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Hotel Brands Work to Simplify Revenue Management

Jan 24, 2012  By 

As revenue management becomes increasingly sophisticated and complex, many major hotel companies are rolling out new platforms and tools to help managers at the property level.

 Phoenix-based Best Western International, for example, recently introduced a two-pronged support structure that offers for-hire services, as well as simplified rate “buckets.”

The first approach—revenue management for hire—fills a need for properties that don’t have a revenue manager on site, said Ron Pohl, the company’s senior VP of brand management and member services.

“We do a regional revenue management process where we combine about eight hotels … a very strong, experienced revenue manager will provide support to those eight hotels and (the hotels) pay that person’s salary to do that,” he said.

Nearly 200 of Best Western’s approximately 4,000 hotels throughout the world are taking advantage of the service, which is based in the company’s corporate office in Phoenix.

 

“Their (revenue per available room) is 30% higher than our brand average,” Pohl said. “Revenue management requires a lot of skills and expertise, and many hotels, especially in the midscale market, don’t have those skills and expertise, nor can they afford to pay that person and have them on their payroll.”

The second prong in Best Western’s revenue-management support system is an enhanced set of tools managers can use to control their own pricing structure at the property level.

Any brand or hotel can have between 30 and 50 rate codes that are opened and closed on an hourly basis, Pohl said, adding the process can be incredibly complex and time-consuming.

 

To streamline the process, Best Western developed a system of “buckets,” in which various rate categories are grouped together. A typical property might have only four buckets, Pohl said. One might contain the government rate, AAA discount and a locally negotiated rate, all of which are a 10% discount off the property’s best available rate. In another bucket might be the rate codes that receive a 20% to 25% discount, and so on.

“(Managers) can very quickly go into our system and say for any given day or any given hour, ‘Open this rate, close this rate,’” Pohl said.

The platform also tells managers whether they’re ahead of or behind pace, he added.

“They’ll know for that given day, Monday is pacing 10 rooms ahead of normal—you may want to close down your bottom two rate buckets and leave your top two buckets open,” Pohl said.

 

Brand support
Best Western isn’t the only major hotel company to offer increased support to property-level managers.

Denham, U.K.-based InterContinental Hotels Group also offers revenue management services for hire, as does Parsippany, New Jersey-based Wyndham Hotel Group and McLean, Virginia-based Hilton Worldwide.

Hilton has approximately 325 of its 3,750 hotels taking advantage of the services, Chris Silcock, head of global distribution management, said.

The company also introduced a pilot program at 20 properties in the U.S. that combines “the most advanced analytics” to essentially control revenue management functionality at the property level. Owners or managers have the option to let the new software run on autopilot, but they also can step in and pull certain levers to address situations out of the ordinary, Silcock said.

He reiterated Hilton is “not taking away in deploying this system revenue management from the hotel.” Rather, the company is providing franchisees with a new tool that lets them focus their attention back on other areas such as the guest experience.

Official rollout is scheduled for later this year at Hilton’s focused-service brands, with full-service deployment planned for 2013.

When asked about the potential cost to owners, Silcock said, “That’s not something I’m ready or willing to discuss.”

 

Wyndham soon will begin rolling out its own simplified support structure, which comprises new tools and analytics, said Flo Lugli, the company’s executive VP of marketing.

“We are implementing several different tools through our revenue management and related areas on the distribution side to really understand what’s happening out there, to understand need periods better, to understand pace (advance bookings compared to last year) to really understand revenue optimization and margins,” she said.

“We also have added some additional staff for analytics to support revenue management and distribution teams in those areas,” Lugli added.

Silver Spring, Maryland-based Choice Hotels International is doing the same, said Sharon Paine, senior director of rate and sell management. The company, which franchises more than 6,100 hotels throughout the world, developed a platform that incorporates “BAR levels” similar to Best Western “buckets.”

Property-level managers can attach selling strategies to various best available rates. For example, the highest BAR might represent periods of highest demand, during which time the steepest discounts are turned off. On a day-to-day basis, managers can switch from BAR strategy 1, to BAR strategy 2, to BAR strategy 3 and so on, Paine said.

Choice has sent its corporate revenue management team and other support out into the field to help owners set these pricing strategies.

 

Beyond the BAR
The brands’ new approach to revenue management is more encompassing, stressing optimization across all channels instead of a blinder-like focus on rate.

Wyndham, for example, is working to drive more direct bookings through its websites and mobile platforms. The company launched eight new optimized brand websites since September 2011, Lugli said.

Every source interviewed for this article said their companies are providing more training and educational sessions to educate owners on the true costs of each channel.

 

“We are looking to enhance our business intelligence arsenal and capabilities in order to optimize revenue across all channels and segments,” Lugli said.

 

About Patrick Mayock

Patrick Mayock

Patrick Mayock is Associate News Editor with HotelNewsNow.com. Patrick specializes in writing articles and creating multimedia news content for HotelNewsNow.com’s Web site and daily newsletter. Patrick joined the HNN team after a tenure

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