Appropriately, hotels are attuned to channel and revenue management, actively setting hurdle points and rate fences to manage demand on a daily basis. In my view, there are thousands of dollars being lost at the point-of-sale by front-desk personnel who have not been properly trained to handle the walk-in and/or rate-sensitive customer in person. No matter how good the property management system is displaying rates to assist with yield management, many of the skills are dependent on effective “wetware” (a.k.a. people) and not hardware nor software.
Perhaps the best way for me to define yielding is by way of example. Recently, I was retained by a client to do an overall operation analysis and implement programs that would improve profits, reduce costs and improve guest satisfaction scores. As part of our agreement, I made him promise to allow me to arrive as a guest on property unannounced as a walk-in. The property staff was not to know who I was until after I had been able to shop the hotel both from afar and in person.
I drove to the hotel and walked up to the unsuspecting desk clerk without a reservation. Here is the exchange verbatim:
Me: “Got any rooms for tonight?”
Him: “Sure do. The rate is (US)$97.90 plus tax per night.”
Me: “That’s too high.” Thanks a lot. I start to walk away. “Can you give me directions to the XYZ hotel?”
Him: “Sure. Go out of the hotel and take a quick left, and they are on the right-hand side.”
Me: I walk to the outside entry doors, and just as I am about to step out he says …
Him: “You don’t want to go there. Their rooms aren’t very nice. How about I give you the AAA rate?”
Me: Still standing in the doorway, “How much is that?”
Him: “(US)$91.90 plus tax.”
Me: I walk back in and go the desk. “I saw you online for less. If you can do (US)$85.00 I will stay here tonight.”
Him: “It is only for one night, so sure.”
There are lots of things wrong with this interaction, including the fact the clerk had no nametag. What’s important is the amount of money the hotel lost in this exchange unnecessarily.
Here is the Wiki definition: Yield management is the process of understanding, anticipating and influencing consumer behavior in order to maximize yield or profits from a fixed, perishable resource. As a specific, inventory-focused branch of revenue management, yield management involves strategic control of inventory to sell it to the right customer at the right time for the right price.
Yielding is one of the old-school methods taught to me in the early 1990s by seasoned hoteliers back in the day before the Internet and modern notions of software and system-driven revenue management existed. But it seems some of the new methods have gotten so advanced that the basic interaction from guest service representative to guest has been less-trained and trivialized.
Let’s talk about what should have happened:
First, let me start by saying that at no point should any walk-in be allowed to leave the property without trying every strategy we discuss below, and, if necessary, being offered a daily, lowest-available rate that is determined on a daily basis by management. One-hundred percent capture of walk-ins is always the goal because at the end of the day a hotel’s fixed costs will occur whether a guest stays there or not; the inventory is perishable, and the turn-cost, or what is known as variable cost per occupied room (costs that occur as a direct result of a guest staying in the guest room, e.g. housekeeping labor to clean the room, wash the linens and terry, replace bathroom amenities etc.) runs anywhere from US$15 per occupied room to US$55 toUS$60 per occupied room if you are in a major metro such as New York. Most hotels’ turn cost is less than US$40 per occupied room, so any dollar achieved in rate above that is helping pay fixed costs and helping to achieve profit.
Tony Hsieh, president of Zappos, spoke at a conference I attended and was asked what he likes or dislikes about hotels. He said he dislikes hotels where front desk personnel try to “process him” as fast as possible. He discussed an encounter with a clerk who made him feel special and like an individual as one of his best hotel experiences. Not all situations allow it, but there is an old adage that says, “Every word you get the guest to say before quoting the rate is like pouring sand on his/her shoes”.
One “trick” you can use is to pull up the room inventory on the computer, tell the guest you are checking availability and ask “What brings you to town?”
Probe and start high:
Now that you have built rapport, start asking the guest important questions to qualify his/her business:
-Are you a member of BRAND X frequent traveler program?
-Have you ever stayed with us at our hotel before?
Your guest service representative can now respond appropriately with a rate depending on the answers to those questions. If the guest is staying for 30 nights, will that influence the GSR’s response and redouble his effort to capture the walk-in guest? It better! If the answer to all the questions is essentially no, have the GSR quote by room type a value-added room that is available like this:
“I am pleased to tell you we do have a room available tonight. I have a room that features a Jacuzzi tub and a full-size, stand-up shower, king size bed, etc. Bear in mind that our hotel offers complimentary Wi-Fi, complimentary breakfast, free parking and features a terrific fitness center and indoor pool … again, all at no additional charge. The rate for that room is US$119 plus tax. Would you like me to reserve that for you now?”
If the guest resists, have the GSR drop down to the next room type and quote rack rate, say, “I do have a King Spacious Room available tonight for US$109. That room comes with all of the same amenities as the one I just quoted, but does not have a Jacuzzi. Would you like me to reserve that room for you?”
If the guest resists the rate, rinse and repeat with the next best room type rack rate. In this case perhaps you take away the king bed and drop into a two-bedded queen. By taking away value adds from each room, like falling from one tree branch to another, the guest understands the value that was associated with the drop. It is also easier for your GSR. Most GSRs upon resistance will go to a hip pocket discount (e.g. AAA) to make it easy. Give them something else. In this scenario, the guest might actually not want a non-king room and might yield to a rate to earn that room type.
So your GSR has done his best, but this guest is one tough cookie. So let’s make the best of it. Ask again if the guest has ever stayed at the hotel. The expected “No” response comes back and your GSR can say, “We would like you to be our guest. We think once you stay here and experience our staff and our fine hotel you will return. For this evening, I am able to offer you a rate that only our highest-volume accounts get.”
In this case, let’s say the lowest-available rate is US$89. This hotel would pick-up US$4 per roomnight from this guest, but there is a really good chance the guest will accept one of the rates in the process before the threat of walking out evokes our LAR.
Even the best hotels might be losing money at the point-of-sale. Does your hotel have walk-in traffic and are your capturing 100% of it? Do you have a LAR system in place for the moments when it is needed? Is your hotel “processing” guests at check-in as opposed to taking an interest in them and upselling the property in so-doing? Even US$1 more in average-daily-rate-achievement can yield fabulous “found” revenue for your property.