Discounting is a bad practice to follow; revenue managers must look beyond RevPAR to other options such as RevPASH, RevPAM, and RevPATH, says Binu Mathews.
Revenue management is always in the limelight and will only gain more attention in the days to come. With multiple choices available, hoteliers need to constantly engage customers to retain their competitive edge.
The immediate present will see revenue mangers looking at packaging for profit, focussing on maintaining rate parity, looking beyond RevPAR to RevPASH ( food & beverage revenue per available seat and hour, per F&B outlet), RevPAM (conference and banqueting revenue per available square metre) and RevPATH (revenue per available treatment hour, in spas).
Revenue managers must approach RevPAR by looking at the profitability quotient completely. It is important to understand what will drive more profitability – more occupancy at discounted pricing, or less occupancy at a higher price? The better approach is to offer additional services at higher price, and not adopt discounting to increase occupancy.
The internet’s role in driving RevPAR will grow and revenue mangers will continue to balance the inventory across multiple channels.
There will be larger focus on pushing sales via the hotel’s website to completely reduce the cost of booking otherwise paid to online travel agents and GDSs.
Discounting is a bad practice; packaging for profit is what revenue managers must look at. Revenue managers have to focus on creating offers that are packaged to yield maximum revenue while providing customers with value-added services. Packaging for profit also helps revenue managers differentiate between rates offered across channels.
While packaging for profit, revenue managers must tightly integrate their strategy with customer intelligence, a key requirement for profit optimisation.
Tracking customer purchase history, product preferences, and buying behaviors, help arrive at customer value and forecast customer behaviour to offers. This approach helps develop customer-centric pricing and generate more revenue per customer (MRPC).
Rate integrity is essential to the profitability of a hotel’s operation in the short and long term. In a customer-centric approach, it is important to ensure your customers know that they are always getting a better deal.
This is not possible if the hotel’s website displays a different rate while online travel agents and the hotel’s central reservation office provide another rate. Such a difference in rate will make the customer lose confidence in the pricing, leading to loss of repeat business for the hotel.
Revenue managers must approach optimising revenue opportunities holistically. Focus on RevPASH is already gaining a lot of ground among hoteliers.
This metric is calculated by dividing the total revenue for the day by the total number of seats in the restaurant, multiplied by the number of hours the restaurant has been working.
Packaging to profit can also be adopted in effectively marketing the restaurant to existing customers and prospects to improve RevPASH. Another area of focus for a revenue manager should be the RevPAM.
Spas in hotels have turned out to be a focus area for revenue generation. Revenue managers should focus on ways to increase their RevPATH and optimise treatment room utilisation (TRU) to help them yield and maximise on all revenue opportunities.
Revenue managers should ensure the spas are using their treatment rooms to the maximum and adopt packaging for profit. For example,. creating a marketing campaign to promote the slow times/off peak times.
Focusing on up-selling will also bring in additional revenue.
In the days to come, revenue managers will need to depend on aggressive technology tools to manage rates, rate restrictions, inventory, and reservations, efficiently and accurately.
Â
Revenue managers must take advantage of the technology solutions available in the market to drive more productivity in their department.
They must look for solutions that allow them to review their current rates and allotments on all of the major websites; provide assistance in determining optimal rates for all distribution outlets; allow tracking of competitor rates electronically in real time; provide forecast of total customer spend patterns and booking behavior, and help analyse customer price-sensitivity and distribution channel profitability.
Such solutions will help drive dynamic pricing on all channels and optimise revenue opportunities across the hotel – from room inventory, restaurant, conference and banqueting, to the spa.
