Recently Guestline's Sales and Marketing Director, Rupert Gutteridge was interviewed on how best to increase revenue within Hospitality and how revenue management is about more than just rooms.
Rupert has over 20 years of experience in the industry; he previously worked as Regional Sales Director at IDeaS and also Sales Director - Central Systems, EMEA, for MICROS Fidelio. Prior to this he was with AremisSoft Corporation in both the UK and United States.
Feel free to comment with your own answers to any of the below questions!
Q, Many hotels get a significant amount of business from conferencing and banqueting facilities, F&B operations , the golf course, etc. But revenue management strategies are often focused just on rooms. Looking at the industry as a whole, do you see many hotels taking all revenue streams into account with their revenue management strategies?
A, Yes most definitely, the objective of more and more hotel companies today, is to integrate as many systems as possible. This is done not only to eliminate errors but also allow for the consumption of packaged elements within promotions etc to be automatically and correctly posted on to one central bill. This has the key benefit of also showing the total customer spend. This data illustrates that the management of guests by market segment / room type or channel is very rudimentary. The analysis of total spend can often point to to whole different room rate strategy. This is illustrated further by more hotels using GOP as a KPI rather than RevPAR.
Q, If you do have a hotel with excellent conferencing facilities, for example, how valuable could adopting revenue management strategies in these parts of your business be for boosting the bottom line?
A, This is key to successful business as the lead time on conference business is much greater than transient business and as a result sales people working within the hotel, who are often targeted on conference business, do not look at the displacement cost of cheaper accommodation being offered to conference business. They should be offsetting the displacement cost against the total conference value and further analysing the profitability of the individual conference before deciding whether or not to take the conference business.
Q, When it comes to revenue management for conferencing facilities, what are the added complexities compared to room revenue management?
A, There are many more complexities around conference business than rooms business. To start with the space & capacity of a space needs to be considered. Room rate or per head charge, greater number of delegates does not mean higher spend. Conference facilitities often have a lower profitability as margins are lower on equipment and other resources as well as food and beverage not to mention additional costs associated with more staff, wear and tear, etc.
Q, Where should a hotelier start when devising a revenue management strategy for conferencing facilities?
A, The first place to start is understanding the revenue by department is across rooms / conference and F&B. Then understand the pattern of business. When is the demand of conference business and when is the demand for transient business, what rates are achieved by these two segments.
Q, What performance indicators should be used and what tools are available to forecast and track demand and pick up?
A, The KPI that has to be used when looking at a business that has multiple revenue streams has to be Gross Operating Profit. So with effective displacement cost analysis achieved through accurate forecasting, careful analysis of F&B margins as well as other costs. In order to collate this data a number of systems are available to the hotelier to ease the job. A good PMS to record the customer data, reservations, pick up and other rooms related data. A conference and banqueting system to record ALL conference, meeting and event, reservations and enquiries. A good POS solution with stock control to record the consumption of F&B as well as the stock, wastage, and cost of items. Finally a revenue tool that will help forecast rooms demand and pricing variance.
Q, How important is it to get the sales team incentivised properly so they sell conferencing space to the right sort of customers, who will generate the best profit? How can this be done?
A, A creative approach to incentivation would be the only way to change the normal practice of simply filling the conference rooms and discounting the bedrooms to accommodate the residential delegates. If simple volume is used as a yard stick then the occupancy and not the profit will remain the measure of success.
Q, Similarly, when it comes to F&B operations, what are the added complexities compared to room revenue management?
A, F&B is a complex area to manage in terms of revenue management. It is difficult to change the metrics of price... study demand... and increase profit on low margin items. There are also too many other factors that effect demand like menu selection, ambiance of restaurants, printing menues etc. However time of day, best selling items, day of week can all be used as oportunities to create demand and maximise revenue.
Q. Where should a hotelier start devising a revenue management strategy for F&B operations?
A, Breakfast and room service.
Q, What operating metrics should be used?
A,GOP and turnover
Q. Is it advisable for hoteliers to have a dynamic pricing strategy for F&B? Why/ why not?
A, Pricing strategy can easily be applied in certain areas ... happy hour / packages with in-room entertainment / early dinners ( pre theatre etc.) Day of week ( curry night / Sunday lunch) such easy wins should be employed. However changing price of particular food item demanding upon demand can be challenging. Is it acceptable with the guest / can it be easily implemented etc.