The Indian hotel sector is finally breathing a sigh of relief as demand has recovered dramatically in recent months, even helping push occupancy and average rates closer to pre-pandemic levels in a few markets. However, the hotel sector, like most others, is reeling under the pressures of rising prices, affecting not only operations but also hotel development plans in the country.
One fairly simple focus will be to implement a digital up-sell strategy. Exact figures are hard to find but it seems that 85% of the hotels globally do not have a digital up-sell strategy. Some don't even up-sell at all. This is basically leaving money on the table.
Having clients all over the world, I can say I have direct experience with the issue. And it's no fun. As a consultant, it's frustrating to go on a call and celebrate the hotel's best year ever, hang up and speak to another client running at 1/10 of 2019 occupation rate...
Let's remind everyone what the primary goal of revenue management (RM) is: to ensure that the property sells the right product to the right customer at the right time for the right price on the right channel. In the past revenue management systems (RMS) and revenue managers used historical, comp set pricing and market data and combined this with forward-looking demand signals like pacing to recommend the optimum rates.
To me, it's not a question of whether technology (and AI/ML in particular) is good or not for the Revenue Management discipline. The question is: why are we, as an industry, so far behind other sectors when it comes to the adoption of automated tools and especially Machine Learning in our decision making process?
Over the last 10 years, there have been great advancements on hotel revenue management systems, especially in the areas of price optimization as well as inventory controls. With most major brands and independent hotels on high performing markets adopting customized systems, these applications have proven to be essential for the revenue management in today's world.
Hardship sparks creativity. Hotels all around the globe were forced to fundamentally rethink revenue generation during the Covid crisis. Like so often, many successful concepts started with putting the guest at the centre and looking at what (s)he really wants right now, not what it is that we traditionally like to sell (a room night with breakfast).
In the post-pandemic world, I see three significant revenue generation initiatives for the utilization of the hotel spaces: 1. Create co-working spaces: Similar to Roger Smith Hotel's KettleSpace Flexible Workspaces, create work-from-hotel spaces for out-of-towners, digital nomads and local entrepreneurs who do not want to be tied down by office leases.
Every square metre can potentially generate extra revenue for a hotel, but many properties keep only strategizing the bedrooms' revenue.Ideas? Here are a few:Pre-arrival:Upsell rooms and added value packages and items via app and mailing, with tools such as Oaky or UpsellGuruReview your room inventory.
Many will perceive Tokyo 2020’s tourism legacy to be overwhelmingly negative, due to it taking place during a pandemic and the side-effects that have come with that. However, some positives can still be drawn when looking to the future of Japanese tourism, says GlobalData, a leading data and analytics company.
If there is one thing we know, it is most likely that we know nothing at all anymore. We do not know which border will open or close tomorrow due to a newly spotted variant. We do not know who will be our guest two weeks, three weeks, let alone a month from now, and we do not know who we will be competing with for those guests.
The traditional competitive set selection process in the US has always been driven by financial models, which are developed to satisfy financing and banking requirements. As such, they are usually based on aspirational comp sets in order to show future growth opportunity and return on investment.
Today, every hotel in the world has not one, but three categories of direct competitors. Official Comp Set This is your traditional comp set, included in the property's dSTAR Report by STR or rate shopping report by Fornova. These reports provide real value by benchmarking how well your property is performing against the “official” competition.
Start Treating Direct Online Distribution Costs as… Distribution Costs! Currently direct online bookings and their distribution costs: ongoing website hosting and technology upgrades, website content optimization, SEO, website visitors referrals fees (metasearch and paid search CPCs, online media and retargeting referrals, etc.), hosting, analytics, data marketing, email marketing, social media marketing, digital marketing agency fees, etc.
While cost optimization (or rather, profit measurement in general) is crucial for hotel operators, just like for any other business, our current reality is that hoteliers are offered a very minimal amount of technical functionality that would make profit maximization a user-friendly task.
Finding a calculation that fits every hotel is impossible – different taxation, rules of cost allocation, franchise vs managed vs owned % fees, P&L fee structures, etc. We also need to be realistic. RM has never had the notion of cost optimization – it's just been talked about for the last 1000 years, as much as we talk about TRevPAR.
Ascott Residence Trust (ART) has entered into agreements to acquire three freehold rental housing properties in central Sapporo for a total of JPY 6.78 billion (S$85.2 million[1]) to expand its rental housing portfolio in Japan. The three rental housing properties – City Court Kita 1 jo, Big Palace Minami 5 jo, and Alpha Square Kita 15 jo[2] – are from unrelated third parties. The average EBITDA yield of the three acquisitions is approximately 4%. The transactions are expected to complete by end June 2021. The acquisition of the three rental housing properties will be funded by debt and part of the net proceeds from recent divestments.
In Q1, 2021 labor costs consumed 60%-87% of RevPAR globally (CBRE, HotelEffectiveness), making hotel operations completely unsustainable. Labor costs are increasing up to 5x faster than RevPAR (HotelEffectiveness). The travel rebound in Q2, 2021 has added another headache for the industry - acute labor shortage.
I think one of the first things hotels need to do, especially those that are on older "closed systems" is to convert their core technology stack to the cloud. Why? Simple, once they do, they have a whole set of new services they can subscribe to that can help with automation, make things more efficient.
Oh boy! Are we tired of the game of whack-a-mole yet? Maintaining rate parity is a major effort and somehow OTA "partners" find a way to skirt the rule by offering member-only rates (with very few qualifications), bundling with air, or grabbing a wholesale rate and unbundling it.
Rate Parity is not a new pricing strategy nor is it a hospitality industry-specific invention. It has been used in retail for many decades: fashion clothing, perfumes, appliances, golf equipment, smartphones, automobiles, etc.
Rate Integrity should be the focus, not rate parity. With so many different distribution channels, programmes and closed user groups, making sure the correct rate is getting to the right audience is very challenging. Importantly, at the core of any pricing architecture, a clear understanding of how rates relate to each other, should drive client/customer value taking into account contractual obligations, holistic customer value as well as the contribution to profit of each rate/channel of distribution.
There are significant revenue opportunities outside of room revenue:1. Make your property the “hero of the destination:”Bundling rooms with local places of interest and activities into attractive hotel packages offers significant revenue opportunities.
Revenue managers need to focus on revenue generation. Upselling, cross-selling, total revenue management, new revenue streams should be part of the business strategy. Customization and personalization have to be at the core of revenue generation strategies.
By viewing the entire building/space as a series of opportunities to drive revenue will not only drive top line revenue but also increase asset value. The obvious focus would be to concentrate on staying customers to increase revenue opportunity through F&B, MICE or other retail streams, however looking at local footfall and local residents could also unlock opportunity.
First thing hoteliers should do is invest and implement technology NOW! With today's SaaS monthly fees and free trials, even in this time with little cash on hand, implementing new technology is possible and affordable. Focus on automation.
While there are reasons for optimism for sure, now is not the time to let up. Hard work will be required to stay ahead of the curve (or, let's be honest, with continued uncertainty, just on the curve would be great!). Guest behaviour, travel purpose and travel preferences will not be stable.
Due to the pandemic, in 2020 hoteliers slashed their IT and marketing spending by over 50% compared to 2019 (STR, 2021). Due to budget constraints, this year the big question is what can hoteliers do in this environment of weak but growing travel demand and limited resources?
In the aftermath of the ongoing pandemic, brand signings by keys in India witnessed a year-on-year decline of 42% in 2020. Signings were especially low in the first half of the year, due to the uncertain market conditions and challenges related to closing deals on virtual platforms because of the COVID-19 lockdown and restrictions.
Hotel transactions value in India contracted by approximately 50% to reach INR24,611 million (approx. US$332 million) in 2020 compared to INR49,372 million (approx. US$690 million) in 2019, but was still higher than the previous peak of INR19,929 million achieved in 2015.Going into 2020, mergers & acquisitions (M&A) activity in the sector was expected to be stronger than that witnessed in 2019.
After making several representations to the government, the Indian hospitality sector, one of the worst-hit by the pandemic, was expecting some game-changing announcements during the Budget 2021 speech which would help accelerate the sector's recovery.However, the first ever 'digital' budget of the country failed to provide any direct and immediate support to the sector.
Snow Lake Capital Limited, a leading Asian alternative investment management firm with over US$3 billion in assets under management, today sent a letter to the MGM Resorts International (NYSE: MGM) ("MGM" or the "Company") Board of Directors urging them to sell 20% of their MGM China Holdings Limited (HKEX: 2282 HK) ("MGM China") business to a Chinese company as a strategic investor.
In the past few months, several state governments have been proactively lending a helping hand to the tourism & hospitality sector in their respective states, providing various relief measures to help the sector stay afloat during these trying times. Last month, in a move to reboot the sector, the Maharashtra government conferred 'industry' status to the state's hospitality sector.
All hotels strive to improve and reduce costs on an ongoing basis. During the normal course of operations, hotels try to achieve this by implementing various techniques, such as using alternate products, implementing process improvements, enhancing inventory management, and evaluating more efficient equipment, which allow them to save certain costs during the year. But the question here is whether these efficiencies are significant enough.
Let's remind everyone what the primary goal of revenue management (RM) is: to ensure that the property sells the right product to the right customer at the right time for the right price on the right channel. Typically revenue management systems (RMS) and revenue managers use historical, comp set pricing and market data and combine this with forward-looking demand signals like pacing to recommend the optimum rates.
The current pandemic will certainly have a long term shift in how we satisfy future demand. While there has been a lot of discussion around how it will evolve, it is still too early to figure out how things will materially change, and as such, technology has not caught up to it.
For individuals new to the concepts of revenue optimization, the first step would be to understand the breadth and depth of what is involved. Hint, it goes far beyond pricing. Work alongside an expert until you are ready to fly solo.
Asset-light operating models have become the main stay for growth of many of the major hotel companies in India, with Management Agreements being the preferred structure. The other major asset-light model - Franchising - though is yet to gain significant traction in the country. Approximately 14% of the total brand signings in 2019 were franchised properties as compared to 10% in 2018. On the other hand, Management Agreements accounted for 76% of the total brand signings in both 2019 and 2018. In contrast, hotel franchises are the most popular model in mature markets like the US, where almost 80% are franchised.