Conventional Theory vs Person Wisdom vs Hotel Software
When Wisdom Prevails in Revenue Management
By Richard B. Evans, President of Revenue Report Card LLC & Author of “the Definitive Study of Vacation Rentals”
The "Super Bowl", as described here today can be used metaphorically and replaced by any abnormally popular city wide event in which last minute demand is high. These can include the Kentucky Derby, heavy weight championship bouts, running with the bulls, Daytona or Indy 500's, regattas, marathons, soccer championships, conventions, NCAA finals, the World Series, NBA finals and many more.
Despite the wisdom RM's and DOS's gain over the years, alternative strategies will at times bring confrontation from detractors who will question theory, make disparaging remarks and in some cases go on attack. The intellectuals confront you; the cowards whisper from behind.
When you've lived through certain events, you use those lessons with confidence. And that confidence gains momentum over the years. Above all, you must have the courage and conviction to stay the course. Risk only exists when you don't have the history of experiences that insures optimal results from your decision making. Your wisdom enables you to steer the ship with confidence. And in these circumstances…YOU hopefully are given the reins to steer the ship.
The following metrics are real. I sometimes joke with peers and say that "out of 4 Super Bowls I won 2… decisively!" In an attempt to be as accurate as possible, I went back to old financial data from each of those four Super Bowls and used the first 2 to arrive at the metrics I call a "Typical Hotel Super Bowl" in blue, below. During those first 2 Super Bowls I feel that I followed the conventional wisdom that most hotels do in creating Super Bowl strategy.
First of all, a $1,280,800 week in a 3.5 diamond hotel, in its own right, needs no amplification. Add to that, that we out performed typical hotels who followed conventional revenue wisdom by $491,425 and it is equally as difficult to absorb. Yet the reality is that we stayed the course despite many distractions and detractors.
My hotel principles were absentee owners and I shared what I was doing toward Super Bowls with them and was always grateful for their support. With other executives questioning my actions, I was thankful for the backing and trust, but despite this these can still be difficult roads to manage psychologically.
You know I sometimes thought, why not just go with the conventional wisdom everyone else did and save myself a great deal of anguish! After all, all properties sold out during Super Bowls. Everyone did well and frankly, at the end of the day some owners never realize how much additional wealth, stellar revenue management provides to them on such occasions! This is the hard sad truth for many RM's and DOS's.
But with that said, I like to think that I have always had the same fire in my belly that most revenue managers do. As critical thinkers we could never be satisfied just to succeed. When opportunity knocks, critical thinkers answer. Events like Super Bowls create special opportunities to create vast wealth and roll up the score.
I've had the great honor to get to know so many revenue executives over the years and in discussion have come to know that the vast majority simply can't, in good conscious, retire at night believing that revenues are ever left "on the table". Yes, the mental toll can be exhausting and yet we all know that to achieve greatness and leave our mark we must test all possible considerations and exploit what we've grown to know ~ wisdom after all is part of what makes us great and unique. We add to that revenue wisdom each and every day!
A day after the semi-final games I opened all 495 units up for sale. For 24 hours we tested a 7 night minimum length of stay restriction and then pulled back to 6 nights. We maintained a very healthy rate and navigated our way, at times going a little higher in order to control the pace of reservations. We wanted to be able to wait for possible 7, 8 or 9 nighters without selling out to quickly at 6 nights! We succeeded and sold out the day before game day. Yes I can say looking back that we USED TIME WISELY (http://www.hospitalitynet.org/news/4082294.html ) and achieved optimal results!
We gave Expedia 5 reservations and Wholesaler / Receptive Operators took another 30. That was it and we held tight from there.
Our market manager from Expedia called 3 weeks out to see if we had any rooms we could spare. I said sure, I have 495! Some responses you just can never forget. She said, Richard…. "Are you crazy?" "You're going to get stuck with rooms". I gave her 5 reservations. I never faltered.
My hotel owner stopped in town for a night and during dinner said, "by the way how are you doing with your Super Bowl reservations?" As before, I said I haven't sold anything because I was holding out until after the semi-finals. Like with Expedia the response first brought an awkward silence followed by…. "Ok Richard, are you sure?" I was. The principles were rewarded amply.
There are times when writers describe what true loneliness feels like. It's something that resonates deep in your sole. I must tell you that one month prior to my Super Bowl #3 in 2007, felt like one of the loneliest periods of my life. I truly felt the weight of my decisions on my shoulders. And as I've already said, that burden is always amplified by colleagues who are constantly questioning and challenging your reasoning. But prevailing confidence won those days.
I'm glad to report that in 2010, for my Super Bowl #4, no such anxiety existed. Finally, I had nothing but confidence because I had lived through and knew exactly what to expect. Detractors, that 4th Super Bowl year no longer existed. They had all learned the value of wisdom and became believers.
Yes I won my last two Super Bowls. But only truly enjoyed the last one!
To reiterate, it would always have been so easy to have gone with conventional wisdom in filling hotels over the years during special events. But the internal consequences would have been severe and left me with little joy. Critical thinkers love to be challenged and win!
Bucking Super Bowl Conventional Wisdom.
Super Bowl demand in warm weather climates is un-paralleled, no matter the teams, the weather, the distance or even when catastrophe strikes demand is unwavering.
Hotels within a 10 mile radius of stadiums typically have the ability to sell out (our unconstrained demand study showed that we turned away enough reservations to have filled our hotels 3x if we had used a 5 night MLOS restriction) within the 2 week period immediately preceding game day with high length of stay restrictions and strong rates.
Hurricane Ida moved through New Orleans in November, 2009 and the Saints played the Super Bowl in Miami in February, 2010. I hesitated for a moment, thinking that the after math of the devastation in New Orleans might have an impact on the turn out. But I stayed the course and there was no discernable change from other Super Bowl years that was noteworthy.
Cities that host the Super Bowl seem to breathe a collective sigh of relief when New York, Los Angeles, Chicago and/or other large city teams make it to the final game. Despite this conventional wisdom, my 4 experiences showed that the city from which teams came barely mattered! The following teams played in Miami from 1995 to 2010; San Francisco, San Diego, Denver, Atlanta, Indianapolis (2x), Chicago and New Orleans. Hotel demand never wavered and was equally as strong each and every year.
Be warned, many attendees will try to entice you to provide lower prices and stay restrictions early on. The NFL, your Convention Bureau, NFL Alumni, NFL Hall of Fame, Networks, Executives and the like will all come out of the wood work early on requesting 2 to 4 night reservations and wanting low rates for large blocks. Resist the temptation. After testing the market you will find your "sweet spot" and I believe like me you will find that to be close to 6 nights!
Be warned, many will attempt to put fear in your heart by telling you that your methodology is not sound. Many will tell you that you need to fill your hotel in a similar manner to which you normally approach sell outs; in tiers, at different rates, at different thresholds. But wisdom tells you that there are few events like a Super Bowl and there is nothing normal about your approach to it. Resist. Don't waiver. Stay the course. In this case the end result was a gain of $491,425 over competitors.
As one who relies on revenue management tools, history and current market conditions and trends to make decisions I rarely deviate in my methodology. In many cases conventional revenue wisdom is close to the truth. But in certain cases (cases in which you've suffered the blood, sweat and tears of experience) old time wisdom prevails. Don't fear it; embrace it. Don't let others dissuade you; follow "your gut instinct"~ let wisdom prevail!
Richard B Evans
President of Revenue Report Card LLC
Phone: (954) 290 - 3567