Today’s hotel guest is savvy, shopping around for the lowest-priced room. The average guest visits five Internet sites before they make their reservation. The playing field has evened out, creating a greater challenge for the Revenue Manager in how they manage inventory and rates. The ability to maintain parity becomes paramount in a successful Revenue Management strategy.

Revenue Managers also present challenges for a property. What is their role? What does their job consist of?  In the industry, most Revenue Managers really are Reservations Managers handling the duties of both jobs. This, of course, takes away their focus from both managing revenues and managing reservations. Not exactly a win-win situation.

Now, factor in the ability to compensate and retain a skilled Revenue Manager. While the concept of Revenue Management has been around for a while, the true discipline is less than 10 years old. Yield management of the past has given way to a truly more dynamic specialty. In major markets, an experienced Revenue Manager earns upwards of $60,000 plus incentives, with many approaching $100,000. And with such young, inexperienced managers, many are job hopping with ever-increasing offers. What makes them worth so much?  Studies show that a property with an effective full time Revenue Manager makes twice the profit than a property without one.

What is Revenue Management?

In order to see how outsourcing Revenue Management works, let’s first drill down on Revenue Management as a discipline.

Revenue Management is the mastery of the basic laws of economics: supply and demand and price and value. When these variables are optimized, Revenue Management performs at its best. There is a finite supply of rooms in a market at any given time. Some would maintain this is not the case, with more rooms being built and others going out of service. In tracking this trend we know that supply fluctuates over a larger period of time but demand is what wildly changes on a regular basis. Demand Forecasting is a skill that looks at trends and identifies demand by segment and time, marrying them to a strategy. Many properties see forecasting as an end to a means, when it should be a means to the end.

The second law of economics we need to touch on is price and value. Everything that has a price has some sort of value. In addition, any item that someone will pay for has a value. Effective Revenue Management analyzes that subjective point where price and value meet. When that “point” is discovered, the best price can be set to meet the needs of a specific buyer. This creates increased conversion and improved profitability.

On property Revenue Managers – even the best ones – often fail to look beyond their local market to make the best decisions for their property. Doing this takes time, effort and money. In outsourcing Revenue Management, a property can benefit from a “broader perspective” on current trends as well as aggregate data from a wider array of sources. This type of information creates a strong competitive advantage in any market.

Most often, outsourcing costs less than the average annual salary of a Revenue Manager and, most of all, it gives you access to a team of experts that is always looking at the big picture.

What about Revenue Management software?

Revenue Management software is the hot new thing. Many properties are buying into “new” technology solutions that claim to handle Revenue Management. In fact this type of software can only compliment the decisions made around revenue strategies. The price for these systems is often in excess of $100,000 not counting an additional $30,000 per year to maintain. And, since they are machines, they can only analyze the data given to them, which usually is limited to historical information. They don’t have the ability to examine or analyze other trends, markets or industry nuances.

Although technology can be great at making calculations, it simply won’t understand market intuition or dynamics. In fact, if you drill down to the key concepts of Revenue Management, a machine understands supply, but can’t grasp the dynamics of demand. A machine understands price, but never value. And, as we all know, a machine is still only as smart as its operator.  When investing in a Revenue Management software solution, remember to consider the cost and expertise of the person at the keyboard as well.

How to Outsource for a Revenue Management Solution

Giving up your rates and pricing strategy to a stranger goes against the grain of accepted industry standards. When selecting an outsourced Revenue Management solution, there are some key questions you will want to ask.

1)      Does the provider have access to my data?

• Can the systems download my data or is there a manual system in place that allows for back-up if necessary? An effective Outsourced Revenue Management solution will either directly interface, or connect through a dedicated terminal on site. In addition, there should be a manual system in place for back-up or in the case of inability to interface.

2)      Are the Revenue Managers experienced?

• How many years experience does the manager have and at what type of properties has he/she worked? An effective Outsourced Revenue Management solution should provide you work history of its analysts. The average should be 3-5 years, factoring the experience of the newer analysts with the directors’ experience.

3)      Are the Revenue Managers certified?

• What is the process of certifying the managers and do they have a continuing education requirement to maintain their positions? This is a key point of difference. Any good Outsourced Revenue Management solution should require their managers be certified and in an on-going education program.

4)      What are the guarantees?

• What will the return be on my investment and how long will that take? When inquiring about an Outsourced Revenue Management solution, inquire about the guarantee they are offering.  A minimum guarantee of a complete return on investment in the first year should be required.

5)      From how many markets do they pull data trends?

• What will give them the competitive edge in terms of data collection? An effective Outsourced Revenue Management solution should be able to tell you that they compile data from multiple areas and compare it to the local market.  The actual number is not as important as the fact that they use the broadest source of data possible. This is a case where more really is better.

6)      Do they look at more than just rooms?

• Rooms Revenue Management is only one piece. An effective Revenue Management solution needs to look beyond rooms and provide the option to  manage ancillary products as such as spa, golf, banquets For example.

7)      How do they measure success?

• Are they using the same metrics as your business does?  If you are looking to improve RevPAR, will they help you look at that? With rooms only being one piece of the puzzle, an effective solution will look beyond to benchmarks such as GOPPAR.

Is outsourcing Revenue Management right for my property?

Outsourcing Revenue Management is not for everyone. It is a big step to take and you will want to analyze both the cost and savings. Calculate what you are spending and what you receive in return. After doing all this, most properties reach the conclusion that outsourcing is both a cost-effective solution and an excellent way to leverage the talents of industry experts.  The days of Reservations Managers playing Revenue Managers are behind us. Outsourcing Revenue Management is a proven way to gain a strong competitive edge in the market and maximize your revenues.

To learn more about revenue management and optimization strategies, complete the form below or click on Phoenix marketing consulting firm Aspire Marketing.

By Juston Parker, King Pin of Revenue Management Evolution, Aspire  People.Performance.Profits, LLC

I read an interesting article this week about spa survival and thought I would weigh in, as well as see what you all are doing to recession proof your spa revenues. The article can be found at: http://www.hotel-online.com/News/PR2009_2nd/Jun09_SpaDecline.html

Dr. Judy Singer is the writer of the article, and it also has great tips from Jeremy McCarthy at Starwood hotels and Resorts, Anne McCall Wilson from Fairmont Raffles Hotels International, Liz Ratcliff at the KOR Hotel group.

Here are my thoughts. After reading the article, that has some great tips, nothing was mentioned about creating a strong revenue management strategy around treatments, RevPATT if you will. (Revenue per available treatment time) Having a rate card is so 2008! Why would you charge the same rate for peak times as times when the place is a ghost town?? Supply and demand baby! I realize we do this to a certain extent by offering specials during certain times, AND our clients do not think this is a regular practice on which they can count on. Think about your repeats! Clients will change their schedules if they know every Tuesday at 2:00 they can get a mani/pedi, facial, deep tissue, mocha latte…for a fraction of the cost of peak times. And it will be the best known secret in town. The airlines started it, hotels do it, and now it’s time for spas to get on board with it. Renie weighed in on the conversation in an article she wrote. Check out her thoughts at: http://www.hotelworldnetwork.com/renie-cavallari/spasmdashtheyre-more-business-you-think.

So what are your thoughts? I’d love to know if you are doing anything like this or considering it. In a recession like this we all need to think better, smarter, faster. And it is times like these that change the way we do business forever! Please take a moment and write your thoughts, I’ll make sure you are heard.

Visit our website for more on revenue generation for spas or give us a call at 602-392-0700.

20 ways in which we have recently saved your clients money – and ‘Keep America Meeting’

1. Use online invitations/registrations, this also eliminates tracking manual emails
2. Use social media, networking sites to invite attendees
3. Host meetings/conferences in less expensive cities with alternative airports to fly into
4. Shuttle attendees or share a ride and/or offer limited hours instead of as and when guests arrive
5. Select less expensive venues: Art Gallery over museum or University auditorium over well known event facility
6. Look for a member of a Private club in your organization. Members have great incentives to spend in house with group events. Clubs often have multiple locations and are willing to offer a discount for hosting a series of meetings
7. A restaurant buyout can be cheaper than renting an event venue
8. Piggy back with shouldering groups by sharing speakers, entertainment, audio visual and decor
9. Use outside audio visual instead of in-house
10. Use local entertainment such as music schools, church groups, music clubs, and multi-cultural groups saving on travel expenses.
11. Use in house or produce reusable signage
12. Instead of room drops have a manned registration desk to give out materials, gifts etc
13. Base F&B on consumption instead of pp cost and offer wine and beer only, with maybe one specialty drink instead of an open bar
14. Order less expensive wines by comparing wine lists with online wine rating websites
15. Use water pitchers with glassware instead of bottled water
16. Use a semi private room which won’t have an F&B min and room rental
17. Select non-floral centerpieces or reuse floral over multiple days
18. Look at shipping linens to more expensive cities
19. Have a wireless cyber lounge: a designated “break out room”, negotiate it for free with the hotel. Place signage ‘with compliments’ with the hotel as sponsor
20. Meeting planners usually can obtain further discounts on meetings rooms and ask them to deduct their sleeping room commission from their management fee

Let’s face it, the hospitality and leisure industry are experiencing challenges not seen in a long time. We can help implementing revenue generating programs that will also save money and drive new business…contact Aspire to learn more.

Renie Cavallari, Aspire’s founder, chief inspiration officer and CEO, is an energetic trainer, strategist, speaker, author and leader who has delivered measurable results for businesses around the world over the past 20 years.

Revenue Optimization

Situational Overview
A large management company (over 500 hotels of varying service levels and sizes) hired Aspire to assist in the development and execution of a revenue management and optimization vision.  The outcome was to be a customized revenue optimization learning program that incorporated tools and processes around the preparation and delivery of a situational analysis by a consultant that would support the overall optimization strategies by the management company while providing valuable service to their hotels.

Recommendations

• Custom design a Situational Analysis and Recommendations process
• Design a customized Revenue Optimization training program that will provide Consultants the process, tools and knowledge to conduct a situational analysis
• Develop a certification process that will provide measurable performance and evaluation
• Develop and integrate tools to support the overall process
• Integrate processes that will improve the capture of relevant information and the subsequent analysis

Solutions

• Developed full day Program Map to define learning content
• Developed Customized Situational Analysis Format
• Developed Customized questions around property visit and scenarios based on answers of those
• Developed the tool for presenting discovery and recommendations
• Developed implementation log – how to track the progress of a hotel
• Created customized program manuals and appropriate tools

Results

• Created a standardized revenue optimization property analysis and recommendations process
• Integrated company’s revenue optimization methodologies
• Developed “best practice” tools that would allow consultants to apply Revenue Optimization concepts to properties and present situational analysis and subsequent recommendations resulting in improved performance of the property
• Maximized Revenue Management Consultant productivity

To learn more about revenue management and optimization strategies, complete the form below or click on Phoenix marketing consulting firm Aspire Marketing.