Defining Revenue Management – What’s the right time?16th July 2015
Revenue Management is defined as allocating the right space (room) at the right price at the right time to the right customer so as to maximise revenue. The right time is about what mix of customers you need on a particular day or in a particular season. So on peak or high days the mix will include more customers paying a higher price. However on low days or in trough seasons then the revenue management strategy will need to allow more lower rated bookings using offers or low paying groups.
In order to decide on the mix then hotels need to know their seasons and day of week patterns and to review these regularly. Is your perception of your patterns borne out by the figures?
Day of week pattern
Hotels should track for each day the key performance indicators of unsold rooms, revenue, RevPAR, no-shows, turnaways, and cancellations, then list any factors that have influenced these figures e.g. you filled on that Monday because of a group booking related to an event. You know you are always busy on a Tuesday, Wednesday and Saturday, but do you actually fill and get money for every room, is there an opportunity to more closely manage those days and actually fill? Or if there is excess demand for a Saturday night, but you do not fill on a Friday, should you be holding out for 2-night stays through controls or offering an attractive package to increase your Friday night occupancy?
For hotels using Oracle Micros OPERA Property Management System the History/Forecast report is a good source of data for this analysis. For hotels using Guestline’s RoomLynx the Revenue By Period Report can be used.
At least once a year it is good practice to review which are the hotels high, medium and low weeks and months. Are they the same as last year? If not, why not? What is changing in the pattern of bookings, customers or demand? This should definitely be done as part of the budget setting process. However it would be good practise to do this on a quarterly basis.
So a hotels medium season is the weeks and months with the most normal pattern of business. A high season is when the pattern of business is changed to be much higher than normal by an event. So conversely a low season is when the pattern of business is changed to be lower than usual, often this is a particular time of year. School holidays will have a different effect on different hotels. A leisure driven hotel will see school holidays as a high season demand driver, whereas a conference hotel will see these as a low demand driver.
Most hotels will have annual events which completely change the pattern of demand, these could be called peak seasons or event seasons. So after each event period, the performance should be reviewed and the questions asked:
- What worked and should we do this again?
- What didn’t work and we should not do again?
- What can be improved?
So thinking about what can be improved:
- Can you require a longer length of stay? If the event is for 3 days, are all your bookings for 3 days, if only for two, could you offer a three night package at a good price with pre-payment for advance booking?
- Can you increase the price? If there was excess demand demonstrated by turnaways or other hotels looking to out book, is there an opportunity to charge more?
- Can you offer a package that will increase the average spend? For example, if many guests only book for room and breakfast, would a dinner, room and breakfast package increase the spend?
Once you have reviewed the event and planned for next year, put it in place immediately after the event, so that as soon as customers are looking your offer is there.
- Review your day of week pattern each month, you may think you know it, but look at the figures, is it changing. It should be if you are putting in tactics to improve it.
- Review your seasons, again they may change or the pattern may change, look at the figures, make your plans. This is a key part of your budget planning.
- Set the offer for annual events immediately after the last event. Review the performance of events promptly.
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