on function space?
Your function space cannot be priced without considering the effects on room sales and food and beverage. A price that may be too low for the function space when considered alone may be more than compensated for when room and food and beverage are considered.

- Calculate a pricing per square meter,
- Introduce dynamic tiers/bar pricing to banquet and meeting space,
- Apply inventory restrictions and pricing conditions,

Shall profitability ratios evaluate during my decision process?
- Implement a RevPAS calculation (Revenue per available square meter)


This is the just the first release of our Banquet, Conference and Groups. More posts will follow on that subjects.

Romain @ RSVP - Hospitality

Rate Parity - Technology to support RevPar Growth...

Rate parity exists when the same rate structure for a hotel exists across all its distribution channels.

When a hotel effectively controls rate parity, rate integrity is assured and the consumer becomes confident in booking the hotel. Rate parity ensures an even playing field and is critical in protecting a hotel relationship with all its distribution partners, including hotel franchisors, meeting planners, travel agencies and online travel companies.

If your hotel decides to work with one OTA website and expect them to be effective in a competitive market, it makes sense to start working with as many websites as possible to gain maximum exposure.

If a consumer is visiting a dozen of OTA websites, and there is a different rate on every site, the hotel's integrity is put into question by the consumer. When a hotel's rate integrity is questioned it's very bad for business, for the hotel, the sales team and the website itself.

The key issue in rate parity today is ensuring the rules of certain websites markup structure are 100% understood and adhered so. Managing accurate and competitive rates is tough enough, but attempt to do so through 15-20 of different internet channels? Just imagine: logging into 15-20 of extranet everyday, each extranet having a different website address and login procedure to remember, with different markup methods, different standard room types, different ways to access and change rates, different contract terms, the tasks become boring, if not impossible for an e-commerce manager or revenue manager.

A question to ask to General Manager:
Where would you like to have your associate focus on?

i.e for hotels not using a channel manager:
3 Hours per day * 30 days = 90 Hours per month or 1,080 Hours per year, so nearly 6 months of work.

Today, hotels can obtain and manage increased internet exposure through hundred of websites, as well as maintain accurate and competitive Rate Parity through the use of a Channel Manager. There are over 10 great providers in the market.

3 hours of manual rate loading or 05-10 minutes with the system? Where would you like to be more efficient? loading rates manually or taking business sounds decision that create wealth of revenues for your hotel.

Some channel manager key functionalities:
- Modify prices,
- Modify availability,
- Modify minimum length of stay,
- Opening / closing of rooms,
- Compare prices with direct competitors,
- Overview of your availability and price positioning on various distribution channels,

RSVP Hospitality selections for effective Channel Manager Technology:
- Travelclick: EZ Yield
- Rate Gain: Channel Gain
- Lixto: Channel Manager
- Rate Tiger: Channel Manager


Romain @ RSVP-Hospitality