The first in an ongoing series of live-streamed panel discussions on Hotel Management strategies featured Cristina Lopez, Director of Revenue Management, Anantara Villa Padierna Palace. She was joined by Les Roches Marbella faculty members, Mr. Jon Loiti and Ms. Rocío Montero, for an in-depth conversation about the way hotel managers should think about Revenue Management.
Too often forgotten about in favor of filling as many rooms as possible, revenue management is a fundamental pillar of optimizing price strategies. In this discussion, Ms. Lopez presents to students of the Executive Master’s in International Hotel Management a series of tools and applications that today’s Revenue Managers can take advantage of to standardize processes, in order to save time to dedicate to the strategic thinking that machines are not capable of doing.
“Café con Expertos” | Cristina Lopez, Director of Revenue Management, Anantara Villa Padierna Palace
Online Tools and applications used in revenue management have advance considerably in recent years and this has freed up time for revenue managers to focus on developing and optimizing strategies. While tech innovations have greatly enhanced data collection and organization, the human element is still key to driving a hotel’s revenue strategy successfully. According to Cristina Lopez, there are three main objectives behind implementing these tools: operational insights, data Collection (information), and strategic development.
“Revenue Management is about implementing the right strategies and putting them out there for your guests to be able to easily find and book your rooms at the highest possible rate together with the highest possible occupancy”, said Cristina Lopez. Hotels sometimes need to change their rates several times a day and if one person were to be tasked with monitoring this manually, that would consume a revenue manager’s entire workday. Utilizing optimization tools relieves some of that time and allows managers to dedicate time to more valuable and profitable areas of revenue management.
Data Collection & Analysis
It is important for Revenue Managers to not only understand their client’s behavior, but also have a complete picture on what their hotel’s strengths and weaknesses are, how the hotel positions itself within its market, and how their competitors behave in the same context. Every strategic revenue action undertaken by a hotel creates a reaction from both the guest and the competitor. When all of this data is collected and combined together with operational insights, hotels are able to develop a sound strategy.
Developing Strategic development gives hotels a playbook to follow that will help them to maximise revenue. They can maximize their from two basic areas revenue by drawing from occupancy or from average rates. Speaking on strategy development, Ms. Lopez said “usually in the low season, when demand is lower, hotel’s will draw upon occupancy to increase revenue. They need to identify these periods and incorporate them into their strategy. When there is a lot of demand in high seasons, hotel’s need to focus on growing their average rate.” In addition to seasonal observations, hotel’s must also identify peak periods that arise in between, like those that derive from regional holidays, sporting events, celebrations, etc.. Knowing how to leverage either occupancy or average rate during these periods is a key to success and, additionally, knowing when to leverage both simultaneously will help ensure revenue goals are met. A comprehensive strategy will help to determine what operational measures need to be implemented in each one of these areas.
Software Tools & Applications
Property Management Systems (PMS)
Property Management Systems are used not only by revenue managers but by all operational departments of the hotel. These include Front Office, Back Office, Finance, Purchasing, and more. Each area inputs relevant data to the PMS that enables revenue managers to make strategic decisions that affect occupancy and average rate. Furthermore, the PMS receives the reservations and provides the hotel the information needed to feed into the other systems needed to implement the hotel’s strategy. Within these PMS operational systems, hotels employ channel management systems to distribute room inventory, availability, and rates to online booking agencies, travel agents, tour operators, and concierge services all over the world. This channel management system allows them to offer and sell the hotel’s rooms and maximize revenue. The channel manager saves hotels an enormous amount of time while ensuring that multiple distribution channels are provided updated information in real time.
Rate Shopper – Smith Travel Research (STR)
Understanding the rates from competitors allows hotels to be competitive without sacrificing revenue. Taking into consideration rates and competition, there are two main systems employed in the hotel industry. One of these is the rate shopper, an application that receives information about how competitors are currently selling across all of the distribution channels. It is crucial for revenue managers to know what the going rates are and that the hotel’s average rates reflect that value. Making this determination not only involves the value determined by the hotel itself but also by the value attached to the hotel by guests. Rate shopper applications like that provided by Smith Travel Research, gather detailed competitor information related to room type, hotel category, location, average rates, historical rates, and future projections that allow managers to set rates well in advance, sometimes up to a year. With all of this information in front of them, revenue managers are able to make informed decisions and adjustments.
Online Reputation Management (ORM)
Online Reputation Management systems are often not handled directly by the revenue managers, but instead it is tasked to the Guest Experience department of the hotel. Nonetheless, it is important for revenue managers to understand how guests are responding to their stay and what their overall experience was like. The available ORM systems gather all of the online reviews, comments, and opinions expressed by customers so that managers can identify what aspects of the hotel’s operations should be improved or reinforced. Once a hotel has a clear idea of what consumers think if it, they are able to make better strategic decisions. For example, if a hotel sees customers value its product(s) much higher than its competitors, it is more likely the hotel will be able to set its rates above the competitors while still achieving a high occupancy rate.
Revenue Management System (RMS)
Combining all of the information from the tools employed through PMS systems, rate shoppers, and ORM systems, itself requires a Revenue Management System (RMS). The RMS takes all of the data fed to it and makes informed predictions that assist revenue managers in making future decisions. With these predictions, hotels are able to graphically identify which periods will produce higher or lower demand and thus plan accordingly. The RMS not only assists the operational side of the hotel in terms of areas like staffing needs and supplier requirements, but more fundamentally it allows revenue managers to determine what the final rates will be and for which segments. Some periods may have high demand from business segments and others, for example, may gain more from focusing on leisure segments. The end result is developing a segmentation that creates different values attached to the property.