Pre-pandemic, revenue generating strategies in hotels were focused around guestrooms. However, the changing spending pattern of domestic travellers has seen the emergence of newer revenue mapping trends. Hotel companies are exploring innovative ways to generate business from various ancillary sources, apart from rooms.
As hotels focus on fiscal recovery, Hotelier India speaks to a cross section of hospitality professionals on how they are planning a holistic revenue management strategy. We find out how they are employing TRevPAR metrics to measure the overall fiscal health of their properties by assessing the total revenue generated on a per available-room basis and how regularly monitoring these numbers can give a hotel an edge over its competitors.
How did the pandemic highlight the fallacy of focusing solely on guest rooms for revenue generation?
Varun Chhibber, Complex GM, The Leela Ambience Gurugram Hotel & Residences and The Leela Ambience Convention Hotel: Pre-pandemic, the ancillary revenue departments were aptly named, since these served a secondary role to guestrooms. A large part of our service design, revenue generating strategies as well as marketing spend was focused on room guests. However, newer trends emerged in the postpandemic era. With business travel in general and international travel in particular on hold for over a year, more than half of our business was impacted. In this backdrop, the focus of hotels shifted to domestic leisure travel.
The spend pattern of a domestic leisure guest, travelling on staycations, is completely different. As price points started to get rationalised, a luxury stay has become more affordable and a shift towards ‘revenge-travel’ emerged. With these new trends, the spending pattern of guests shifted too. They are likelier to order high-end wine or take a 90 minute spa treatment. These behavioural shifts impact the hotel’s bottom line. Consequently, hotels are exploring revenue generating opportunities with the ancillary departments as well.
Gaganjit Singh, Revenue Manager, Conrad Pune: Few hotels solely relied on room revenue. There was always a material impact of F&B outlets and catering along with other departmental revenue. However, the pandemic highlighted the need to become creative and have sound commercial know-how to get through tough times when occupancies and room revenues are lagging. Hotels with a large international corporate clientele have taken the biggest hit on rooms business and will take the longest time to recover. Hence, focusing just on room revenue alone was never a robust strategy, even in pre-pandemic times.
Sushant Sharma, Cluster Revenue Manager-North India Revenue Management, Marriott International: While the pandemic narrowed our profits through rooms, we were able to pull our topline. As a strategy, we initiated ‘Marriott on Wheels’ as restrictions on F&B and catering venues
put more focus on this segment, which emerged a large contributor to a hotel’s revenue generation.
The idea and purpose of the room requirement also changed during COVID-19. We were in regular touch with the government for any assistance during this period.
As hotels focus on fiscal recovery, what options can they explore for holistic revenue generation?
Gaganjit Singh: While multiple streams of revenue generation exist, hotels should not completely forget
about the rooms business. Many cities received business from repatriation, quarantine and pharma sectors, which helped them sail through troubled times.
F&B still remains a critical nonroom source for revenue generation. This aside, hotels should come up with compelling offers to drive revenue from their spa and salon verticals.
Varun Chhibber: Apart from staycations, we witnessed an increased demand for smaller events. Hotels
may end up hosting multiple social events on the same day spread across venues. Over the long run, we
expect this trend to continue for social and corporate MICE, where the number of events will increase but the size of each event will shrink.
Besides events, we witnessed an increase in the demand for food delivery at home. This helped us drive F&B revenues during the lockdown as well.
Amruta Deshpande, Revenue Manager, Eros Hotel New Delhi Nehru Place: A successful revenue management strategy is to produce consistent year on year growth. The more the revenue generated, the more the opportunity to offer a fulfilling experience and exclusive services to guests. The best way to top up existing revenues is to add ancillary sources of revenue, especially now, when the traditional room and restaurant business is functional with restrictions.
Before adding these new revenue generation sources, every revenue manager should understand what is unique to their hotel, what amenities and services are most preferred by guests and why customers would choose their hotel over others. Some avenues of generating more revenue can include converting few rooms into pop-up restaurants, focusing on food deliveries and providing laundry services to other businesses.
F&B still remains a critical non-room source for revenue generation for most hotels.
Why is it important for hotels to measure and monitor total revenue per available room (TRevPAR) over and above RevPAR?
Amruta Deshpande: TRevPAR is an insightful metrics for measuring a hotel’s overall health as it assesses the total revenue generated on a per-available-room basis. This metrics takes into account the revenue generated from all areas, including rooms, F&B outlets, meeting spaces, event venues, spa, salon, health club, laundry, parking, golf space, internet usage, etc. Where TRevPAR includes all revenue sources within a hotel, RevPAR includes only room revenue on a per-available-room basis. It is quite possible sometimes that a hotel, which generates highest RevPAR in its comp set, may actually not be a top ranker when compared on TRevPAR Index.
Hence, monitoring and working on the TRevPAR can give any hotel an edge over its competitors.
Sushant Sharma: TRevPAR was an important indicator to us during the pandemic to work on cost-based pricing in every segment segment of the property. COVID-19-related business, which contributed about 75% during the first wave, included everything. This was very low in our RevPAR but made quite an impact on TrevPAR because of the long stay segment and inclusive meal requirement. Hotels working on TRevPAR over RevPAR witnessed better recovery in other channels, including rooms.
Varun Chhibber: TRevPAR indicates the effectiveness of a hotel space in revenue generation and has
a direct impact on the property’s profitability. From a mathematical perspective, each hotel has fixed costs linked to various departments. Hence, to remain profitable and deliver GOP, hoteliers need to identify new sources of revenue generation from each stream. Following TRevPAR as a performance indicator gives us an accurate assessment of business.
Gaganjit Singh: As a KPI, TRev- PAR’s value is in demonstrating how effectively any space is being used for revenue generating purposes. Its main advantage is that it takes into account revenue from all departments, including F&B, catering, events, spa and salon, transportation and even phone/internet services, which can have a significant impact on a hotel’s overall performance. This is particularly for full-service hotels, which tend to have extensive offerings.
Hotels should come up with compelling offers to drive revenue from their spa and salon business.
Can TRevPAR reveal unexplored revenue opportunities?
Varun Chhibber: Currently, when hotels are operating at least 35 to 40 percentage lower price bands
as compared to 19 months ago, we have had to identify innovative ways of generating greater revenues.
These include deals for enhancing the length of stay or a robust upsell programme for rooms, F&B or spa. And TRevPAR can definitely help here.
Gaganjit Singh: In-depth analysis of TRevPAR makes a hotelier appreciate the contribution of each revenue stream. During the lockdown, Conrad Pune actually did more F&B revenue than rooms business for many months. Whenever gyms and spas were allowed to be operational by the government, we capitalised on those opportunities by aggressively promoting it to our customer base in Pune. The governmental regulations in terms of events have been stricter in Pune than other cities, but social events with 25 to 50 guests contributed to the hotel’s topline.
Amruta Deshpande: Analysing this KPI can definitely give hotels an opportunity to see the ancillary services in demand, or explore services that are required considering the current situation. This will help in increasing a revenue source for the hotel. Our hotel added few such services, like pop-up restaurants; home delivery and takeaway, kitty lunches, corporate meals, work from hotel and residential wedding packages.
Sushant Sharma: There were months when the difference between RevPAR and TRevPAR was narrow enough for us to realise hidden revenue-generating streams in F&B. Anticipating our package segment, we promoted ‘Staycation with Marriott,’ which unlocked all other revenue streams.
How can TRevPAR help hoteliers decide on a profitable revenue mix and determine the resources to be dedicated to every revenue source for revenue optimisation?
Sushant Sharma: Rooms have always been the most profitable business for most hotels. We further investigated individual departmental profits, which enabled us to reach a profitable revenue mix. TRevPAR was further divided into rooms, F&B, and others in our benchmarking tool where most of the hotels participate.
This helped us to concentrate on profitability in every section. This analysis further enabled us to understand resources to be dedicated if required. While we did this exercise, our WXYZ lounge became pivotal in increasing our TRevPAR. We also have a bunch of other sister hotels to see the best practices and grow our other revenue streams.
Gaganjit Singh: For running various hotel operations, TRev-PAR can be used to understand how much money and resources should be given to each service. This data helps in taking the right decisions.
TRevPAR helps in identification of the most steady revenue streams in operation so hoteliers can determine a profitable revenue mix. Optimisation of revenues is possible only once you have data that makes a material impact. By doing TRevPAR analysis, a hotel can identify ways to stretch alternative revenue sources, and also see how to shift resources to the most profitable non-room revenue streams. This makes recovery simpler and faster.
Varun Chhibber: The idea is to increase revenue as the number of guests at the hotel increases. By accounting ancillary services, we may be able to not only enhance the guest experience but also generate
greater money.
For example, a hotel may be offering complimentary parking. But by adding small services such as car
cleaning will lead to greater total revenue generation per available room.
Similarly, by adding small benefits such as grab-and-go for guests (given the social distancing norms) may enhance the F&B revenues while also help managing the buffet cost as well as crowd at the outlets.
At the same time, hotel can also divert resources (people and products) to revenue streams that contribute more to total hotel revenue.
For example, during busy operations, our admin teams assist guests in busy areas of the hotel. These are
aspects that require greater attention during the ongoing pandemic, such as ensuring safe-distancing
during the social events.
Amruta Deshpande: By amalgamating a detailed room segment-mix study with TRevPAR hoteliers can
identify the guest profile and their spend on various business services in the hotel apart from rooms. This
study will further help in determining different packages with value addons for these segments, or in offering discounts on services that can add to the overall revenue. Offering room prices with meals included, or creating bundled staycation packages will definitely boost a hotel’s total revenue.
