Market segment pricing

When creating or developing a revenue management system, the first step to take is to understand who is using your products or services, and who could / would, and then segment the offer in order to meet these markets.

A market segment is a subgroup of people sharing one or more characteristics that cause them to have similar products needs.

Market segmentation is the process in marketing of dividing a market into distinct sub segments that behave in the same way or have similar needs. Because each segment is quite homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is why all businesses need to write a marketing plan focusing on their market segmentation.

Like this, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way and promoted in a certain way; this process leads to targeting and positioning.

i.e: have a look to your business cost of distribution percentage, between:
- How much business do you generate, from your own internal department (Sales team, manager, your website, your marketing collaterals, your existing client word of mouth, your Facebook page...),
- How much business does any third party is bringing in revenues to your business?

If you consider your business too dependent from the third party distributors, or any other business that bring you clients through their platform (Global Distribution channels, Online Travel Agencies, Online Portal) but you estimate that you pay high marketing / distribution cost, then the only way to assess well the market, is to have a detail sub market segment that will tell you, perhaps on weekly basis, who is contributing to your success.

The intent is to identify groups of similar customers and potential customers, to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment, in order to improve revenues.

Once the different segments have been identified, you can design a method to attribute different segments at different prices. Our Revenue Management Training company can help you with the process, because once you have it right, you are on the right track to collect data and then analyze and draft your strategies.

The segmentation is not linked to profits. If segmentation is about choices and about the search for opportunities where resources such as sales and advertising can be applied to yield the greatest opportunity, then the segmentation must yield a way to evaluate the different opportunities. One segment may be more difficult and more expensive to reach, or may use products that have a higher cost and lower margins. Any segmentation should link not only to revenues but also to profits, so that the choices about which segment to address and how to address them, can be made in a mannner that boost the bottom line. 

No revenue management, business maximization can be well executed if the market segmentation has not been discussed, challenged and implemented.

The challenges of market segmentation in the future will definitely be a top topic. Consumers change, market shifts, distribution channels evolve, and products reach new generation. To avoid becoming obsolete, any segmentation must be updated over time to stay at edge from your competition.

Make it happen!

Contact us for more information

Cheers,
Romain Saada

How to prepare the weekly revenue management meetings at your hotel?

This post is providing answers to the regular emails I get from Revenue Managers, in U.A.E non chain hotels:  how to lead in my position and impose myself in my hotel environment?

In independent properties, revenue managers are still more assimilated as reservation managers with heavy combined duty tasks on printing reports, analyze and trying to guide the hotel on the yield strategies it should follow.

Let's focus on the U.A.E market; revenue managers effectively hold a title.  As per their job description and latest trends, they report to the General Manager who understand the processes of yielding rates and managing inventory. But in reality, the revenue managers are spending most of their times with the Director of Sales, feeding them with data and trends. Many times the D.O.S (Director of Sales) of the hotel property has a strong personality, great public relations skills and market/clients knowledge that allow them to impress. The D.O.S is then more keen to take decision with gut feelings as opposed to the Revenue Manager who lead by facts and analysis. Here come the first dilemma.

My Dear Revenue Managers,

One of the key aspects of leading your position in Revenue Management is that the strategies must be followed by all departments of the hotel. This is why the revenue management culture must be created throughout the property and a weekly (at least) revenue management meeting of all key departments should be held. This is your meeting, you need to arrive prepared and tackle your points vs. possible people who will disagree. In few words, you need to: "LEAD THE GROUP."

The main purpose of the meeting is to focus on maximizing revenue in high demand and push the occupancy on low dates, but you should also:

1) Communicate the performance facts:
- Actual overall room revenues vs. forecast vs. budget,
- Actual market segmentation room nights and revenues vs. forecast vs. budget,
- Find explanations: everybody can read figures, ratio, variances but not everyone can understand why your property is ahead or behind your forecast; whatever you lose in the period analysis, you should better come with solutions how to gain in the remaining days left.
- Discuss your market share performance and how do you plan to gain in position to be the market leader,
- Discuss the turn aways and cancellation statistics with the reservation and the front office to adjust your overbooking and inventory restrictions,

2) Adjust the forecast in occupancy, rate, RevPAR, market share and GOP:
- Evaluate trends with your pickup reports: it is always advisable to be the most details person during that person, so I would recommend to bring pickup reports by market segment,
- Review your On The Books for the week, the next 30-60-90 days,

3) Discuss and agree on strategies going forward:
- Prepare your pricing analysis for you vs. the competitors,
- Analyze your competitor room types positioning, as you may have a competitor selling a higher rate but you may not understand that this is their second room types categories, which may lead you in a different judgments (Competitor room types configuration is a must),

4) Ensure all departments are on the same page and understand their roles in achieving RevPAR and profit goals:
- You cannot push your revenue tactics to gain maximum in ADR, while you will have someone at the front office or in sales giving complimentary upgrade to clients,
- Sales need to be effective in the control of their performing vs. non performing key accounts management; I am sure you had a case of "Let's make an exception for this client, and give him a standard room, when standard rooms are not available". The sales manager will rather accept the bookings for his/her relationship (future big account?) rather than declining it.
- Reservation manager should think revenue rather than order taking,
- Many times the group draft a strategy but does not stick to it, bringing dozens of excuses,
- Monitor the deviation and report it to the next meeting session, bearing in mind that everyone can take some control risks,

Allocate sufficient time 60-90mn and prepare an Agenda for the meeting.

Attendees recommendation:
- Revenue manager to lead the meeting, provide analytics, challenge, confront, foster team decisions, draft revenue minutes and action plan,
- Director of Sales and Marketing provide overall sales direction (blitz, corporate meetings, groups status, future groups),
- E-distribution ensure that all the distribution campaigns are in place for the need periods and are not being run when not needed. Observe the needed periods as e-distribution have tendency to add inventory for OTA, in periods where it is better to sell Best Available Rates (BAR rates),
- Reservation Manager should ensure that reservation department understands the occupancy needs and have appropriate selling strategies in place,
- Front Office should ensure that up selling strategies are in place to avoid upgrade (revenue loss), they should communicate peak check-in/check-out,
- Financial Controller has to provide the overall profitability performance and impact of revenue management decisions,
- Event Manager has to monitor the groups after contracting (sign contract) so they can manage the block accurately,
- General Manager, when available and to push for the revenue culture,

Variances may be observed

Shall you need some assistance for the best revenue management strategies and strategic weekly revenue meetings, you can contact us at info@rsvp-hospitality.com and we would assist at one of your revenue meetings and would provide you our feedback, free of charge.

Cheers,

Romain Saada
Founder
RSVP Hospitality Dubai

Profit Therapy Program for Beauty Salon's Owner - UAE

Over the past 2 years, I discovered that whilst beauty salon / spa owners are experts at hair styling, manicure/pedicure, facial and massage therapy, they don't always have a good grasp on the financials of running their businesses.

Most of my clients say that they never look at their numbers because when they DO they don't understand them. They will rather focus on what is left in the cash box on a daily basis and pay what needs to be paid on daily basis. They empower their receptionists to become the salon magicians and handle staffs / clients / P.O.S / statistics / accounts / payroll / marketing. Hmm...realistically it does not work!!! and raise high employee frustrations.

It's not surprising; the Beauty Industry teach you what you need to know about beauty products, techniques and some customer service practices. As opposed to the Travel and Hotel Industry, Beauty Industry lacks of higher diploma that speak about management courses in Human Resources, Marketing, Loyalty Marketing, Sales and Finance and much more topics.

Through consulting, at RSVP Hospitality, we can close the gap by helping you understand business financials and empower you to make actions that will make a measurable difference in your bottom line.

Profit leaks are those areas of your business that waste money and human energy. It can happen rapidly in every single corner of your operations. If money flows out of your business quicker than it flows in day after day and year after year, you are in trouble. Stop digging and let's start filling in the holes in your bank account, your joy and your success!!!

At RSVP Hospitality, we propose our Profit Therapy Programs to our Beauty Salon, Nail Spa partners as:

Our consulting projects mission are to:

• Analyze and controls all outflows of cash,
• Coach salon owners to step into Leadership role,
• Develop systems and processes to recruit, retain valued employees,
• Stop reckless and unnecessary spending,
• Empower clients on how to work ON their businesses,

What clients say about the program:

1. Allow them to place data/statistics in front of operational issues: How much? When? Sum? Percentage?
2. It replace the "Great I need to talk" with "I realize that..." or "I calculate that...."
3. First teach me what profit and loss is and help me to control it,
4. Helped them to make changes,
5. Helped them to eliminate treatments and focus on increase profits,
6. Look forward to the training,
7. Helped me to make sense of my life through my work as salon owner,
8. Keen to read more on Revenue management programs,

Romain Saada - RSVP - Hospitality

+971 50 589 3011