Albert Einstein famously once said: “Education is not the learning of facts, but the training of the mind to think.”
The most successful hoteliers are savvy operators constantly on the lookout for smarter, more efficient ways of managing their hotel business and driving it to succeed.
Looking at the discipline of revenue management, it’s a perfect example of how hoteliers can not only learn the facts but train their minds to think in a different way.
One hotelier leading the way in his field is Stefan Wolf – senior vice president revenue & distribution strategy for the ONYX Hospitality Group.
With more than 20 years’ experience working with some of the biggest global hotels brands – namely IHG, Marriott, Jumeirah, and Shangri-La – Stefan has taken his passion for the evolving nature of revenue management and distribution disciplines, and turned it into a track record of profitability.
Now with the ONYX Hospitality Group, Stefan leads his team across 40 properties to execute leading revenue generation strategies. So it was only natural that we asked Stefan for his top tips and advice.
Here are Stefan’s most valuable revenue management rules your hotel should be following every day to maximize bookings:
1) Strive for a healthy business mix optimization
Within your database of guests, there are different segments and it’s important to understand how they differ. Crucially, they’ll have different lead times in order to diversify and optimize your business mix for your hotel. Generally speaking, these are:
Lower yield segments – These are guests who typically book earlier – although it can be six months out for city hotels – but tend to give you business all year round. Think guests from wholesalers.
Higher yield segments – These are guests who typically book with considerably less notice before arrival, maybe even five days prior to arrival.
Think guests from OTAs and direct bookings via your hotel’s website.
2) Forecast your demand by day and by segment
Once you’ve become familiar with your lower and higher yield segments, your next step is to think about demand, and how that changes from period to period.
If you have a low demand period, you take what you can get, but the challenge is high demand periods. If you get a high demand period and you fill it too early with the business you get earlier, you leave money on the table.
To drive incremental revenue, you have to:
- Forecast by segment
- Put a strategy in place which prioritizes high yield over low yield.
This is easier said than done because the critical part is forecasting. You need to know your demand for best available rate (BAR) business and high-yield business, and ultimately have enough confidence to say no to the low yield business.
You need to be able to forecast by day and by segment too – in the past this was done once a month, but now it’s evolved to forecasting by day and by segment.
It’s critical to really understand your opportunities via demand periods. If you have a revenue management system (RMS) it will do this for you – but without that, you would have to do it manually.
3) Think about revenue management as a marathon, not a sprint
Revenue management as a discipline is very numbers driven, looking at what will give you higher revenue and profit. But it’s a marathon, not a sprint.
Some segments will give you business year-round. For example, wholesale business is lower yield, but supports you year-round, while other segments tend to be more seasonal, like corporate business, so you also have to make sure that you make the selection on which business to accept and not to accept.
If in high season you only take high yield (eg. BAR or OTA) business, then that season will drive more revenue, but you will damage the relationship with low yield guests and potentially get no support for the rest of the year.
The end result is that you have less revenue. Sales typically handle the relationship with our clients ensuring we get business all year-round. Often we have to compromise short-term revenue for overall profitability throughout the year.
It’s a tricky balance.
4) Analyze the spending power of your guests by location
When you analyze different markets, you will start to see that length of stay and spend by guest is very different across different countries.
Once you start tracking geo-source and spend with your property management system (PMS), you can make decisions on which markets to focus on and which ones to restrict.
This data allows you to make decisions on which groups to close out, or which ones to focus your marketing efforts on, in order to diversify and optimize your mix for the hotel.
5) Invest in good talent…you’ll thank yourself later
If you are starting in the revenue management journey, this is a critical investment. Hire the right person, who has the ability to analyze numbers, and more importantly is able to communicate what these numbers mean to an audience who isn’t familiar with revenue management.
Revenue management is full of introverts, but it is important to have a revenue manager who is able to communicate their strategies to all stakeholders. This allows everyone to understand why recommendations are being made and get behind it. Without being able to communicate effectively, the other stakeholders in your hotel would be reluctant to give it a shot.
6) Subscribe to technology to help you watch your competition
Understanding your local market dynamics and identifying opportunities to increase or lower your prices accordingly is a mammoth task. Independent hotels may not have the resources to subscribe to a rate comparison technology provider, but the alternative is a manual job, which is very time-consuming.
There are so many hotels, you have to constantly browse the web, and then have all the combinations of length of stay – it’s an almost impossible task.
If you can, use a technology provider, which gives you access to the rate positioning of your competitors long-term (the year ahead but especially the next 30 to 60 days).
If you have a tool that can provide alerts that competition is closed out or are bringing their room rates up, you can identify an opportunity to increase your own rates.
On your own you may not be able to react quick enough to market changes and miss an opportunity to increase your hotel’s rates (and profitability) in time.