Finance

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.