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The Revenue Manager of the Future

We have confirmed that the hotel revenue management is constantly evolving and in this article Hotel Business Review offers a list of skills that describe a revenue manager. This is a list based on Sherri Kimes’ research from Cornell University and Kelly McGuire’s experience from the SAS Institute.

Here the list of skills for the revenue manager:

Analytical: revenue management is a science and even if we are now surrounded by new revenue management software, we still need the person who understands the results, who is able to translate them and to create the right strategy. Someone who really comprehends numbers and statistics.

Good communication skills: the revenue manager is a “geek who can speak” (S. Kimes), because it is essential to be able to explain, sometimes complex strategies, to the rest of the team, who does not speak “numbers, analysis and statistics”. This person needs to clarify the importance of concepts, of actions taken and at the same time be able to be influential and successful.

Data-minded: it is critical that the data are understood – their origins, their reasons to be, their strengths and weaknesses and gathered and analysed to develop the successful strategy.

Technology-savvy: the revenue manager needs to have a technical knowledge, to be able to deal with the hotel software, their integrations. He/she needs to have a good expertise on web page and social media as well as new mobile applications.

Negotiator: the revenue management is not only for hotel rooms, but all the departments that bring revenue to the property. Working very closely with the marketing team, the revenue manager becomes the middle person between the operations and the management, working in […]“political waters to drive results”[…]

Education: courses and trainings in revenue management are really important, they give the right fundamentals to the coming experience, to grow in the right direction.

To conclude, revenue managers need to be really empowered and free to make decisions, they need a good knowledge of numbers, statistics, technology, but they need some operations background.

Hotel managers need to create new incentives for the sales team, no longer based on volume!

Cluster offices are not always the right solutions.

Technology is essential nowadays and we need to stay on top of it to be more competitive.

Just one simple fact experienced lately. I have been talking with a lot of people, from the hospitality industry, and many of them, after I stated my profession, have smiled at me and said that they are doing “revenue” since the beginning of the millennium. It sounded really interesting, and then I asked what they meant and the answer was, “we open and close rates and availability many times during the day”. Still confused I asked “what else?”. During the various conversations, I have realised that there is still a little misunderstanding on how the roles are covered among the departments of sales, marketing, reservations, even front office and the management itself, everybody is doing something that should be part of the revenue manager’s job description!

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How to create a better comp set

Many properties, especially independent and small boutique hotels, have no ideas how to look at their competitors, they raise a few questions, they are not sure whom they need to recognise as competitors, if by location, size or style, brands, chains or independent…and if it is really necessary to “waste” so  much time on it. Yes, it is important to have a significant understanding of the comp set, it is one of the elements that helps to create a better strategy.

In this article HotelNewsNow offers a very clear description of how to understand the competitors’ list, how many different sets of competitors the hotel can choose from and how to benchmark them.

Here are a few points to refine the comp set:

  1. Understand comp set composition – the average suggested is five or six properties. I personally worked most of the times with eight, depending on the area, at list for the primary list.
  2. Consider multiple sets – a second or even a third one can be added:
    • Regional – when the typology of our property can really compete with the entire region. E.g. I used to work for a property located at 1500m and nothing else around, so we used to look into other similar properties over an area over 4,000kmq.
    • Local – hotels that are not necessary of the same style.
    • Aspirational – hotels we would like to become, maybe after a renovation.
    • Niche – hotels that are not in the same location, but of similar characteristics.
    • Seasonal – properties open during the same time.
    • Group and transient mix – for properties with a great group business, it is important to focus on what the competition is doing exclusively on the group segments.
  3. Understand how to benchmark your comp set – STR can help on grading the properties to understand which category is better for the hotel:

                […]The grade is based on nine criteria:

  • Comp set average daily rate spread
  • Class variance
  • Nameback percentage
  • Occupancy standard deviation
  • ADR standard deviation
  • Revenue per available room standard deviation
  • Average distance
  • Room count variance
  • Age[…]
  1. Recognize opportunities to improve – it is important to keep an eye on the comp set and to update it, if new properties are added in the area or of a similar category, if some hotels have been refurbished or have been going through a particular change. Waiting years before changing the comp set does not give us the right information.
  2. Use all available tools – the right comp set is a tool and if it is not up-to-date it will bring no help to our strategy.
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How the Best Hotel Revenue Managers Have Transformed The Profession

Hotel Revenue Managers have transformed the profession in the last 15 years and I particularly like this article when it says that the Revenue Managers “are self-dividing into two distinct categories: those that are well prepared (or preparing) for 2024 and those that are well prepared for 2004.”

In the few years before 2008, we have seen a massive increment in revenue and profits in tourism, it was the time when OTAs have found a fertile ground for a splendid growth. The demand increased exponentially and the hotels were not prepared for such a blast and so with a good look and study towards the fellow airline companies, the revenue manager profession started to develop inside the hospitality walls.

Ten years down the line and the growth has consistently slowed down and sees today a little increase year on year, the offer caught up and overtook the demand. It is in this environment that a real Revenue Manager demonstrates how to maintain and drive more profits.

Here the 8 principles that make the Revenue Manager in a winning position ready to fight:

1. From Rooms to Relationships. The Revenue Manager is no longer focused on Rooms, but on the overall revenue that the guests are willing to bring to the property.

2. From Myth to Math. Analysis is where all starts, examine the data, the figures and anything that bring potential revenue is fundamental to build a stronger strategy.

3. From Silos to Systems. All figures among departments must be combined and analysed together to make sure to reach the overall target. It is not a civil war! The Revenue Manager should be responsible to work with all information at hand.

4. From Organized to Optimized. For the first few years Revenue Managers were drowning in new technologies, which did not talk to each other, but now the optimisation helps to improve the day to day task.

5. From Discounts to Drivers. It is important to see the difference that the value has achieved in the last few years. It is not the discount that drive more revenue, it is showing how valuable the product has become.

6. From Planning to Predicting. The Revenue Manager is not the extension of the financial team, they create one budget with a very mathematical calculation, the Revenue Manager works through a variety of possibilities based on a series of analysis and is flexible to the market evolution.

7. From Data to Decisions. Management used to receive pages and pages of reports with all the little details, nowadays the Revenue Manager prefers to engage the time to make decisions rather than type figures that nobody reads. Basic data are reported to show the improvements.

8. From Business to Better. To avoid to have a stagnant business, the Revenue Manager does not wait to see what happens, he/she makes it happens, being flexible with new strategy, approaches until the profits increases.

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5 ways hotels can improve direct online booking conversions in 2016

An important on-going subject is to improve direct online booking conversions for hoteliers. The question is how do we do that? How do we compete against the big OTAs’ websites How do we increase our visibility? How do we make our websites easier to manage for the potential clients and above all how do we make it more interesting?

Those are the questions that we all ask ourselves and our teams. The answers that sometimes we get are not what we would like to hear and they depend on whom we are asking! According to this article from eHotelier nowadays the average abandonment of hotel websites is 77% and it seems that the marketers are the only ones to blame. Let’s do not give all the fault to marketers, at the present time the potential clients are no longer easy to influence as they used to. They like an extreme varieties of offers, but simple to understand. They spend a lot of time on the internet, browsing many websites, but they prefer the ones straightforward to manage, with a clear process. And the fact is that our potential clients they do want they are looking for, because somewhere they will find it and our job is be that “somewhere”.

Here five specific areas where we can improve our direct conversion:

  1. Avoid extra administration charges that OTAs will not have, and if there are fees out of our control like the city taxes (in selected countries), better to show them upfront and not just before the check-out, it might make the potential client leave and book more likely via an OTA.
  2. Maintain an updated content according to the season, promotions should reflect what the location and property can offer during a specific time of the year. Small hotels tend to leave in the content summer and winter offers at the same time, based on the excuse that they do not know when the guest is going to book.
  3. Present an on-site re-engagement message, a lastminute promotion, added value or special offer that re-gain the potential guest’s attention, before leaving you site unsatisfied.
  4. Do not over-compensate with too many empty and meaningless advertisements, offer some added values instead.
  5. Follow up after the guest’s departure with new promotions or added values that OTAs will not offer.

Easy said than done or at least to see real great results at the end; nothing is left to chance, if we do not even try!

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How will OTAs evolve in 2016?

Hospitality is a world in continued evolution and we have to keep up with it. Every day we are amazed by a new technology and we are constantly thinking of how we can make our guests’ stay an unforgettable experience, how to make our time more valuable, how to get surrounded by more professionals and experts and how all together we can improve our revenue and at the same time decrease the costs.

Evolving is part of the growth, but one question is constantly recurrent, how do the OTAs can play a smaller role in this process? How can we get to keep more of the earned revenue without bleeding commission to them?

The opinions and the suggestions on how to act to get better, more healthy and keep more money are countless, but in reality – and here not to be pessimistic – deep deep down we all know the answer and nevertheless we are all in denial. Opinions are very important, but revenue managers, financial controllers and marketing directors, as well as general managers, can read numbers and figures are not opinions, are facts.

Frederic Gonzalo, a strategic marketing consultant, briefly explains on eHotelier, the OTAs domination and their future, asking everybody to add their point of view. He presents a summary of what the OTAs have been up too in 2015. Facts that have happened between the giants of the hospitality industry. Expedia which became the biggest OTA with the acquisition of TraveloCity and Orbitz as well as HomeAway, leaving Priceline behind on the second place with its best known brand Booking.com. He also mentions Airbnb, TripAdvisor as well as Google’s stories.

The point is that we cannot compete with the OTAs or think to cut them out, what we need to do is to learn to live together and to accept that part of our business depends on them; they are bigger, they are stronger and definitely they have more capital to invest.

My point of view: either we try to invest as much as they do in PPC campaigns, advertisements of any kind and we know that independent properties cannot compete with that, or we save in the investment and we pay them a commission. In one way or another we have to spend to have a return of investment, it does not happen if we simply want to save. We only need to make sure that the “big boys” do not abuse their power with us.

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How to drive organic search results for hotels

SEO – Search Engine Optimisation – organic search results for hotels, something very important that in the last few years have been part of the marketing strategy in all businesses, however for many hotels’ management is still a little hazy. We all understand what it is and why it is vital to get it right, however it is still quite difficult to act on it and make it work.

We will find suggestions and strategies all over the internet, I found this article by Kerri Fivecoat-Campbell,  a HotelNewsNow contributor, very straightforward to understand. It offers a brief description from the Oxford English Dictionary definition  – “the process of maximizing the number of visitors to a particular website by ensuring that the site appears high on the list of results returned by a search engine” – up to a few suggestions to make it work.

First we have to take in consideration that the SEO is no longer what it used to be and that every year the algorithms are modified thousands of times to make sure that we keep up with our website and that we do not ignore it for too long. It is a challenge to keep up with search engines like Google, but if we want to maintain our hotel website on the top of the list we have to manage it and here a few points to achieve that:

  • Consistency is definitely one of the keys, the hotel information should be written in the same way on all pages.
  • The content is king – we need to make it interesting to engage our visitors, short but with a clear message.
  • Videos play a very important part, however they need to be of a high quality and not too long.
  • Keywords are essential and well spread out in all the pages, three to five main ones are enough.
  • The home page should have the brand promise to catch the interest of the visitor.
  • The website must be mobile friendly, as more than 60% of our potential guests, check out their next trip over the phone.

This is just the beginning, but when we get to start our strategy many other details become clearer.

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Price Positioning Strategies

This week I would like to address another great topic of revenue management: the price positioning strategies. I usually take the subjects from interesting articles on hospitality magazines, today I would like to be a little bit more academic and mention an article published by Bill Carroll on the eCornell blog.

We know that the OTAs offer an endless range of prices, however hotels and restaurants still need to come up with the best price strategies. A price decision is influenced by many different factors like competitors’ rates, events and different markets. Here Bill Carroll offers a price-value matrix to help us to position our product or service. This is possible when we know the targets we would like to achieve. Those could be short term revenues, higher profit margins as well as to stand out from the competitors or just to survive.

Here the five different price positioning strategies to apply:

  • Skim – we position ourselves higher than the competitors, to attract the crowd who is willing to pay more, however high price is equal to extremely high value and guests are still wondering why they should pay more in our property.
  • March – we sell one of our rates like our competitors and the others slightly higher, in this way we can be competitive without beating the other players.
  • Surround – we get one rate lower than the competitors and bring in the market who has a limited budget, but at the same time have higher rates with great products / services and added values for guests who are willing to spend way more.
  • Undercut – we can potentially get more guests, if we offer the same rate like our competitors and one even lower, personally I am not a fan of this one.
  • Penetrate – we stay lower than the competitors, cutting prices and increment offers, but this can take to a price war, depress the price market, lower margins and reflect bad on our property reputation.

Pricing strategies are more complicated than that, however it can be a really good start.

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The fundamentals for forecasting success

You will usually expect that your revenue manager can achieve your targets and more, submitting the winning strategy, an accurate forecast and getting the right response from your market. This is possible, however it is not a one man job. In this article Alicia Hoisington, Managing Editor at “Hotel News Now” presents a very clear and straight forward discussion among a few panellists of “Forecasting fundamentals” panel at the Hotel Data Conference in Nashville, TN. It explains that to produce an accurate forecast the management team must work together; sales, marketing, finance, front of house and of course the general manager and the owners. Data must be gathered, as well as everybody’s experience brought to the table.

Here the highlights described in the article:

“[…]When it comes to forecasting via data, accuracy is key[…]”

“[…]Revenue managers need to have goals that are measurable, and they need to hold people accountable[…]”

“[…]A must for forecasting is a marketing plan that is not a static document[…]”

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Tower Bridge London

Hotel growth to slow in 2016, says PwC

In 2014, London has been considered the only city worldwide that has seen a consistency of new hotel openings while at the same time none have been closed down. They have been sold and they have seen different management teams come and go. However, the doors have been kept open.

According to a PwC forecast for 2016, it is interesting to see that the market for hotel growth is likely to still increase, albeit at a slower pace. You can read more about it in this article written by Tom Davis and Michael Northcott in the hospitality magazine “Hotelowner”.

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