advanced revenue management for hotels 1 - lisbon 2016 - english

AdvancedRevenue Management

for Hotels

Understanding all the Indicators

Given by Tomeu Pons

14 Nov. 2016 - Lisbon

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Advanced Revenue ManagementIntroduction

The main objective of this seminar is to review and look in more depth at the concepts that form the key pillars of revenue management.

The participant must already understand the concepts of e-distribution as well as the principles of revenue management.

Therefore, this seminar looks in more depth at each of the elements so that the participant understands them and can use them in their daily work in the hotel where revenue decisions must be taken on the basis of data rather than instincts.

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Advanced Revenue ManagementIntroduction

Professor: Tomeu Pons [email protected]

I am currently Associate Professor at Turisme Sant Ignasi TSI - Esade Foundation (School of Tourism and Hospitality Management Sant Ignasi). Responsible for Training in the Tourism Department of Cibernarium – Barcelona Activa

and Associate Professor at the UB.

Qualifications in Hotel Management, Marketing, Ecommerce and Systems from UIB Hotel School, Esade, La Salle URL and UPC.

I work as BDM in Hotelerum and I have worked as consultant, director of marketing and CEO in companies such as Flamingo Hotelier, The Perfect Hotels, Sercotel, Hotusa, SAP…

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Advanced Revenue ManagementContents

• Introduction• Basic Definitions

• Forecasting• Benchmarking• Segmentation• Pricing

• Reports, Statistics • New Tools• Exercises• Glossary• Exam• Reading

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Advanced Revenue ManagementNotice

This 2nd level seminar does not contain formulas, graphs or any other type of applied calculation since it is necessary to be fully clear about the thinking behind a formula before starting to use it.

Many hoteliers apply incorrect formulas and calculations to their revenue management strategy due to their limited knowledge of the elements they contain.

These formulas and the excel sheets that support them are

explained in depth in the 3rd level course “Professional Revenue Management”

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Advanced Revenue ManagementBasic Elements of RM

The elements required to carry out Revenue Management are:

• History – Statistics. Demand and Trend• Forecasting – Predictions• Benchmarking• Segmentation• Pricing - RM Pricing Policy• General Strategy• Price Management Systems and Tools• Inventory Management

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Advanced Revenue ManagementWhen is it appropriate to apply yield?

To apply RM we need:

• fixed production of stock/products

• perishable product• clear dynamic price setting policies • ability to update rates quickly • that bookings/purchases take place in a period of time • possibility of segmenting markets or groups of customers

The involvement of the Management, Sales and Bookings teams is

necessary to manage RM actions. The RM vision, mission and objectives

must be unified.

It is necessary to collect information about demand: prices paid, booking

dates, consumption dates, amount of demand, events in the destination or

origin cities, prices of our competitors, distributors, etc.

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Advanced Revenue ManagementMain Techniques

The following are some of the main tools used in RM:

- Availability Management- Room Allotments - Groups- Terms and Conditions for Bookings- Automatic Room Allotment- CTA, Close to Arrival- MinLOS & MaxLOS- Upselling- Overbooking

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Advanced Revenue ManagementKey principles for price

The key point is to have appropriate prices and to define them we will take into account:

- Value of our product- Perception by the customer- Positioning- Competition

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Advanced Revenue ManagementMinimal influence of revenue

Several studies indicate that revenue management and commercial management influence around 30% of a hotel's total results.

The same studies indicate that 70% of the factors influencing the result of a hotel depend directly on the economic environment of the customer and the hotel.

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Advanced Revenue ManagementWith what Aim

The key point

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Advanced Revenue ManagementForecasting or Scheduling demand.

Forecasting, organizing our forecast.

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Advanced Revenue ManagementWhat is Forecasting

Forecasting is the estimation and analysis of future demand for a specific product, component or service using inputs such as historical sales ratios, marketing estimates and promotional information.

Price Waterhouse Coopers

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Advanced Revenue ManagementObjectives of Forecasting

The objective is to predict the periods of low demand, to be able to stimulate sales, and to identify the periods of high demand in which we can raise prices.

It is about creating a study based on a schedule that allows us to identify the demand that our product will have in the future.

It also meets other objectives of different departments such as: purchases from suppliers, visitor flows, estimates for governance, bar or reception staff, expenditure planning and other logistical and operational aspects.

It helps with the general forecasting of the hotel's operating results.

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Advanced Revenue ManagementReasons for Forecasting

Why are forecasts produced?

• to measure demand• to predict lack of demand• to react to lack of demand• to define the commercial strategy• application of prices• restriction of sales• to discover cancellation patterns• to control expenditure• to control commissions• financial planning• hr planning

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Advanced Revenue ManagementObjective of Forecasting for a Revenue Manager

The main objective is to maximize income and for this we will work on the following points:

• Predict high demand• Predict low demand• Application of rates• Define reaction strategies• Terms and conditions of sale• Distribution of the room allocation• How to stimulate sales• How to raise prices• Predict distribution costs or commissions• Help marketing in buying advertising

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Advanced Revenue ManagementMinimum Data in Forecasting.

No matter how simple a forecast is, the minimum data that you should consider are:

1. Occupancy2. Average rate3. Total income or by segment4. RevPar5. Pick up6. Commissions

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Advanced Revenue ManagementData in a Forecast.

The recommended data that you should consider are:

1. Occupied rooms2. Average occupancy %3. Rooms denied (demand)4. Rooms rejected (overbooking)5. No shows6. Canceled7. Current bookings8. Bookings trend9. Historical comparison10. Average Room Rate (ARR)11. Revenue per Available Room – RevPar12. Market Penetration Index – MPI13. Gross Margin Per Available Room – GOP14. Total rev per av Room – TrevPAR 15. Duration of stay16. Booking Pace – time between bookings and arrival

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Advanced Revenue ManagementData in a Forecast.

The extra data that you should consider are:

1. Historical occupancy for each day (calendar, numerical, weekly)2. Evolution of historical bookings for that day (what day they were made)3. Current bookings for that day4. Current evolution of bookings for that day5. Customers who shorten their stay6. Customers who extend their stay7. Customer supplier/distributor

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Advanced Revenue ManagementAdvanced Data in the Forecast.

To produce a Complete Forecast (for the whole hotel) it is necessary to know the historical data for consumption, referring to:

• revenue from rooms• F&B and other revenue• weekday consumption• consumption at events: fairs, festivities, etc.• consumption in vacations• segmented customer (business or leisure)• changes in demand

If you can, do another on competitors and another on the destination.

This document will allow you to know the number of arrivals and departures, occupancy per room and possibly other hotel revenue streams. It is a good tool for setting internal targets.

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Advanced Revenue ManagementPhases of a Forecast.

Phases of a Forecast:

1. Compilation of historical data2. Compilation of current data3. Introduction of data into the future calendar4. Mapping adjustments for days or periods

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Advanced Revenue ManagementHow to produce a Forecast.

We can produce the Forecast with two types of data:

- internal data (sales and commercial department) - external data (reports and competitor data)

Both systems are correct.The best Forecast comes from the combination of both types of data.

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Advanced Revenue ManagementHow to use the forecast in our daily work.

It is very helpful to use the forecast in our daily work.

Although it is only a “scientific” forecast it can tell us how our sales level is doing (forecasts) and if we are moving away from or towards our target, for both sales and income.

We can compare not only the bookings already obtained (on the books) but also the demand for bookings that we have (on the books or pick up XXXXXX).

That is, it allows us to react to the (demand curve) that has been seen to obtain sales if we are not achieving the overall (level of production) targets or those by segment or distributor.

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Advanced Revenue ManagementExternal Forecasting Parameters

External parameters for the hotel.

The economic environment of the hotel is important when producing forecasts. We must use data from the micro environment and the macro environment.

Parameters:•Prices of competitor hotels•Economic framework•Growth of demand in the market•Growth in supply logistics (flights)•Complementary offer maturity•Strategies of the local, national and international competition•Public safety, fame, etc.•Consumption habit of the customer

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Advanced Revenue ManagementElements of the Analysis

We have three levels of analysis: daily, monthly and annual

Daily:- Average occupancy- Average rate- Rev PAR- Pick Up, for what day are the bookings made today

Monthly:- Geographic Origin, GOB- Length of Stay, LOS- Lead Time- Channel- Commissions Paid

Always: - Profitability of the customer type

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Advanced Revenue ManagementOther factors to Consider in the Forecast

Factor: Consumer Behavior

It is important to segment customers not only by nationality, supplier, channel or distributor but also by pattern of behavior at the time of the booking and during the stay.

Factors such as: choice of room type, reserved rate, payment method, commission paid, consumption in the hotel, length of stay, days at the hotel (national long weekend), level of service required and customer satisfaction.

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Factor: Actual Demand

The actual demand or unconstrained demand is the real demand for our hotel rooms including not only what we sell but also: refusals, rejections, cancellations and no shows.

In some cases this figure can represent 3% of demand. And if we do not have it, we tend to work with lower prices.

These data should be recorded in the PMS by the corresponding departments.

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Factor: Segment, Key Accounts or Key Supplier

We must constantly review key accounts, segment and key suppliers or distributors.

The decrease in one of these can cause serious losses for the hotel and lead to a large workload for the sales team to replace them or increase demand from other channels. This work can only produce a good result if it is diagnosed early enough to react.

They should represent 10% as a minimum and 30% as a maximum.It can also be carried out on: packages, products, events, nat.+ purchasing behavior, direct, reception, walkins, etc.

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Factor: Failures or Lack of Accuracy.

The following errors can be made in the forecast:

•Using inaccurate information•Too few historical references•Lack of matching of periods and dates•Not having total demand•Basing it only on internal data•Basing it only on external data•Counting group customers as individuals.•Working with discontinued products or packages (no demand)•Not knowing what promotions or strategies we had in previous years

We must measure the quality of our forecast.

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Factor: Calculation of Errors in the Forecast

In the Forecast

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Diagram: Demand Curves. Automate your view from the PMS

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Diagram: Simple Demand Curves.

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Diagram: data we extract from the PMS

-Where do the bookings for a certain day come from-What has been booked during a certain day.

We try to locate key revenue periods for that day

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Diagram: Example of Forecast 1

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Advanced Revenue Management

How we measure our Factor Yield/RM

Revenue per Available Room

RevPAR

Income from rooms

or

Average Rate x Occupancy

Number of Available Rooms

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How we measure our Factor Yield/RM

Gross Operating Profit – GOP

Available rooms

Total Revenue

Available rooms

TRevPAr Total Revenue per Available Room

GOPPar

Gross Operating Profit per Available Room

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Advanced Revenue ManagementVocabulary for Forecasting

Booking Pace The Booking Pace for present and future days should be monitored to ensure that it is performing in a way which means we can meet the forecast, reacting to any deviation if it is not.

Daily Pick-upThe daily Pick-up, and the ability to follow the booking pace should continue to distinguish between individuals and groups.

On the BooksThe Booking Pace for present and future days should be monitored to ensure that it is performing in a way which means we can meet the forecast, reacting to any deviation if it is not.

Booking WindowThe daily Pick-up, and the ability to follow the booking pace should continue to distinguish between individuals and groups.

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Advanced Revenue ManagementPick Up

The Pick Up is the figure that tells us today how many confirmed sales we have for a day. This figure shows us, by day or room type, the % already sold in a very detailed way.

This figure will act as a guide in the decision to raise or maintain prices for a day and that we must apply from today.

The ideal situation is to be able to analyze this figure and act daily in all channels.

EXPLAIN THE 4 PREVIOUS WORDS

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Forecast Vs. The Reality of the Hotel

To make decisions in the face of...

1. Too many sales of a segment2. Lack of bookings3. Commercial actions or discounts4. Correction capacity (time and auto room allocation)5. Increase in commission expenses6. Decline of a market7. Marketing proposal of a distributor8. Increase in prices9. Decrease in prices10. Decline or disappearance of segments11. Change of consumer behavior; booking site12. Change of maintaining the strategy

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When should I produce a forecast?

The frequency of the forecast must be established by each company.Continuous context of measurement and reaction (decisions by business)

The normal frequency is:

- Weekly for the sales targets meeting- Bi-weekly for the next 90 days- Bi-weekly for special dates- Monthly for season changes- Quarterly for the rest of the year- Quarterly for the next 12 months- When we detect a deviation of 10% from the pms for a certain date- When we detect a deviation of 5% in a supplier, destination

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Constant Forecast.

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Collaborative Tool.

Use Google Calendar to identify all the events that can influence consumption. This is an easier and more accessible tool for the whole team.

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New Tools

The Externalized Forecast.Use Google Calendar to identify all the events that can influence consumption. This is an easier and more accessible tool for the whole team.

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Advanced Revenue ManagementElements in Forecasting

Remember:

- Targets met vs Targets set - Bookings on the books- Actual Pick up vs expected Pick up - Segments expected- Average rate- Total revenue

We must carry out at least one Forecast:

- Once a week for the next 4 weeks- Once a month for the next 3 months- Once a month every 3 months for the whole year- Once a year for the next year

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Advanced Revenue ManagementBenchmarking, selecting my competitors

Benchmarking, selecting my competitors

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Advanced Revenue ManagementBenchmarking

This is a study of the competition that aims to find out how they sell, at what price and what their occupancy is. All of this with the aim of discovering how we can improve and giving us clues on how to act with distributors, customers, etc. in order to improve our marketing.

As a minimum a benchmark study should have data on:

• Prices• Room type• Products• Packages• Distribution channel• Occupancy• Services Offered

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One of the basic elements of revenue management is outlining who our competitors are, and it should be the marketing or sales department that advises us.

We must select our competitors, since they will serve as a reference when identifying how a customer may perceive us.

The analysis of competitors is key to making progress in strategies and results.

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The objective of benchmarking is to be able to compare ourselves with the selection of competitors to identify:

-Their prices (public, private, FIT, etc.)-Market shares-Development of our sales-Where they are distributed-At what prices they sell-From where customers arrive-Occupancy rates-Average price-Opinions of their customers-Deficiencies-Segmentation-Positioning in OTAs-Strategies-Extras offered and prices-Promotion tools (marketing)-Photographs-Descriptions

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We propose a simple method: 15/9/6

We must select:

-5 establishments that the customer could consider to be superior to our hotel, superior substitute product

-5 establishments that the customer could consider to be similarto our hotel, similar substitute product

-5 establishments that the customer could consider to be inferiorto our hotel, inferior substitute product

Over time we will reduce the list to 9 but we will never have fewer than 6

References: stars, zone, type of room, customers, etc.

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Advanced Revenue ManagementBenchmarking, the Competitive Set

We propose a simple method: 15/9/6References: stars, zone, type of room, customers, etc.This is our Competitive Set

5 3 2

5 3 2

5 3 2

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Advanced Revenue ManagementBenchmarking and Daily Prices

Monitoring the prices at which our competition sells is one of the best tools to help us sell better. Using this we will be able to reach numerous conclusions.

There are many tools on the market to obtain this information.

The data to extract will be:

• What is their strategy?• Do they use yield?• What occupancy they have?• Can they affect our sales?• What will their next price be?• Selling with minimum stay (LOS)

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Advanced Revenue ManagementBenchmarking, IT Tools

We propose the use of comparison IT tools as they facilitate the work, automating it.

Companies such as: Rateshopper, STR Global, Dueto, Pricematch,

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Companies such as: Rateshopper, STR Global, Dueto, Pricematch,

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Companies such as: Rateshopper, STR Global, Duetto, Pricematch

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Advanced Revenue ManagementBenchmarking, Reference Variables

a) Market share: total hotel rooms/total market rooms x 100

b) Current market share: total hotel rooms sold/total market rooms sold x 100

c) Penetration index: current market share/ market share

d) Average price index: average hotel price/ average price all hotels

e) Income generation index: ipm x imp

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Advanced Revenue ManagementMarket/Customer Segmentation.

Market segmentation

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Market segmentation is a study that should allow us to know the different reasons why customers come to our hotel.

This should allow us to form different segments or homogeneous groups of customers based on the reasons for the visit.

On knowing these reasons we will be able to analyze how to increase the demand of these segments.

We must also know the segments of our competitors and the destination in general to compare these.

A single customer can be in several segments.

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To consider a group of customers as a segment it must comply with the following:

1. It is not a channel or distributor2. Sensitive, responds differently to the strategy3. Measurable, both in themselves (age) and in the result (consumption)4. Operable, can be worked on (mtkg, prices, etc.)5. Profitable, Segment or micro segment but not too small

It always responds to the marketing mix.

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9 Benefits of Segmentation.

1. It increases income by segment2. It allows the selection of more profitable customers3. It saves on the marketing budget4. It improves marketing actions5. It allows different prices to be offered6. It allows different services to be designed (package) 7. It allows our services to be adjusted8. It generates a customer who is more satisfied9. It has an impact on the customer environment

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Segmentation Stages:

1. Identify the group of customers, dimension2. Determine their needs and expectations3. Ability we have to generate demand4. Internal changes to promote this demand5. Analysis of the historical report and consistent forecast

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To study market and customer segmentation we should collect this data:

• Schedule of their demand

• Length of stay• Purpose of stay (inbound and outbound)• Reason for choice of hotel• Time in advance • Revenue per room • Revenue per customer• Distributor through which they book• Place of purchase• Final product they consume• Frequency of purchase• Profitability• Group size

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Revenue per Available Customer Value. Rev.PACV

These are the revenues we obtain by customer type, which allows us to classify them and assign them a value.

Grouping them will allow us to be more effective when it comes to optimizing our revenue as we will focus on those that offer us more revenue at any time.

Top Revenue Client.It allows the calculation of your “Displacement”, opportunity cost of having one customer and displacing (rejecting) another.Very applicable for selecting series, groups and TOs.Occupancy ceiling by group or TO.

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Exercise:

- Identify my segments- Identify the segments of my competitors- Identify the segments of my destination

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Advanced Revenue ManagementOfficial Definition

Pricing

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Advanced Revenue ManagementImpact of Pricing

Impact of Pricing on our Hotel

The importance of pricing is crucial for companies.

In 2009 a European study by Simon-Kucher showed that price setting is crucial for the company and reported more benefits than from cost reduction.

We can ask ourselves, what importance does our general management place on cost reduction? How many programs are implemented in this area?

And about pricing, how much attention is it given? Who imposes it on us? How do we work with it?

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What is Pricing

These are the pricing setting techniques developed within a company. This price setting can vary depending on the company’s strategy.

The main price setting factors are: manufacturing costs, market, competition, market position and quality of the product.

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Advanced Revenue ManagementAccess to more customers

Pricing or how to multiply access to products and customers.

The focus for the pricing objective must be global and strategic.

The pricing objective in the hotel sector is not only to make changes according to market demand.

The main objective is to create a range of products that can be absorbed by as many customers as possible to generate the greatest possible revenue.

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Advanced Revenue ManagementEfficient Price

Price management triangle:

Costs

Competition Demand

Management of Prices

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Advanced Revenue ManagementEfficient Price

Efficient Price:

These are price setting techniques for a good or service. Setting prices can be approached from the point of view of either production cost or demand.

From the marketing point of view, an 'efficient price' is a price that is very close to the maximum price that a consumer is willing to pay.

In economic terms, it is a price that transfers most of the value obtained by the consumer to the producer.

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Advanced Revenue ManagementPricing. Where do prices come from?

From the mind of the customer. From what the customer is willing to pay for a good or service. The customer compares different options (substitute products) together with their available budget and the return or pleasure they obtain.

That creates the idea in their minds of the appropriate price they

would pay for a good.

To increase its profitability per sale a company must always know the maximum price range at which its customer is willing to consume.

To increase the customer's perception of value, factors such as the product, price, distribution and how we promote it must be taken into account.

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Advanced Revenue ManagementPricing. Where do prices come from?

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Advanced Revenue ManagementThe Customer's Price and Response

Having a good price but not having customers.

Although price seems to be a tool over which we have control this feeling is totally false.

- Price is defined by demand- Sometimes it goes up and sometimes it goes down- Seasons of high demand and low demand- Years without demand- Channels without demand

Price is also defined by the competition (local or international).There are techniques or factors that help increase the price

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Pricing

Next step: “scientific pricing”.

A mix of software, human behavior tracking, statistics and scientific models to obtain a price for each customer.

It is based on the idea that: the hotel can discriminate between different sellers and the seller can discriminate between different buyers.

Why is the data collected by Google or Facebook so important?

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Financial Pricing

There are several financial or accounting techniques for setting prices, all excellent, but none of them are based on market factors so they are not useful to the revenue department.

They are only useful for establishing what prices we should sell at given the investment made in the hotel.

We will not discuss any of these techniques in this seminar.

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Main methods for setting prices depending on the:

Market.•Prices based on demand (elasticity/inelasticity)•On the life of the customer•On the value perceived by the customer•Depending on the competition (high, penetration, market)

Costs.•Costs of the intermediaries•Prices based on direct costs

Perception of the customer•% of one room type to another•Reaction to the product•Private prices/loyalty

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Pricing

Other factors for price setting are:

Quality of hotel services (and how we explain it)Room quality (position, views)Desirability, exclusivity factor GeographyDemand SeasonCustomer typeAvailable budgetCompetitorsOffer in the area

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Prices and results.

There are 3 approaches to measuring the effectiveness of prices by their results. How do we want to measure it in our hotel?

-Based on the average rate-Based on % occupancy-Based on RevPar

We must analyze the prices that we sell most by:-Channel-Season-By rates/offer

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Price Discrimination.

These are the parameters by which a company assigns prices.

1. Perfect discrimination. This is the most effective system in tourism, it assigns a price to each customer and each product. It assesses the intensity of demand and evaluates the type of

customer.Applied in the extreme, the price would vary depending on the unit we sell and who it is sold to.

Other discrimination options:2. Volume. By purchase volume/quantity (including by what they consume in the hotel)

3. Type. By customer type/group, or by versionBy positioning, image, flash promo, seasonal, etc.

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Pricing and Rate Obscuring

This is one of the techniques to deal with a serious fall in demandsuch as a crisis or collapse of an outbound agency.

Offers are the best response followed by masking:

• Make packages• Free nights for every x of stay• Opaque channels, priceline type• Free breakfast• Prepaid• Transport• Excursions

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Advanced Revenue ManagementTariff Structure

Pricing

We can base our tariff structure on:

1. Official2. Rack3. Walk-in4. Negotiated 5. Corporate6. Wholesalers7. Fit8. Promo9. Mice - meetings incentives congress and events10. Weekend11. Bar12. Last m.13. Long Stay14. Loyalty15. VIPs

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Advanced Revenue ManagementPrice matrix

Standard

Superior

RACK PREF BAR1 BAR2 BAR3 BAR4 BAR5 BAR6 WKD1 WKD2

200 160 140 120 110 100 90 80 70 60

215 175 155 135 125 115 105 95 85 75

Suite 230 190 170 150 140 130 120 110 100 90

General Price Table

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Dynamic Pricing

Advantages of Dynamic Pricing

- Eliminates discounts in periods of high demand- Reduces room availability for groups- Increases discounts in periods of low demand- Sets rates for "Special Events" or for periods of extraordinarily high demand.

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Advanced Revenue ManagementActual Effects on Hotels

* Avoids cannibalism

Pri

ce

Mix of Rates

No. of Rooms

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Advanced Revenue ManagementRevenue Algorithm. Example

Display Prices of:

1. 0% €116.0 2. 20% €122.4 3. 40% €128.8 4. 60% €135.2 5. 80% €141.6 6. 100% €148.0

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Practice: How we set our prices

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Standard

Superior

RACK PREF BAR1. BAR2. BAR3. BAR4. BAR5. BAR6. WKD1. WKD2.

200 160 140 120 110 100 90 80 70 60

215 175 155 135 125 115 105 95 85 75

Suite 230 190 170 150 140 130 120 110 100 90

General Price Table

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Standard

Superior


200 160 140 120 110 100 90 80 70 60

215 175 155 135 125 115 105 95 85 75

Suite 230 190 170 150 140 130 120 110 100 90

25% 50% 75% 100% 33% 66% 99%

Very Low Season Price Table

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Standard

Superior


200 160 140 120 110 100 90 80 70 60

215 175 155 135 125 115 105 95 85 75

Suite 230 190 170 150 140 130 120 110 100 90

25% 50% 75% 100%

Low Season Price Table

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Standard

Superior


200 160 140 120 110 100 90 80 70 60

215 175 155 135 125 115 105 95 85 75

Suite 230 190 170 150 140 130 120 110 100 90

33% 66% 99%

Shoulder Season Price Table

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Standard

Superior


200 160 140 120 110 100 90 80 70 60

215 175 155 135 125 115 105 95 85 75

Suite 230 190 170 150 140 130 120 110 100 90

25% 50% 75% 100%

Shoulder-High Season Price Table

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Standard

Superior


200 160 140 120 110 100 90 80 70 60

215 175 155 135 125 115 105 95 85 75

Suite 230 190 170 150 140 130 120 110 100 90

25% 50% 75% 100%

High Season Price Table

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A hotel with 200 rooms. If RM is applied to the sales of each of its rooms and each room has an increase per sale of €2, the result at the end of the year is very significant.

200 rooms x €2 = €400/day x 365 days = €146,000

200 rooms x €3 = €600/day x 365 days = €219,000

200 rooms x €5 = €1000/day x 365 days = €365,000

200 rooms x €15 = €3000/day x 365 days = €1,095,000

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1 Hotel x 100 Roomsx365 days = 36,500 Rooms 1/3 = 12,166 Rooms

12,166 x €3 = €36,498 12,166 x €6 = €72,996 12,166 x €9 = €109,494

ANNUAL TOTAL EXTRA = €218,988

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Price parity

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Advanced Revenue ManagementPrice Parity

The price parity model is strongly criticized by some but also advocated by others.

Despite having no financial logic this practice is widely used today and is the only one accepted by all the IDS.

Internally, there are differences between the commissions charged that are taken as promotional or marketing expenses. Some IDS are offset with others.

Without parity, customers would go en masse to buy through the cheapest IDS and although this would be more effective it would cause a single IDS to dominate almost all of the hotel's sales; a very dangerous situation.

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Advanced Revenue ManagementCommercial Parity

Commercial parity is based on the comercial parameters that can condition the purchase by the customer.

It is important to have commercial parity with our distributors as this can give them advantages over our own channel.

- Payment conditions- Booking conditions- Cancellation fees- Days of cancellation- Cleaning costs- Hidden offers- ...

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Advanced Revenue ManagementControl your Price Parity

Control of our parity is very important and can mark the relationship with our customers and distributors.

There are technological tools to compare the prices for our hotel.

- know who we are working with- know who distributes us- know the “mark up” on our product- understand the model of our distributor: Retail, Merchant, Opaque

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Advanced Revenue ManagementParity Disrupters

Dumping

Some companies carry out “Parity Disruption” measures on a completely voluntary basis.

It is about breaking the parity of your hotel to benefit them, reducing their own sales margin so that the customer chooses to make the purchase in their companies.Other times they integrate data from several of your channelsand show the one with which you have a lower price contract.

These companies usually don’t have a direct contract with the hotel and use price comparators to reach the customer.

If necessary, make bookings on each channel until you get the rate/voucher and know through which agency you are being sold.

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Pricing and Distributors

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Capacity and its management.

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Advanced Revenue ManagementAvailability Management

The correct management of our availability is one of the biggest points of support for proper RM.

Factors that condition our availability:

- Booking conditions- Rate level- Non-Guaranteed Bookings- Prepayments- Room Allotments - Groups- Overbooking - Waiting list- Peaks and Troughs in planning

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Advanced Revenue ManagementCapacity/Availability Management

Actions on capacity:

- Nesting (sell the superior ones at prices of doubles)- Room Allocation Protection (Closures + wait)- Auto room allocation bookings- Closures in network of distributors- No action on capacity (whoever comes takes it)- Static versus dynamic room allocations- Capacity by customer value (capacity x cookie)- …

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Overbooking

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Advanced Revenue ManagementOverbooking

Overbooking is a tool for the management (increase) of capacity. It is a consequence of the deliberate sale of a larger number of beds than exists in order to offset cancellations and no shows.

Often no shows, last-minute cancellations and customers who decide to cut short their stay can affect our income and possibly our profitability.

RM is a tool that allows us to find the optimal level of sales to make the most of the availability of our hotel.

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Action Plan

As a result of this, it is advisable to have an action plan for these occasions. In this we set out our planning:

•where deviations will occur•stay costs•transport costs•compensation in services •monetary compensation •possible sanctions

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Calculate your level of Overbooking and Assess Risk versus Profit

Bookings Made > > ArrivalsUnguaranteedCancellations

No Shows

Rates We ChargeDeviations we pay

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Day to day tools

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Advanced Revenue ManagementRemember:

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Advanced Revenue ManagementExercise

Establish the strategies and objectives of your hotel.

•Who we want to attract•At what prices•How may products we offer them•What services we will provide•At what prices per segment•How you differentiate your hotel from the competition•What days make up each season•What factors will make us vary prices•Increase profitability•Increase repetition

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Establish your hotel's positioning.

•The one that most interests your most profitable customers•What services you offer •What prices we set for the rooms•What prices we set for extra services•What changes you make to your image and descriptions•Which distributors we use•How much money they generate for us•What cost per sale we have•What is the total amount of commission paid•Who generates all the demand I need

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Make your budget.

•Day to day budget•By segment•By type of room sold•Channels•Nationalities•Segments•By distributor/supplier•Large accounts (group and TO)

Complications on extracting information from the PMS and formats.

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Advanced Revenue ManagementExam

Questions

1. When should an offer be activated?2. Where do they come from?

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Advanced Revenue ManagementSummary: Concepts of Revenue Management

Free Download:

http://www.duettoresearch.com/resources/Effe

ctive-Revenue-Management-in-the-Hospitality-

Industry-Report.pdf

http://www.duettoresearch.com/resources/Rev

Mgmt%20to%20RevStrategy.pdf

http://www.hospitalityupgrade.com/_magazine/

MagazineArticles/Running-Shoes-Bears-and-

Revenue-Strategy.asp

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Advanced Revenue ManagementSummary: Concepts of Revenue Management

Free Download:

http://www.adhp.org/pdf/1-theBasicsofRM.pdf

http://revenueanalytics.com/pdf/Cornell%20Fe

bruary%202009.pdf

http://cqx.sagepub.com/

http://www.hammerman.com/files/occtrack/fore

casting.pdf

http://www.hsmai.org/members/SIGRevManag

ement.cfm

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Advanced Revenue ManagementRecommended Reading

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Professor: Tomeu Pons

[email protected]

LinkedIn: http://es.linkedin.com/in/tomeupons

@tomeu_pons

Thank you for attending.

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