ALERT - Hotel Distribution: >50% Revenues from OTA

What shares does the OTA (Online Travel Agency) segment represent of a hotel's transient leisure demand? removing the corporate and group business segments, and you may arrived at a total dependance towards OTA.

20%? 30%? 40%? 50%? 

60%? 70%? 80%?

Scary? well your Director of Sales may still tell you "it brings revenues", your Director of Finance may still alert the increase in commission level and payment delay.

What shall you think as a Revenue Manager, and how to decide on the right path to lead your hotel.

I would call it an hotelier lazy man's approach. It may work for you on a short term notice, but does it really make sense when a hotel hire 5 full sales managers who blitz the market, develop the so-called "business relationship" (Room Nights potential versus Rate), segment the market towards Corporate Individual, Corporate Government, Corporate Groups.

Very often, the e-commerce manager or online distribution manager, will settle rates that drive bookings but under-cut your long term business relationships being "Your corporate market". If you take a monthly report and look at the average rate (before and after commission deduction) for online bookings and compare it with your Corporate market average rate, you may find surprises.

What are the distribution cost for an Independent Hotels in the Gulf?
- Direct Online Channel (Hotel brand website): AED 25-30.00 per booking

- OTA Channels: AED 220-260.00 per booking based on average 20% merchant commission, length of stay of 2 nights and an average rate ranging of AED 500-650.00

On average it is 10 times cheaper to sell your room via the direct online channel compared to the OTA channel. On a year basis, can you imagine what the difference in distribution cost it would represent for a 140 room hotel (Average rate of AED 395.00):
* Direct Online Booking (40% of total room nights) = 20,440
Cost = 20,440 room nights x AED 25 = AED 511,000

* Online Travel Agencies OTA (60% of total room nights) = 30,660
Cost = 30,660 x AED 200 = AED 6,132,800

Name any Hospitality owners who would not like that!

Hoteliers, you need to invest in your direct online channel. Being dependent from OTAs, who required year on year, higher commission and commitment, will not allow you to leverage any types of strategies.

Top 3 Recommendation for General Managers:
1) Challenge your e-commerce managers to create Direct Online Channels strategies and not only fill up extranets. Because a large part of profit is left on the table.

2) Organize a meeting with your Online brand booking being I-hotelier, Synxis, Fastbooking, Res-Avenues, and ask them the following: "I would like to increase my market share of Direct Online Bookings to 50%, what would you suggest us".

3) Review your website redesign, optimization and SEO, online media with experts, take control of your database (email collection...) to turn your e-commerce person as a data analyst rather than an extranet order taker (that adds room when the allocation is set at zero).

Please share your thoughts below.

Romain @ http://www.RSVP-Hospitality.com

Nail Salon | Hair Salon | Spa: Are we suitable for Revenue Management

With the upcoming Beauty Fair Middle East, many people inquire us: does my salon qualified for Revenue Management?

The key to revenue management for salon (nail bar / hair salon...) is how to balance between price, space, and time to be in line with perishable inventory (your seat), distribution methods and variable demand (Days of week, Time of days, months, events calendar...).

Should price be more expensive for more difficult the service that requires longer time? It is important to set your prices according to your fix (Rent, DEWA, Equipments depreciation) and variable costs (labors, ingredients...).

Don't be stress, if your Salon struggle with those 3 key challenges to generate extra cash:
1) Anticipate your demand:
That is a difficult one for small businesses, some customers reserve in advance, some just walk in.

2) Different skill sets:
Some practitioners may be faster than others or some layout designs are more study than others. The staff skill set may be very different, their expertise is difficult to assess during an interview (Asia). One possibility would be to standardize your operations in order to gain more control on the duration (15mn, 30mn, 45mn, 90mn...)

3) Different strategies:
Busy beauty salons that want to increase their revenues and experience may afford to have 4 staffs for 1 client for a complete manicure and pedicure set. Whereas, in a smaller structure you may only have one staff devote for many clients, so it takes longer to perform the job.

Time allocation is not practiced as much in Dubai nail's bar or hair salon, as compared to Spa operators.

But, one company found a better way to control time. The N.Bar (http://www.thegroomingco.com/nbar) differentiates itself from competitors through the use of technology and the proliferation of social media as new distribution channels. First of all, the company defines time explicit for all services including nail art. How? it defined all procedures for each service to come up with a set price and time package. It penetrates well in social media, Facebook, Twitter. The company puts great efforts in managing time variability, it can schedule staff more efficiently, reduce waiting time between customers and increase service duration.

Some Spa Operators like Sensasia (http://www.sensasiaspas.com) in Dubai are more advance with revenue management concepts. No wonder it is a success story in the Emirate. Regardless of the menu, time is accurately define per treatment per time duration such as 30mn, 60mn, 90mn, 120mn, 150mn. By stipulating time, the operators gain more control over time which allows them to increase productivity of their therapists, service more customers which increase the bottom line. Have a look to their site, with a online booking systems along with a friendly social media plan. Well done!

In other words, this is Revenue Management! For more information, register at Beauty Fair Middle East (May 30-31, 2012).

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Revenue Management and Parking elements

Put your books and pencils away, just an early morning question...define Revenue Management.

zzz...boring! Yea, the topic of revenue management may be the perfect cure for your latest insomnia but it's also become critical in your profit generations. Revenue management, also known as yield management, is the process of understanding, anticipating and reacting to consumer behavior in order to maximize revenues or profits. I will use other words, by manipulating your price, companies can maximize their profits.

So let's put our attention with Hotel Parking to determine if revenue management is appropriate:

1) The product or service is perishable. Parking spaces are a perishable commodity - if a space sits empty, the lost income cannot be made.

2) Capacity of the product is limited. A parking facility has a certain number of spaces and more cannot be added without additional costs or construction.

3) Market Segmentation - There are discounts and early bird specials, but with RM consulting, the potential for parking facilities to increase revenue is even greater.

4) Advance purchase - Often done through reservation systems, to enable forecasting and manipulate price and demand.

5) Variable cost of a parking spot is low - the main parking variable cost for parking attendants and maintenance. Sell an additional parking spot, and the revenue contribution to the profit is up.

6) Demand Variation - demand for parking varies throughout the day. Revenue Management parking consulting can smooth the demand curve by stimulating demand during low demand times and increasing revenue during high demand times.

The parking industry is the prime candidate for RM approach. 

Now stop a good minute, grab your notes and think your respective parking facilities in your hotel. How many parking spots do you have? Do you have a control system (parking, tickets, watchman...). What are your costs associated to it? Do you pay a rent for it? What's your pricing?

Contact us, for your Parking Revenue management project, and we will organize it for you.

Profit Regards,

Maxime @ RSVP - Hospitality