Get your Revenue Management in Shape for 2015!
During the first few days of a new year, everyone is busy planning their personal new year’s resolutions. But although most of us spend the beginning of each year focused on self-improvement, we rarely think about new year’s resolutions for our business.
For hotels, this is an especially important practice because your revenue management practices can make-or-break your hotel’s profitability for the coming year. So while you’re planning your resolutions for 2015, consider adding one for your property: to get your revenue management in shape for the coming year!
Here are four steps that every hotelier and revenue manager should take this January in order to ensure that their revenue management practices are in tip-top shape for the year ahead.
Abandon Deep Discounting
I wrote an article at the end of 2014 discussing the problem with deep discounting as a revenue management practice. I won’t repeat the entire article (because it’s available to read here) but here’s the key takeaway: “Deep discounting is counterintuitive because giving away rooms for practically nothing results in a drastically decreased RevPAR and because it can damage a hotel’s brand.” In short, if you do choose to offer deep discounts at any time this year, you could be damaging your hotel’s profitability over the long term. Even if it does result in a short-term boost in occupancy, it’s unlikely that the budget shoppers who book at this bargain-basement rate will spend enough on food and beverage or other incidentals during their stay to actually make the promotion worth your (financial) while.
Incentivize Potential Guests to Book Directly
One of the revenue manager’s most difficult tasks is to increase the volume of bookings coming through direct channels, instead of through the OTAs. In order to accomplish this, think beyond the room rate. Consider other ways that you can incentivize your potential guests to book directly, like offering value added services. Value added services could include perks like free parking, free airport transfers or a free breakfast, or they could include free upgrades to better room types, or extra loyalty points. The only limit to these incentives is your imagination.
There are a few things to keep in mind while planning your incentive program. First, make sure that you are offering incentives that aren’t very expensive for you to fulfill but that have a high value to guests. For example, free parking or free room upgrades are very valuable perks for guests, but will not cost the property a great deal. While breakfast is a great incentive for guests, it can often be very expensive for hoteliers to fulfill those incentives, making it a less attractive option for those properties that don’t already offer free breakfast to other types of guests.
Secondly, make sure that you promote your incentives via all of your marketing channels to ensure the greatest boost in direct bookings. Consider posting a message via social media channels, include info about the promotion on your homepage and your booking page (if not every single page to ensure optimum visibility), including it in your marketing newsletter, letting current guests know about the promotion to ensure that any repeat bookings will be done through the site, etc.
Cultivate your Online Reviews to Improve Profitability
It is very important for hotels to monitor their online reputation channels (such as TripAdvisor) and address any issues or negative feedback that may arise immediately. A 2012 study done by Cornell Center of Hospitality Research showed that a one-point increase in a property’s ReviewPro Global Review Index™ (GRI) score would enable a 0.89% increase in price (ADR), a 0.54% increase in occupancy and a 1.42% increase in RevPAR, making it very valuable for hotels to monitor their online reputation on an ongoing basis.
Invest in a Sophisticated RMS
Most importantly of all four of these tips, a sophisticated RMS is the key to getting your revenue management strategies in shape for 2015. Here’s why… most revenue managers only work Monday through Friday, leaving a property’s pricing updates stagnant during at least 105 days every single year. That’s 105 days that a property can lose money if the market changes drastically and there is no revenue manager available to make the changes manually across all online channels. And that’s not even taking holidays and overnights into consideration, during which times most hotels don’t have revenue managers working.
But with a sophisticated RMS, your pricing updates don’t have to stop when the revenue manager is not in the office. Sophisticated RMS technology can eliminate tedious manual analysis, calculation and updating of rates as the market changes. With the right RMS, it will be done automatically in real-time, to ensure that your property is always offering the best room, at the best rate, at the right time, which is the most effective way to increase your occupancy, ADR and RevPAR this year.