Eid Holidays: October 26-28th, 2012 the great Yield Factor

Expect bumper to bumper traffic and shoulder rubbings crowds around Dubai as tourists from the Gulf countries descend on the United Arab Emirates for the Eid Holidays, which falls this weekend.

There is something unique with the shopping malls for the Dubai stops, as Dubai is implementing 24-Hour Shopping initiative that should draw more crowds from the Gulf this year, until early hours in the morning. What a treat for Dubai shopaholics!!!

Hotels are anticipating 90 to 100 per cent occupancy during that period. Once again as per the Article of local news paper in Dubai, Gulf News.......just a second, no one talks about Rev PAR performance, like if it was a habit to fill up the rooms, during high occupancy demand, without getting a mix clientele. I see in this article, that travel agents registered an increase of 20% in demand. So it means hotels are selling negotiated room rates 30-40% from their current rate to travel agents. Is that logic?

Most of the hotels are selling their last room with price for a Suite in 5-star hotel being above USD 1,000.00 (AED 3,670.00 per room per night).

Ok it's great to see that hotels will make some money, after a so-so month in September 2012. But what would be even more interested is to know if revenue management leaders have been able to drive the bookings at the lowest distribution cost possible. 

In fact during a high demand period, you should look at your distribution channels mix between:

- Online Travel Agences: 20-30% Commission,

- Travel Agencies - Tour Operation: 15-50% Commission,

- Corporate Bookings: No commission but yearly contracted rate,

- Best Available Rates: 10% Commission

Easier to say, difficult to implement?

Every Eid Holidays in the UAE are a great performance, because there are great activities organized by DTCM and Shopping Malls as well. The regional troubles in the Levant part (Lebanon / Egypt) will not favor the clients to consider those destination. So for all nationals and expats, UAE will be THE great destination for the weekends.

The majority of the hotels are on very high occupancy; therefore if you analyze your nett bookings you will realized that there might be a 40% gap between your daily reports average rate and revpar and your daily reports without your commission.

Currently the vast majority of hotels are selling with daily quadruple rates, but when we will see the market performance, to the exception of the 5-star hotel, the 3 and 4-star segments will not be above AED 1,000.00

Profit Recommendations:

- Do not overbook your first category base, because you will end up upgrading for free,

- Turn off your up selling program for the period,

- Control your room allocation / block with travel agents, and maintain your cut off dates,

- Maintain a minimum length of stay: 3 Nights,

- Sell per room type on the phone with Travel Agents, Clients and business partners,

- Restrict your availability with OTA to the minimum and sell directly on the phone or through your brand website,

- Honor your cut off dates as per contract,

- Ensure all your reservation are guaranteed by company or valid credit card,

- Maintain descent services, as some hotels are charging their rack rate or even more than their rack rate,

The following should allow you to gain significantly in RevPAR for few days left.

Cheers,

Romain 

RSVP Hospitality wishes you Eid Mubarak for you and your family.

03 things that should clear your mind about Yield Management !!!!

Yield management has become a solid term in hotelier's jargon. Yet if you ask 10 hoteliers to define what it is, 5 may have a clear idea of what it is, and you may end up with 10 different answers.

The reason for such a different panel of answers is that the underlying concepts of yield management have not been well communicated to them. Yield management in the airline industry, is different to car rental that it is different to hotels.

The root concepts are the same, but the application and the techniques used to implement the concepts differ widely.

Yield or Revenue Management is the practice of maximizing profits from the sale of perishable assets, such as hotel rooms, by controlling price and inventory and improving service. What Yield management bring is a systematic approach to reach that objective. Through that systemization, hotels discover that they can deliver their product differently, and more profitability.

Revenue Management business practices could be:
- Setting the most effective pricing structure,
- Setting last room available for top corporate or leisure clients  based on a contract commitment,
- Limiting the number of reservations accepted for any given night or room type, based on the expected incremental profitability of a reservation (price, length of stay, cost of distribution...),
- Negotiating volume discount with wholesale or destination management company,
- Identifying peak periods and write them down in the PMS,
- Develop an upselling program instead of massive "free upgrade",

Revenue Management uses information about customer purchasing behavior and product sales to develop pricing and inventory controls that produce greater revenues and deliver products that are better match to their needs.

It is a mix activities between PMS technology information, statistics, probability, business experience and knowledge.

1) Yield / Revenue Management is NOT a sole computer system:
Discussions over yield management appears to be difficult at the first meeting as it is linked to computer systems, inventory, capabilities of forecasting demand, optimizing reservations and limiting discount availability.

Please get it right, Revenue Management is not a computer system neither a mathematical science. It is an approach to increase revenues and improving service by responding to current demand. It is a process, a way of conducting business.

Certainly computer based tools can be a key component of such a program to assist with forecast demand, cancellation and no show expectations to push your overbooking levels.

2) Yield / Revenue Management does NOT work in low demand season
Since demand forecasting is the basic of Yield Management, to evaluate also potential low days in advance, it can allow the hotel to take specific actions. There is no point sending your entire sales team on the same day of arrival, as you may want to reach from 70-100% Occupancy points, as this could have been identified much earlier.

Demand may be low for a study pattern of days (weekends, second week of the month, week after corporate season and New Year Eve, Sunday and Thursday...), rather than sporadic dates.

When such  conditions happen, revenue management can help marketing and sales departments identify opportunities for hotels to increase. The information can be crucial when sales people are on calls with clients.

3) Yield / Revenue is NOT easy
If a yield management program is not implemented with the right tools, then it might appear complex.
Obviously staffs deserve many hours of training and develop hotel procedures and policies that support the system. Don't think of hiring someone from Starwood, Accor, Hilton or other chains, to manage your Independent Hotel, because those revenue managers will not be able to implement policies learn at big groups. Reason: big chains have top tools and invest enormously in Revenue Management trainings and best practices.

BOTTOM LINE:
To summarize Revenue Management is an evolving process that can increase a hotel's revenue. Not working the right way with it, may have a low impact on your profitability. How well revenue management works for a hotel depends on how well the program is designed and implemented.

For more information, please contact us for free consultation call: www.rsvp-hospitality.com

Fitness Revenue Management for your business

Royce Gomez is a Dubai colleague of mine, and we were discussing fitness industries. I was informing him, that many fitness centers lack on implementing the revenue management minimum requirement.

Although Revenue Management is now quite known in United Arab Emirates for the hotel rooms / car rental / airline industries, it remains a complete desert highway for the Fitness Centre in the region.

Have you ever sat on an airplane and asked the person beside you what price they paid? or asked someone at the hotel your staying at what rate they got compared to yours?

To apply it to your Fitness / Health Club, the manager needs to understand those principles:
* Seasonality: High / low periods of your Business (Hourly, Daily, Weekly, Monthly...),
* Analytics: Revenue per Square Meter, Memberships Levels, Number of Members growth...
* Competitive Set: Online & Offline; what rates would you be able from the receptionist at the counter vs. a published rates?
* Pricing Strategy: variable and fixed pricing, upsells
* Sales and Marketing Plans: does our Media Plan link with our occupancy at the Health Club?
* Market Segmentation: who are my clients (Age, gender, marital status, payment methods...)

If you fill those conditions, you may contact us for an early business meeting, to elaborate a discussion.

How to understand your metrics / analytics?
Now this comes with a bit of daily tracking to understand what the business really looks like and not what you think it look like.

Simply having someone tracking your data in an excel spread sheet your daily information and analyze accordingly.

Your new memberships will not be the same month to month. The beginning of October is traditionally a big time of the year for most Health Club, and it's usually the most competitive for market share benchmark.

In a market like Gulf Countries, you may have the same approach for your Beach and Pool access, where generally the rates identified to High or Low Season. There are more to explore and drive for the profitability.

Bear in mind that a Fitness Club standalone and a Fitness Club attached in a hotel may have different market segmentation mix and marketing program.

To prevent prices war, you need to analyze and see what works for your business units and adapt your pricing structure.

How to understand your competitors market?

Smart business owners understand their clientele. The AED 3000.00 (USD 800.00) of Fitness First Dubai may have more facilities than the Shangri-La Dubai (AED 7,500.00 - USD 1,750.00), however the price and segmentation is depending on the positioning of the brands.

Many time when you understand how much each member is spending (membership, nutritional needs, equipments, coach, extras...), you have a number to bench market on, plus it allows you to forecast the next 90 days period of your gym.

How to understand your clientele?

Many managers would see their clients as a result of 1 promotional price = 1 client. Ok, fair enough basic analysis! Except upon enrollment, how many times will the Point of Sale - CRM activities will be properly use.

In fact, is my Client just a price tag, or do I want to understand more his/her purchasing habits? For that you have to elaborate a set of analytical reports and understand who are your clients.

What about we think the fitness industry as Space and Time Management environment? 

*What are we selling?
We are selling a membership to access fitness machines environment in order to feels good, exercise regularly, gain muscle, loose weight, in a pleasant environment (music, Tv, deco, lightings, changing rooms, mirrors...). So we are selling space.

* What are the busy periods of a Fitness Clubs?
Generally from 5pm to 9pm, from Sunday to Wednesday.....

* What are the low periods of a Fitness Club?
All Fitness Clubs open at 10am, generally there are dead until afternoon time.
So we have time management.

* What are the market segmentation mix?
- Individuals,
- Couple or Family,
- Corporate,
- Special Groups,
- Students,

* What machines to feature?
It's important that we study which machines exercise drive the most usage.

Imagine if your gym's average monthly spend per member was AED 275.00 and you moved it to AED 350.00 per member. This is what a well though Revenue Management program could do for your fitness business.

If you require some help with your fitness business and looking at adding a revenue management program. Contact us our our website.

Romain
Founder
@ Profit Therapy for Fitness Industry
RSVP Hospitality