Hotel General Managers should become more business minded

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

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

Invitation for a Yield Management and Spa Survey...

In conjunction with a leading wellness spa website in Dubai, Spagenie and RSVP Worldwide decided to join efforts in making the survey to measure the impact of Yield Management in Wellness Industries.

Spagenie.ae is the Region Biggest and Most Popular Spa and Wellness Resource in the Gulf Countries.

RSVP Worldwide is a leading revenue management firm in the UAE for independent structures.

By wellness industries we compile the following business units:
- Hotel Spa,
- Standalone Spa (Independent),
- Standalone Organic Spa (Independent),
- Hotel Medical Spa,
- Standalone Medical Spa (Independent),
- Beauty Salon Brand,
- Standalone Beauty Salon (Independent),
- Hair Salon Brand,
- Standalone Hair Salon (Independent),
- Nail Spa Brand,
- Nail Spa Standalone (Independent),
- Yoga Classes,

Visit the link below:
http://www.surveymonkey.com/s/GLVYTSK

We thank you for your answers. Results will be published.

For Spa business solutions

Revenue Team @ RSVP

The value of Outsourcing Your Revenue Management process

Choosing to outsource part of your business unit's revenue management and/or analytics requirements can provide benefits that go far beyond mere cost - cutting. RSVP Hospitality outsourcing allows the hospitality independent business to identify the areas where specialized support is more needed, in order to complement the skills of their internal reservation, revenue and marketing teams.

We see the most successful outsourcing arrangements, is a partnership where existing capabilities are enhanced to provide better revenues results with the client.

So what kind of advantages can revenue management outsourcing offer to an organization?

1) A larger skills set
In many independent hotels, too many activities are operated between too few people. The Revenue / Yield / Business analyst position are far more using the associate time into a report extraction function and less impact is driving pertinent analysis that will translate in a decision that impact the property (pricing, inventory restrictions, competitive set performance, market segmentation, distribution channels cost analysis, system configuration...). When Travelclick solutions came on the markets, with their innovative reports, the choice was given to the hotel to either continue performing competitors rate check manually, or outsource to Travelclick Intelligence and collect automated reports with multiple functionalities.

By outsourcing non core areas, of your revenue management, you can extend your analytical performance with specialist skills when you need them.

2) Ability to focus on what you do best
Even the most capable revenue manager and sales & marketing teams or business owner will be stronger in some areas than others. For example, I see many hotels hiring a "chain/hotel group" revenue manager into an independent one (Standalone brand), and the fellow revenue manager is struggling because he/she does not have all resources that its previous company used to offer. If you are struggling to deliver on projects/k.p.i and tasks that contribute to a competitive advantage, the outsourcing of external activities could be the answer.

3) A fresh approach
For internal analysts or data input people, it can often be difficult to "step out of the comfort zone", to look past the familiar and try something different. An advantage of outsourcing is the introduction of fresh ideas and new ways of thinking, resulting in exciting, creative exchange that make the company gaining revenue and market share.

4) More experience on what works (and what doesn't)
Even the most experienced revenue managers, directors of sales and marketing or general managers can't know everything. The changing ways that clients book your services, their booking methods, their payment methods, their feedback methods, their satisfaction and the difficulties across service industries and job functions makes it hard to keep it up. Incorporating the experience of revenue professionals results in a broader collective experience of which tactics, approaches and strategies are most likely to be successful.

5) Reduce overheads
There is little doubts that selective outsourcing has a financial impacts. If the focus is solely on hourly/daily rates, then outsourcing may be viewed as expensive. But if you review the project target and cost, the deliverables required and the efficiency that expertise and the luxury of being one step removed the day-to-day has for the outsource provider - it becomes clear that there is money to be saved. Add to that a lack of training costs, equipments or tools to work efficiently, and the savings become all the more apparent.

Do you selectively outsource part of your revenue and distribution tasks to an external supplier? let us know your experience of outsourcing and how you ensure you're getting the most out of your outsourcing arrangements. Leave your comments below:

If you are interested by outsourcing some/all functions of your revenue management at info@rsvp-hospitality.com, and we will schedule a meeting accordingly.

Summer is over - Time to get back to work at your hotel?

With the Ramadan season behind you, now it's a great time to take 60 minutes and check your on the books for 2013. Here are my 5 recommendations that should be in your radar as you will soon enter a new year:

1) Best Available Rates - Price & Availability: when we analyzed booking pickup during peak periods in Hotels, we realized that lots of reservation came from a Contracted Tour Operators or a Group, and sometimes much more than their allocation. The reason might be that since you don't extend your next year rates in advance, the business traveller that aims at booking long time in advance, does not see availability at your hotel, resulting that he will book your hotel using an alternative distribution channels.
Recommendation: In fact every month, you should load rates for 365 days in advance.

2) Rates Upload for online bookings: if you have a fair idea of your seasonality and your demand curve (high/low) for 2013, do upload your rates as per your online strategy.
Recommendation: Rates can be changed at any time, but if you don't display availability they will go to the next property.

3) New Competitors supply: named them Rotana, Accor, Hilton, Four Points, Marriott, there will still be new supply nearby your hotel, so start anticipating their opening date. Obviously every new hotel does need business, and comes on the market with an aggressive rate structure.
Recommendation: Explore your business intelligence networking capabilities, and you should be the one that inform your General Manager.

4) Talk to your Sales Team about 2013 rates: there will still be new conferences in town, inflation will still occur, new hotel supply will get released. You need to work your Business Intelligence, but first and foremost you need to build your base for meetings and conference for next year (06 months booking lead).
Recommendation: While your budget may not be started, prepare your group rates and allocation mix through the first semester to secure groups.

5) Give some thoughts to your next summer periods: for lots of hotels, this period is mostly a low demand seasonality with occupancy rate varies from 40-65% and low ADR impact. In fact, its quite surprising that for the last 08 years, hoteliers are practicing lower and lower rates offer, while the overall hotel expenses grew by 30% in the last couple of years (Electricity, Water and Gas cost / Employee Costs / Distribution costs...), resulting on a low profit margin.
Recommendation: Ask your Financial controller about the break-even cost, or level of revenues to performed in order to cover the cost, because you may walk into the wrong directions.

For more information, contact us at www.rsvp-hospitality.com

Why spas should be added to the revenue management department of hotels?

Many directors of development/feasibility consultants for business hotels, conference hotels, resorts and upscale boutique are adding a spa to their property/projects:

Why?
because by adding a spa to their hotel/project they will:

* Create a competitive advantage,
* Increase the guest experience,
* Performs better ADR, Revenue and also profitability,
* Generate additional revenues (retail...),
* Stand in a better way within the direct market competitors,
* Raise the value of the property,

But unfortunately, I noticed that most of the time, the spa is underutilized or even empty. Looking at the previous post on that subject, spas in hotels often represent an high cost factor (Spa Receptionist + Spa Therapists x 2 + cleaning costs + retail products + investment), instead of an incremental revenue. Probably the reason why some large hotels outsource the spa, to create a lease revenue, rather than exploring possibilities of managing it effectively.

The spa product needs to be managed more strategically! it does not only require to have 25% occupancy per day or cut deals with Groupon and Cobone, but it's need to be thought as a perishable structure. A AED 199.00 (USD 55.00) for a 90 minutes massage with manicure / pedicure does not always drive return clients, because the experience is not performed by real professionals, and the time allocated is not suitable.

Hotel spas just like the rooms, the restaurants, the banquet rooms, experience periods of high and low demands. At the stage of high demand, you will often see a more profitable treatment has to be turn away to guests, because the treatment room is booked for a low profitable treatment. Lack of profitability planning!

As demand fluctuates by days of the week (Sunday-Saturday), and time of the day (10am-10pm), busy demand can be identified quite fast. Automatically there is large opportunity for hoteliers to generate incremental income and profit by implementing revenue management solutions to their spa product, just as to optimize the revenues of their hotel rooms. If you manage well your weekdays (85% occupancy) vs. your weekend (45% occupancy), you may fluctuate your offers according to demand. If you are full on the weekends, manage your treatment offers in a different way.

Even if majority of hoteliers are using tactical techniques (25% off credit card, spa packages, the entertainment book discount, two for one treatment, group deals...) to try to sell during the low demand periods, very few have developed a strategy that allows grouping these techniques with their market segments to apply revenue management principles.

Most spas sell their treatment rooms on a "first come, first serve" basis. Revenue Management will help spa hotels to attract extra clients during low demand periods by offering attractive treatment deals, growing revenues or yielding during the high season with optimization strategies. It requires an analytical person, because most spa managers do not have the time to do it and do not feel very comfortable of creating excel spreadsheets. The best way to team up is the revenue manager along with the spa manager, because they may end up analyzing lots of information. Both understand the spa profit margin concept, however they will have different functional skills. One will have to go through lots of data, cross with market segments and pricing, and the other one will have to share his operational constraints.

For our spa managers/assistant readers, i know that you may say, this is a great way to increase my revenues, but what shall I start with?

In brainstorming sessions with Spa professionals in Dubai, on the subject of spa revenue management opportunities, we came out with the following points in applying revenue management lies in:

1) Contribution analysis: Where are your income coming from? Which treatments are more profitable for your spa? How did you calculate the duration time of your 30-60-90 spa treatment?

2) Productivity Management: What are the periods where revenues are the highest? Which is the least treatment sold? What day of the week has more demand? What time of the day is the most demanding?

3) Cost Management: How to better control your costs? Do you have a detailed standards of operations for your treatment? Who is managing the availability booking? How effective is my spa menu?

4) Retail Selling: When was the last time you trained your team on selling techniques? What types of product information your team has to sell the retails products? How many brands product do you sell?

5) Guest History: Do you have an email database? How far do you update your guest profile in your spa software? Where are your clients from? Do you use specific market segments?

6) Marketing Strategy: how do I communicate with my clients? Does Social Media help to convert Likes into Effective clients?

Revenue Management will help you manage these six elements and will allow you to increase the income generated by the spa.

So like room revenue management, you will need to start building effective historical data reports analyzing your transaction through your software or manually, to provide you with data to analyze to help you to make better decisions on your spa pricing strategy and packages availability.

Get more revenue management tips and advice from RSVP Hospitality.

Bring back the Revenue Manager

Have you noticed the revenue manager are short in supply these days? these are the executives who run analytical reviews, control the leverage of demand vs. pricing, drive the strategy and perform forecast accuracy within their business units.

But in many independent companies in the Gulf, the only true revenue driver is the General Manager. Everyone else, whether the 65 hours a week executive, the credit manager with his 25 calls a day for cash recovery, the night auditor processing 60 reports or the sales team with its 8 sales calls each, runs a piece of business to support their functions.

As a result, a limited number of people have full, end-to-end accountability for business success and there are few opportunities for revenue managers to learn all aspects of a business. This may be one of the reasons why many organization struggle to perform.

In large hotel chains organization, the revenue manager is at the center of action. He is regularly trained by his regional managers, he can create best practices to be shared with his peers or he attends business management courses (Time management, effective leadership, communication skills, project management). In small independent group of hotels, or independent structure (100-250 rooms), the revenue manager seems to be just noted as a "title position" to remain trendy with the hotel market development; however many of them are an extension from the reservation manager position... so the title does not really reflect the functional role. There are no added value when it comes to developing a new BAR pricing vs. competitors analysis, evaluating a piece of business, displacing calculation, seeing their market within a 90 booking window, changing his benchmark competitive set, analysis of historical data, day-to-day forecast, confronting a director of sales on the strategy, constructive feedback to General Managers...

Starting in 2005-2007, many GCC hotel base companies evolved to "functional" structures to cut costs and reduce duplication. Revenue management being the favorite buzz in the General Managers round tables, the main question remain at who will perform the RevPAR growth. Is it a G.M responsibility? Is it a team responsibility? In my mind, the hotel better have the right structure in place to perform. And this comes from a thorough review of the organization functional aspect.

When will the hotel understand that reservation department is an extension to sales department (clients relationships, selling what is on the Property Management Screen,  entering rooming list, managing extranets distribution channels and many more functions...) and therefore cannot be performing at Reservation and Revenue Management. It can be a short term solution to evolve a reservation / revenue manager, but the organization needs to go deeper in defining the roles and responsibilities of each. The reservation executive answers the phone and sell, while the revenue executive review hundreds of data every day, perform reports, and follow the guidelines of the hotel revenue management policies to extract data that will support the strategy.

I meet dozens of revenue managers in the market, who are great in their roles, however unable to perform great numbers, because their position is a result of a mix functional roles between a reservation role, a extranet/e-commerce role, a yield manager role even in some cases a sales manager role....This become very complex for their understanding and development, they feel there are doing a bit of everything, but not to the expert level; so when an opportunity comes for another position within the market, they switch for it....

As a result of this shift, career paths today are less geared towards filling the few revenue manager position, and instead focus on functional specification.

Obviously we cannot reverse the structural trends of the past 5 years in the region. However, companies can take steps to give their people more management, business skills and accounting/finance experience, which may help them avoid the narrowness of functional specialization.

Given the difficult nature of business today, having people with broader perspective may be critical to developing successful independent hotel establishments. So it just might be time to bring back the Revenue Manager.

To what extent does your independent hotel company have opportunities for true revenue managers?

Romain Saada @ RSVP Hospitality
Visit us at http://www.rsvp-hospitality.com 

Evaluate the Distribution Costs for your Hotel

When it comes to making channel mix decisions for your hotel, it requires much more than choosing between direct channels or third party channels, since each category carry costs.

Since we are in the budget season, it is highly important that this comparison need to be establish.

The cost to deliver a reservation to a hotel has grown dramatically in the last 10 years. Besides reservation transaction costs, it is also necessary to consider the cost to trigger the reservation.

Since many hotels maintain a budget for operational expenses (reservation delivery) separate from a budget for operational expenses (triggering the reservation), it can be problematic to determine actual distribution costs because these fees are often combined when charged to a hotel.

Are Search Engine costs treated as a marketing fee or as one to facilitate the booking of a direct reservations? Does the online travel agency (OTA) commission get charged as a reservation or a marketing expense on the P&L (Profit and Loss Statement)?

There are many factors to consider when evaluating costs and benefits by channel such as direct and indirect reservations and marketing costs. Each hotel would have to conduct those analyses using its own data to determine the best management action that applies to its own situation.

COMMISSION COSTS ON THE P&L (MERCHANT AND OPAQUE MODEL)
In order to conduct a cost comparison by channel, the reservation expense has to be clearly identified. Connectivity fees from reservation vendors (Travelclick - I-Hotelier, Synxis, Travel Tripper, Fast Booking...), switch fees, retail travel agency commissions or marketing fees, are all booked under an expense that apply against the revenue they deliver.

The cost of business delivered through 3rd parties, being merchant model or opaque model, through the OTAs may prove to be difficult to track because it does not appear on the P&L.

When a room is sold through this model, the hotel provides a Net Rate and never pays a commission after the guest checks out. It is a prepaid room with a rate that comes in only as a revenue.

In order to establish a comparison, the cost of all channels should be identified to enable a comparison.

Apply this to a RSVP Hotel:
- 100 Rooms
- 75% Occupancy
- ADR: AED 500.00
Monthly Revenue (31 Days): AED 1,162,500

Let's take an example that a mixture of OTA commission costs of 20% room only, 25% package and 40% opaque, this may give you a 25% blended commission.

The RSVP Hotel Market Share for OTA is 40%. In revenues, this represents AED 465,000.

Since the commission is deducted on the website for (Expedia, Lastminute....), the amount of deducted commission is equivalent to: AED 116,250. This amount is pre deducted so it does not appear on the P&L.

You need to compare the level of the above commission with your other OTA channels such as Booking.com, HRS, Venere...This task should be carry out by your E-Commerce Executive, Online Distribution Executive or Revenue Manager. This also need to be compared with your brand booking meaning www.rsvpxyzhotels.com, because you have to drive your direct booking strategies.

VARIABLE MARKETING AND RESERVATION FEES

A typical cost for a AED 500 rate at a one night length of stay may range from AED 30.00 to AED 130.00. Those fees comes from Voice-Direct, Voice-Third Party, Voice Travel agent, GDS Fees, Transaction fees, Hotel CRS Fees.

The results of your comparison will have a very large impact on your profitability for 2013 strategies. If you need assistance, contact us.

Romain @ RSVP Hospitality