Does this type of revenue management conversation sound familiar?
GM: Thank you for showing us the revenue and market competition last night, but I believe we need to fill up the last rooms. Bring down the Best Available Rate, Send Sales 1 to Airport, send Sales 2 to corporate area, ask Sales 3 to call travel agents with our special offers and e-commerce executive, upload rooms on Expedia, Booking.com.
RM (*Revenue Manager): but the trends shows that there are not much business at our rates, we will dilute our existing base of clients.
GM: Trust me, I have experience, I know the city.
RM: We may end up with low piece of business that will not move our RevPAR.
GM: We will fill the hotels with whatever rates, that bring revenues.
RM: But....
GM: That is my final decision. Let's move on.
Results: Sales managers are begging for hotel rooms last minute to travel agents (those smart one understand that next time they have to place cheap business they will call you, and you will only say YES), and online travel agents will sense that you are not hands on your strategy, therefore next time they required for 50% advance purchase, you will be in the 10 pre-selected hotels. Your Corporate clients will loose the trust, because they can find better rates than their contracted rates on the last minute booking window. There are no secret, people are observing our behaviors, because travel agents have goals too to maximize their business.
In the end it turns out that the hotel fill up but does not move in RevPAR, because it has accepted rooms with a much lower rates that the existing on the books. And the market picked up at higher rates. Unfortunately too many General Managers still influence the strategic decision making process of hotels based on feelings, market knowledge and experience. They drive their decisions based on influence instead of hard factual data.
Where does this comes from?
Traditionally in the hotel industry, many people are promoted from Director of Sales or F&B Director to General Manager. Nothing wrong with that essence, internal promotion is great and moving up the ladder is a personal development. However different skills set are required to be a F&B Director, General Manager, Director of Sales, Director of Revenue Management. In Independent Hotels, the Revenue Management function is combined with Front Office and Reservation. In other words, analytical and operation function form one sole person responsibilities. Front Office is already a very tense position to handle between Check-In Operations and Housekeeping coordination. I strongly disagree!
Unfortunately we see far too little training given to the key position. The big hotel chains invest massively in the development of those key people to support their brand standards and guidelines.
We highly encourage hotels to invest more in business management and analytical development training of their staff. Because a large portion of tomorrow profitability will be enhance on how people are effectively understanding their data. Technology is no longer the impediment to driving improvement. It is proven. The obstacle is now people and behavioral change management. Increasing skills with analytics. Overcoming resistance to change.
In Revenue Management, for many independent hotels in the Gulf, the operation and strategic functions is grouped under a single responsibility, where it DOES NOT MAKE SENSE!
Strategies can't just be done in 05 minutes. It is a process that requires constant study, data extraction and preparation. If you are in an environment, where the phone rings every 30 seconds, it is hard fact to find your mind highly focus on your numbers. Just step a second, in a trader's life at New York Stock Exchange, and imagine how in one day, they could take up to 1,000 strategic transaction decisions for their investors.
Before taking any price decision or driving demand, history and trends need to be analyzed. Last week, I met a hotel sales manager employee, he was very happy his RevPAR grew by 20% (from previous year) during Eid Weekends, and he range a RevPAR of AED 700.00 (Full occupancy first two days over 4). My next question was how did your market share grew? He was still last in class on the market share competitive report. Do people really fill their hotels without strategies? When I went through specific market mix questions, he filled up his hotel with travel agencies and Booking.com. I let him smile, but do people really understand what they are doing??
There are nearly 32 days in Gulf markets (Conference cycle, religious holidays, week days, group business seasons...), where you can really make the difference to boost your RevPAR and profitability, the rest is all depend on your strategies, pricing structure and ability to drive the team. But during 32 days, the strategies you make can increase your RevPAR performance by 15-20% on a year basis. Worth it, isn't it?
It surprised me that in the independent hotel industry (non large international chains), strategies and tactical are just decided on a short lapse of time. It seems that many senior managers in the hotel industry still have problems with saying NO to unprofitable business. Hotels should not be the first one to fill up.
Independent hotel need to take a big jump if they want to be able to keep up the fight against the competition.
Romain
Founder
RSVP Hospitality
GM: Thank you for showing us the revenue and market competition last night, but I believe we need to fill up the last rooms. Bring down the Best Available Rate, Send Sales 1 to Airport, send Sales 2 to corporate area, ask Sales 3 to call travel agents with our special offers and e-commerce executive, upload rooms on Expedia, Booking.com.
RM (*Revenue Manager): but the trends shows that there are not much business at our rates, we will dilute our existing base of clients.
GM: Trust me, I have experience, I know the city.
RM: We may end up with low piece of business that will not move our RevPAR.
GM: We will fill the hotels with whatever rates, that bring revenues.
RM: But....
GM: That is my final decision. Let's move on.
In the end it turns out that the hotel fill up but does not move in RevPAR, because it has accepted rooms with a much lower rates that the existing on the books. And the market picked up at higher rates. Unfortunately too many General Managers still influence the strategic decision making process of hotels based on feelings, market knowledge and experience. They drive their decisions based on influence instead of hard factual data.
Where does this comes from?
Traditionally in the hotel industry, many people are promoted from Director of Sales or F&B Director to General Manager. Nothing wrong with that essence, internal promotion is great and moving up the ladder is a personal development. However different skills set are required to be a F&B Director, General Manager, Director of Sales, Director of Revenue Management. In Independent Hotels, the Revenue Management function is combined with Front Office and Reservation. In other words, analytical and operation function form one sole person responsibilities. Front Office is already a very tense position to handle between Check-In Operations and Housekeeping coordination. I strongly disagree!
Unfortunately we see far too little training given to the key position. The big hotel chains invest massively in the development of those key people to support their brand standards and guidelines.
We highly encourage hotels to invest more in business management and analytical development training of their staff. Because a large portion of tomorrow profitability will be enhance on how people are effectively understanding their data. Technology is no longer the impediment to driving improvement. It is proven. The obstacle is now people and behavioral change management. Increasing skills with analytics. Overcoming resistance to change.
In Revenue Management, for many independent hotels in the Gulf, the operation and strategic functions is grouped under a single responsibility, where it DOES NOT MAKE SENSE!
Before taking any price decision or driving demand, history and trends need to be analyzed. Last week, I met a hotel sales manager employee, he was very happy his RevPAR grew by 20% (from previous year) during Eid Weekends, and he range a RevPAR of AED 700.00 (Full occupancy first two days over 4). My next question was how did your market share grew? He was still last in class on the market share competitive report. Do people really fill their hotels without strategies? When I went through specific market mix questions, he filled up his hotel with travel agencies and Booking.com. I let him smile, but do people really understand what they are doing??
There are nearly 32 days in Gulf markets (Conference cycle, religious holidays, week days, group business seasons...), where you can really make the difference to boost your RevPAR and profitability, the rest is all depend on your strategies, pricing structure and ability to drive the team. But during 32 days, the strategies you make can increase your RevPAR performance by 15-20% on a year basis. Worth it, isn't it?
It surprised me that in the independent hotel industry (non large international chains), strategies and tactical are just decided on a short lapse of time. It seems that many senior managers in the hotel industry still have problems with saying NO to unprofitable business. Hotels should not be the first one to fill up.
Independent hotel need to take a big jump if they want to be able to keep up the fight against the competition.
Romain
Founder
RSVP Hospitality
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