Revenue Management The Integration of Revenue Drivers

As peak season nears for many hotels, revenue management is the key to a successful summer season. Leisure remains strong even as business travel continues to disappoint and it is imperative that in March the pieces are in place to maximize revenue.

Potential customers are much smarter than they used to be about locating, qualifying and making their hotel choice. In many cases, this process is completed without ever contacting the hotel.

The term revenue management means many things to different people — whatever the definition, the intended end result of the process is increased REVPAR for the organization. It is increasingly clear from feedback that I receive at seminars and from my consulting clients that there is often a lack of co-ordination and/or consultation on the rate and offering through all of the revenue drivers.

Revenue drivers are defined as all areas of revenue generation within the organization. This includes central reservations, property-level reservations, the sales department, the electronic distribution channels and the web site. While franchised properties have a higher level of consistency through the GDS, it still requires monitoring and management at the company or property levels.

At a recent sales seminar, participants expressed frustration that they are largely unaware of, nor are they consulted about the rates that are posted on the electronic distribution channels. One result is a very high attrition rate in meetings and conventions as attendees book their hotel at these lower rates and “fall” off the group block. Another consequence is when the rate posted is lower than what has been negotiated with third-party suppliers such as wholesalers.

A coaching client of mine expressed frustration over his lack of consultation in the development of the new property web site and the rates that are being quoted through the site. First of all, the content was skewed to a specific market segment that was not representative of the core business segment and secondly, the copy changes disrupted the optimization strategy.

Secondly, the rates that were quoted were not at all aligned with the rates being quoted at the property level or through the central reservations agent and many room descriptions were inaccurate. The end result was that not only was this hotel  nowhere to be found on the key word searches in the major search engines — a potential disaster for this independent property, but fewer reservations were being made through the site.

Collaboration across all departments that generate revenue is the only way to ensure continuity. This need not be a tedious process of endless meetings. A few things put into place and adjusted periodically, based on market conditions and forecasts, are sufficient:

Product/Rate Positioning:
A plan for product/rate positioning is ideally developed as part of the Business/Marketing plan process and includes consideration of the product/rate positioning of the competitive set, group bookings, rate resistance input from reservations and past history. Once the strategy is developed, it then only needs to be adjusted periodically. Don’t forget to monitor the franchise yield management system in light of groups or events in previous years that may not be a factor in the present year.

Existing and Anticipated Contracts:
These include group contracts, volume contracts with LNRs, wholesalers and any other rate commitments. Just as the sales department makes decisions based on the rate structure, so should consideration be given to any agreements made thorough sales. It is one thing to adjust rates on the web site or distribution channels to drive volume at a slow time but if it undermines the agreements above, it is counter productive.

Web Site Presence and Reservations:
Many leisure customers locate the hotel through key word searches on the search engines. Others locate the hotel on the electronic distribution channels then access the hotel’s proprietary web site. Still others will pick up the phone after visiting both and call reservations to see if they can cut a better deal. It is essential that the “message” of rate and offering be relatively consistent across all channels to be effective. The rates on the web site need to be adjusted in tandem with the electronic distribution channels and reservations needs to be aware of what’s appearing on both.

Another consideration in web site development is the increased use of the site as a sales tool. It becomes the electronic brochure. The sales department’s inclusion in its development is essential to the site’s secondary role as the electronic brochure. Sales people should be accessing the site with their clients to moderate the virtual tour. If there is a special rate posted that is inconsistent with the rates sales are quoting, it blows them out of the water and appears to the client that the hotel doesn’t know what it is doing.

The process of collecting the information is about communication and collaboration and can be accomplished through periodic updates from the revenue drivers to the revenue management team. This swings both ways as revenue management needs to keep the revenue drivers informed of their proposed tactics in order to solicit input and buy in.

The consequence of not doing this is to present an inconsistent message to the public who is in the position of making selections without any direct contact with the property thus depriving the hotel from any opportunity to make adjustments or explain the disconnect. In the consumer’s mind, a hotel that can’t get its act together to project consistent rates may have the same problem when it comes to servicing them as guests.

The issue is more than rate parity, it is aligning the rate structures between all revenue generating departments so that each is maximizing their contribution to revenue.