Finance

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.

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.

My view is strongly that hospitality needs real people or it can't be hospitality. The humans need to be there to make the guest feel welcomed and taken care of. A little friendly contact goes a long way to improve guest satisfaction.

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?

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.

In the pre-COVID-19 era, some revenue managers were indeed stuck in the rut. Who were they? Revenue managers who acted as mere “OTA Relationship Managers.” Or as comp-set pricing strategy plagiarists. Who used an Excel spreadsheet as their only technology tool.

The industry needs to face some important challenges, the first one incorporates more technology in our ecosystem, hotels and chains need to have more information on the daily basic decision, but they need to be more disrupted in this area, for example, smart destination software must come to our technology ecosystem.

Thank you for the viewpoint, Scott. First of all, I'd like to express my opinion that the discipline of Revenue Management will never lose its relevance, no matter what happens in the industry and in the world. A business simply can't be successful without some type of RM tactics in place.

Here are the three main action steps in revenue management in the post-crisis period: 1. Break down the silos! The post-crisis requires a completely new approach to revenue management (RM), not going back to the old ways of doing RM.

While none of us have any idea when the virus outbreak will be contained and when currently closed hotels will be allowed to open again, we can and should get ready for the day which will eventually come. At the same time, we can't plan too early without proper data and information.Action A: Resist the temptation to hand over your inventory, promotions and rate strategy to the OTAs.

It's true that the hotel industry has been through many storms. However, it has never seen a black swan event like this one. As the leading brands expect revenues to decline by an unprecedented 70% or more, millions of people are out of work and we are still 3-6 weeks away from the peak of the crisis.

It is very important for hotels to maintain a detailed forecast for both the short term (more frequent) and longer-term (outside 3 months). If your property has an automated system that provides demand information, it will likely only be reliable for the short term.

Without a forecast it is difficult to understand all of the revenue opportunities for a hotel and how to weave them into a single, successful revenue strategy. Creation of this strategy has two components. The continual, repetitive forecast update process that is needed to adjust tactics to make the strategy come true is clearly better accomplished by automation.

In my opinion, day by day forecasting is even more important now than ever. At Crescent Hotels and Resorts, we believe this is an integral part of our strategy, as it conveys to our stakeholders our strategic intent by day by market segment.

Hoteliers who are unwilling to invest in the latest revenue management technologies are the ones “stuck in the rut.” Less than 5% of independent hoteliers have a revenue management system (RMS) in place, many branded hoteliers are stuck with their hotel chain's less than adequate RMS technology.

Is revenue management not keeping pace with today's world? How condescending to assume that a lack of reinvention every decade is a sign of incapacity. Think back to the promise that revenue management systems made: a property could see its revenue increase by a minimum of five percent by opting into an electronic revenue management system.

While having a revenue management system was a competitive advantage in the past, it's now commonplace. We are close to what the airlines are struggling with for years, they all use the same algorithms and they all end up with the same pricing.