What Could Revenue Management Offer for Hoteliers Beyond Room Revenue?

Before the COVID-19 crisis, hotel revenue management was largely focused on maximizing room revenue. When COVID-19 hit the global hotel industry, this force hoteliers to come up with many revenue-generating creative ideas to keeping their business afloat from room revenue to renting out equipment, offering outsourced services and using every square foot within the hotel property to generate more revenue.

At its core, total hotel revenue management brings together and optimizes all revenue streams, as opposed to thinking of each department separately. Thus, a more holistic approach to revenue management is needed to identify revenue-generating opportunities and optimize revenue and profit generation. Today, hoteliers are looking for ways to generate extra revenue even during low-occupancy times, in line with this, we’ll see an important shift towards total revenue management and not only room revenue.

When it comes to hotel revenue management, a lot of focus rightly goes to room sales. Again, that’s understandable. As a hotel, the property’s primary means of generating income will be through room sales. However, it should not be hoteliers only focus, the hotel Industry has been talking about moving beyond rooms revenue for decades, but fortunately the pandemic accelerated an opportunity that was there even before for hoteliers to move beyond the room revenue. Managing room revenue only is no longer enough in today’s unpredictable and fast-paced market. Especially during the pandemic, every hotelier will have heard or used the terms total revenue management, or total hotel revenue optimization. New circumstances call for new approaches, which is always a jumping off point for innovation. To effectively apply a total revenue management strategy beyond room revenue, Hotels need to change the perception of hospitality being less about just selling rooms, and more like a retail business. In such low demand, Hotels must focus on how to drive revenue beyond the core business (room sales) through alternative space usage and ancillary revenue, as today, what used to be seen as ancillary income has become a primary source of revenue for some properties. And there’s still room to grow!

 Alternative and Optimizing Space Usage:

Thinking out-of-the box has become the norm, rather than the exception. But adding functions to existing areas while keeping the luxury and comfort factors in mind is no mean task. Some hotels are rethinking their spaces for different uses where the segments’ demand evolution post-pandemic saw the rise of different customers and different needs, which required the Hotels’ strategy adaptation towards a more local and experience-driven target, by re-imagining the use and function of every square foot of a hotel property, and how revenue is generated from it.

Hoteliers need to move away from the idea of “Meetings & Events” and instead think about “Space as a Service”. Simplistically, any hotel has a certain number of square meters. You sell the square meters for meetings (yes), events (yes), but anything else is possible as well, especially during “low demand -time”. who would have thought that Hotels would sell their room as an office space, turn their restaurant into a ghost kitchen or sell the suite as a private dining room?  Those all are ideas for optimizing any space and any square foot in the hotel, no matter where it is located, it could be the hotel roof top, if there is a demand sell it to the right customer at the right time with the right price, at the end of the day it will generate revenue, here are a top ten ideas to monetize more space at a typical hotel.

• More Meeting Space: A) Sell more meeting space by adding tables and chairs to your pool or garden area, B) Proposing kitchen space, C) Turn a conference room into a coworking meeting space, D) Rent out tables and chairs instead of entire meeting rooms.
• Breakout Rooms: Divide large ballrooms to create a bunch of smaller meeting spaces.
• Business Center: Turn your business center into a bookable meeting space.
• Housekeeping: Offer Housekeeping services for residential and commercial clients
• Rooftop Access: Sell rooftop access.
• Hotel Parking: Sell hotel parking lots and garages for a different meeting space.
• Lobby Area: Take advantage of your hotel lobby space by including it as a sellable option.
• Restaurant: Rope off private dining room space in your hotel restaurant for more meeting space.
• Hotel Gym: Offer your hotel gym as a meeting space.
• Bar Area: Sell more meeting space by offering a section of your bar area.
• Garden: Sell your garden as open-air wedding hall or Offer access to courtyards and green space.
• Laundry: offer laundry services for local residents and businesses

There are so many ways you can stretch and adapt your hotel space to accommodate new business segments, where after a certain point, you still can capture and customize your hotel space with a meeting planner’s attention when they want to give their events that “downtown” feel?

Revenue strategy has become more complex than ever. In response to that complexity, hospitality organizations must evolve to meet new challenges and find new opportunities for increased revenue, Hoteliers must re-imagine their properties to do that, with every square foot representing the potential to maximize results. Maintaining consistent occupancy levels in guest rooms is still an important business objective. But there is more to the story, as hotel events spaces of all kinds – convention halls, ballrooms, meeting rooms, and even poolside and garden spaces – represent opportunities to make the most of a property and to serve the needs of a wider spectrum of guests and the events they attend. Tracking revenue in these spaces means building on the potential of a hotel location beyond guest rooms.

Ancillary Revenue:

In the hospitality industry, the term ancillary revenue refers to the revenue gained or generated from sources other than the primary product offering, which is the rooms and in order to optimize this, you need to think of your hotel as more than rooms and rates. These revenue sources include food and beverage services, transportation, entertainment, spa and wellness, or miscellaneous services such as extra beds, flower delivery………etc. Several types of revenue sources can be packaged and offered to a particular customer segment, like business, leisure, family, or group travelers. Additional services are in high demand by business travelers of all age groups; while packages are more popular with leisure travelers.

In a more holistic way that leans towards complete revenue cycle generation, the buying cycle of the guest does not end after we sell the room, hence we need to understand that the pandemic deprived people of the joy of travel and therefore the pent-up demand will be strong: guests will be willing to enjoy the vacation they longed for long. Opportunities are there as long as the Hotels change their sales approach and become relevant and specific on their non-room revenue strategy. It is, as always, just a matter of understanding and profiling what demand is out there and how to satisfy our guest and convert it with the right product and offer, at the right time.

 The room purchase is part of the “travel budget” or the guest cycle , but when at the hotel property, the guest opens the “leisure budget” for extra leisure spend such as room upgrades, dinner, spa….…etc there is an opportunity to tap into that second wallet and create a memorable personalized experience for a deeper engagement of the guest and incremental extra-spend and Total RevPAR for the Hotel, Ultimately, implementing ancillary revenue ideas will lead to a more fulfilling experience for the guests who accept them and flood your hotel with a whole new source of revenue.

Having said that, even in less challenging times, ancillary revenue strategies are an excellent way to earn additional income via upselling and cross-selling hotel products and services. A strong ancillary revenue strategy would allow you to move beyond selling only rooms. It enables you to drive more revenue for your business while ensuring a more holistic guest experience. Wondering which are the top ancillary revenue tactics that can add to your dynamic hotel pricing strategy and transform your hotel’s revenue-generating potential? So which ancillary revenues are more profitable? And which are most popular?

• Upselling: Transform your free room upgrades into paid upsells.
• Packages: Offer hotel packages and bundled services to target your local, short-haul and drive-in feeder markets.
• High Speed Wi-Fi: one of the most popular options, you can sell it as free and more advanced with fees,
• Early check in by Hours: Give your guest an option of flexibility to arrive to your hotel.
• Late check out by Hours: anther popular request, don’t miss the chance to change it with hours to give flexibility to your guest and to use the hotel other services.
• Business Center Services: make it as a small fully equipped office or small meeting room.
• Extra loyalty Program Points: It can suit several business needs, but the program must be designed with care to ensure value for both the brand and the paying customers.

Remember that Ancillary revenue influences GOPPAR,

Beyond Room Revenue: Shifting to Total Revenue Management and Profit Management

For a long time, Occupancy rate, ADR, and RevPAR, were the most important KPIs in hotel revenue management. They measured business success and were compared to the same metrics of competitors, even for years, the hotel industry has used traditional RevPAR models to maximize revenue but today’s paradigm is different.

However, as the pandemic continues to transform hospitality, hoteliers recognizing the flaws of traditional revenue models are turning towards strategic profit management or TRevPAR models (Total revenue per available room). With TRevPAR models, hoteliers are placing a new emphasis on the revenue streams beyond room occupancy, including F&B, spa revenue and more to the point of using every and each square feet in the hotel.

But as Hotels begin to center their attention on the revenue earned beyond room revenue generated by occupancy and rates, they also need to reevaluate how they measure total revenue to truly capitalize on revenue-generating opportunities. Just as hoteliers utilize yield management systems to determine the total revenue per available room, it is critical to understand yield management in the other departments to take maximum advantage of their potential demand.

This means that the KPIs will focus mostly on GOPPAR (Gross Operating Profit Per Room) and TRevPAR (Total Revenue Per Room). a 2017 study, conducted by Sheryl E. Kimes of Cornell University School of Hotel Administration the Future of Hotel Revenue Management, reveals that GOPPAR and TRevPAR are indicated as the most important benchmarks with 33.7 and 17.5 percent of respondents supporting this idea. The research participants were 400 revenue management professionals. RevPAR (revenue per room) remains an important KPI for hotel revenue management, but its relevance is declining.

The move to total revenue management involves a shift from a tactical, short-term focus to a more strategic, long-term view. Total revenue management relates to capturing mostly untapped revenue and profit potential, associated with hotels’ non-room revenue-generating centers. Some hotel chains are already expanding revenue management practices to F&B outlets and/or the function rooms.

Overall, there is opportunity, the revenue management field needs to decide though where to priorities Hoteliers need to shift the mindset from a room-only / RevPAR-focused approach to a Total Revenue per available square foot (or meter) And make that net revenue while we are at it…

“Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com”