getting started with hotel revenue management
TRANSCRIPT
Getting Started with Hotel Revenue Management
WEDNESDAY, MARCH 18th - 9:00AM (PDT) Duetto Educational Series
About Duetto
Rapid innovation, new
product features
released weekly
Disruptive
Thought
Leadership
Committed to the success
of our customers
Customer Service
FocusedBest-in-Class
Team
Innovative
Philosophies
Marquee
InvestorsIndustry-Leading
Founders
World-Class Technology
Development
Best-in-Class
R&D
About: Nathaniel “Nat” Estis Green
Senior Global Solutions EngineerDuetto family member since Dec. 2012
Agenda
▍ Revenue Management Introduction▍What is it?
▍ Simple Steps to get started
▍ How Revenue Management Can Increase Profits▍ Booking Curve Management
▍ Effective Yielding
▍ Moving Forward▍ Revenue Management is critical in today’s world
▍ Questions?
4
Ever leave money on the table?
250,000 + People
Ever leave money on the table?
250,000 + People
LOSANGELES
LASVEGAS
Ever leave money on the table?
250,000 + People
Ever leave money on the table?
250,000 + People
$99per night
Strip Sell-Out@
Ever leave money on the table?
250,000 + People
$99per night
Strip Sell-Out@
$1,000per night
Walk-Ins@
Industry at a Crossroads
10
1970s 1980s 1990s 2000s 2010s 2013
Separation of ownership, brand, and management
Product segmentation; financial engineering
First online booking; enter Expedia
Online distribution explodes complexity
Crowded value chain
Meta search; enter tech giants & new gatekeepers
Historically Travelers Booked Directly with Stay Brands
11
Consumer Stay Brands
Courtesy
Booking Brands Now Dominate Consumer Point of Entry
12
Consumer Stay Brands
v
Booking Brands Courtesy
Commissions Rise at 2x the Rate of
Revenue Growth39%+
2009 2010 2011 2012
%Increase
Commission
Increase
13
20%
Total Acquisition Costs
Room Revenue
Sales & Marketing Expense
Total Revenue
Retail commissions onlySource: HAMA Study 2013-2014
Courtesy
Customer Acquisition Comparative Costs as % of Revenue
14
Revenue
Cost %
3-6% 4-6%
15-25%
Do you manually make rate changes in the PMS & CRS or through a revenue system?
Poll Question I15
Revenue Management Introduction
“The application of disciplined analytics that predict consumer behavior at the micro-market level and optimize product availability and price to maximize revenue growth.
The primary aim of Revenue Management is selling the right product to the right customer at the right time for the right price and with the right pack.
The essence of this discipline is in understanding customers' perception of product value and accurately aligning product prices, placement and availability with each customer segment.”
Cross, R. (1997) Revenue Management: Hard-Core Tactics for Market Domination. New York, NY: Broadway Books.
Inventory /
Capacity Demand
Price
$
Getting StartedRevenue Management 101.
How to Get Started
▍ Segmentation
▍ Forecasting & Budgeting
▍ Pricing
Segmentation
The Right Segmentation
for YOU
Segmentation: to divide the marketplace into parts, or segments, which are definable, accessible, actionable, and profitable and have a growth potential.Economic Times
OR
Are you pricing your rooms using seasonal rates, Best Available Rates (BAR), by LOS, or by Open Pricing?
Poll Question II
Forecasting & Budgeting
Constrained
Forecasts
Unconstrained
Forecasts
Demand controlled by hotel capacity
Demand if capacity is not a factor
Pricing Types
22
Seasonal
Pricing Types
23
Seasonal
Best Available Rate (BAR)
Pricing Types
24
Seasonal
Best Available Rate (BAR)
BAR by LOS
Pricing Types
25
Seasonal
Best Available Rate (BAR)
Open Pricing
BAR by LOS
How Revenue Management Can
Increase Revenues
▍ Booking Curve Management
▍ Effective Open Pricing
Booking Curve ManagementUnderstand demand trends.
Monitoring Booking Trends
▍ Pace: Rate at which you are getting bookings
▍ Pick-Up: Amount of bookings over a certain time interval
Web Site (IBE) Activity
Be proactive, not reactive, with demand trends.
▍ Review search date, stay
dates, rate code, room
type, rate, source, and
country
▍ Understand high-demand
periods before you sell-
out supply
Effective YieldingTackle rising cost of acquisition.
Take Back Control
▍ Independently price every single segment, offer and room
type
▍ Maximize revenue over high demand and need periods
▍ Keep all channels open and benefit from the “billboard effect”
Traditional Pricing
Day 1 Day 2 Day 3 Day 4
CAPACITY
AAAPromo Rate
10%
20%
✔✔
AAAPromo Rate
10%
20%
✔✔
✖ AAAPromo Rate
10%
20%✖
AAAPromo Rate
10%
20%
✔✖
Open Pricing
Day 1 Day 2 Day 3 Day 4
CAPACITY
AAAPromo Rate
10%
20%
✔✔
AAAPromo Rate
10%
20%
✔✔
10%
20%
✔ AAAPromo Rate✔
AAAPromo Rate
10%
20%
✔✔
Moving Forward
▍ Understanding your segmentation is the most important thing for proper
forecasting which impacts pricing and other decisions
▍ Managing the rising acquisition costs requires flexible pricing to optimize
profits
▍ Effective yielding through keeping most channels and discounts open
maximizes revenue over high demand and need periods
34
Questions?
WEDNESDAY, MARCH 18th - 9:00AM (PDT) Duetto Educational Series