building a revenue and channel culture together
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Building a Revenue and Channel Culture together
Key Objectives Broaden awareness of Revenue Mgt and Business strategies Focus on the development of critical analysis and strategic thinking skills with a
focus on enhancing competitive positioning and driving total revenue growth Develop influencing behaviours and strategies for planning and preparing for
trade reviews and board reports. Optimise channel contributions through clear understanding of the hotels market
segmentation Increase the awareness of all channel distribution points by linking into the sales
and marketing function. Develop competencies and skills of revenue champions at hotel level Communicate, share and enhance best practice between revenue/channel and
hotel Drive revenue generation through strategic promotions across all 4 channels
Key drivers to achieve our goals
Research Understanding the business
Analyse Problem solving & decision making Innovation
Convince Leading & developing people Impact & Influence Adaptability
Execute Planning & organising Drive for results
Measure Take responsibility Asses strategy
Course agenda
Market segmentation Data Collection & Analysis Forecasting Yield management Channel management Pricing
Market segmentation
What is a market segment – Dividing a market into distinct groups of buyers who might require separate products, have different needs or show different
behaviourEach property may have different market segments depending on their focus or location.
City hotel CorporateBTALeisureIndividuals
Resort HotelLeisureIndividualsTravel AgentsCorporate
Conference hotelCorporateConference organisers
Long stay hotelsCorporate BTA
Transient hotelsCorporateleisureIndividuals
African Sun’s Mkt Segementation African Sun/Staff Business Travel Agents Conference organisers Corporate Government Leisure Individual Non-Government Organizations Sporting group Tour Operators Associations
Benefits of accurate market segmentation
Accurate forecasting
Optimising market mix
Developing targeted strategies to attract specific customers
Effective and targeted pricing strategies
Data collection
Where does one look to extract the information needed to make an informed decision on generating increased revenues
PMS Market share reports Market trends Events calendar Sales reports Local news papers
Why do we need to analyse data out side of what the PMS can give us ?
Key metrics associated to room revenue
Occupancy Average daily rate RevPar
Quick calculation
Revpar / ADR = Occ%
Revpar / Occ = ADR
ADR X Occ = Revpar
Which of the above is the most significant measurement for RM to consider ?
RevPar
Revenue per available room
Gives a measure of performance against all available rooms as opposed to just sold rooms
A key measure in ensuring that pricing and occupancy decisions give the best possible return
Rate reduction decisions to drive occupancy must be considered very carefully – increased occupancy carries increased costs
Increased price can result in a drop in occupancy but also give a better RevPar result
Key performance indicators
MPI – Market penetration indexHow our occupancy compares to our competitive set
ARI – Average rate index
How our ADR compares to our competitive set
RGI – Revenue generated Index
How our RevPar compares to our competitive set
Market Penetration Index
Our occFormula =
Market occ
Hotel MarketExample Occ 84.1% 77.1%
MPI 1.09
Average Rate Index - ARI
Our ADRFormula = -------------
Market ADR
Hotel MarketExample ADR $71.96 $81.90
ARI 0.879
Revenue Generated Index - RGI
Our RevParFormula = -----------------
Market RevPar
Hotel MarketExample RevPar $60.55 $63.17
RGI 0.959
Monthly Performance Data
Job Number: 957984 Staff: Dave Bunyard Created: July 30, 2009 Currency: ZAR - South African Rands
Date Index RankMy Prop Comp Set My Prop Comp Set
Jan 2009 27.1 48.7 47.1 60.8 55.7 5 of 5Feb 2009 44.8 65.8 64.7 85.6 68.0 5 of 5Mar 2009 36.8 64.3 60.6 76.4 57.3 5 of 5Apr 2009 35.5 56.4 61.8 71.0 63.0 5 of 5
May 2009 40.0 66.2 53.7 70.6 60.4 5 of 5Jun 2009 62.7 73.4 72.3 70.5 85.4 4 of 5
Date Index Rank
My Prop Comp Set My Prop Comp Set
Jan 2009 1,477.43 1,597.50 1,353.60 1,413.37 92.5 5 of 5Feb 2009 1,654.56 1,714.76 1,621.49 1,623.36 96.5 4 of 5Mar 2009 1,531.95 1,685.61 1,547.68 1,533.24 90.9 5 of 5Apr 2009 1,417.14 1,644.37 1,562.50 1,554.71 86.2 5 of 5
May 2009 1,411.16 1,762.26 1,549.00 1,578.67 80.1 5 of 5Jun 2009 1,431.85 1,910.03 1,561.15 1,602.23 75.0 5 of 5
Date Index RankMy Prop Comp Set My Prop Comp Set
Jan 2009 400.21 777.43 637.02 858.83 51.5 5 of 5Feb 2009 740.67 1,128.09 1,048.57 1,389.80 65.7 5 of 5Mar 2009 564.36 1,083.65 937.64 1,171.51 52.1 5 of 5Apr 2009 503.48 927.09 966.04 1,104.13 54.3 5 of 5
May 2009 564.46 1,167.38 831.66 1,115.04 48.4 5 of 5Jun 2009 897.20 1,401.98 1,129.16 1,128.85 64.0 5 of 5
ADR
This Year Last Year
My Property: The Grace In Rosebank #133104
RevPAR
Comp Set: Hyatt Regency Johannesburg #111222, InterContinental Johannesburg Sandton Towers #111489, The Michelangelo Sandton Square #127993, African Pride Melrose Arch
Hotel #137159, Excludes Subject Property
This Year Last YearOccupancy
This Year Last Year
Other revenues
SpendPAR RevPOS RevPas RevPASH
SpendPAR
Total in-house guest / Total Rooms = SpendPARRevenue Available
$12,375 / 100 = $123.75
This excludes events, banqueting & conferencing revenues
RevPos & RevPas
RevPos – Revenue per occupied space (sq m)RevPas – Revenue per available space (sq m)
Total revenueRevPos = -------------------
Occupied square meter
Total RevenueRevPas = -------------------
Available square meter
Teak 0 42.84 0 85.68 27-Jul Acacia 30 8550 8550 2 28.56 57.12 57.12 100% R 149.68 R 149.68
Baobab 35 9975 9975 2 198 396 396 100% R 25.19 R 25.19Boardroom 0 36.69 0 73.38 Mahogany 9 315 315 2 28.22 56.44 56.44 100% R 5.58 R 5.58Seringa 0 138.84 0 277.68 Teak 0 42.84 0 85.68
Jul Acacia 113 39170 1500 1230 41900 26 28.56 742.56 1771 42% R 56.43 R 23.66Baobab 346 73280 4500 14300 92080 20 198 3960 12276 32% R 23.25 R 7.50Boardroom 4 0 0 180 180 2 36.69 73.38 2275 3% R 2.45 R 0.08Mahogany 115 35350 1500 1605 38455 32 28.22 903.04 1750 52% R 42.58 R 21.98Seringa 259 60140 15000 16425 91565 22 138.84 3054.48 8608 35% R 29.98 R 10.64Teak 161 62225 0 8000 70225 26 42.84 1113.84 2656 42% R 63.05 R 26.44
Date Room No of Pax Total DCP Venue hire Extras Total Rev No of Periods Square meters Occupied Available % Occ RevPOS RevPASTotal 998 270165 22500 41740 334405 128 473.15 9847.3 29335.3 34% R 33.96 R 11.40
Cost per square meter
Date Room Total Cost Square meters Occupied Available % Occ RevPOS RevPASJuly Total 257000 0 9847.3 29335 34% R 26.10 R 8.76
Profit per square meter
Date Room quare meter Occupied Available RevPOS RevPASJuly Total 0 9847 29335 R 7.86 R 2.64
Example of Hotel C&B RevPos & RevPas
RevPash
RevPash – Revenue per available seat hour
Benchmark to establish revenue generation for food and beverage outlets
Takes into account perishable products of a seat and outlet opening times
Total outlet / Nr of available / hrs open = RevPASHRevenue seats
$13,000 / 100 / 10 = 13
Variable V’s Fixed costs
Variable costs – a cost that is proportional to the volume of the input produced Examples:-
Guest supplies Utilities Food & Beverages
Fixed costs – A periodic charge that does not vary with business volumes Examples
Admin & General Sales and Marketing Salary burden
Gross operating profit
GOP – Calculation Increase increaseADR Occ
Total Hotel Rev $15,000 $18,000 $18,000_
Variable costs $4,500 $4,500 $5,800_
Fixed Costs $5,000 $5,000 $5,000
=
GOP $5,500 or $8,500 or $7,20037% margin 47% margin 40% margin
Forecasting
Forecasting should drive at least 50% of your actions
Forecasting Revenue MathMarket segmentation
Channel ManPricing
Yield Man
What is forecasting
Estimate the company’s share of market demand based on defined market segments and an assumed marketing environment
Predicting market demand In each market segment Based on predicted market conditions
Building blocks to achieve accurate rooms forecast
Opportunity/gaps/peaks Short Term In system No shows
Yield Restrictions Long term Booking Pace Cancellations
Financial performance Historical Data Day of week Budgets
Demand to come Room nights Market seg Patterns/trend
Pricing Average Rate Length of stay Tentative/definite
Overbooking Revenue Uncertainty Groups Wash down
Market conditions Unconstrained Special Events Capacity
Forecasting
Organizing the data
Questions & Short term – Long term – Uncertainty – Budget – Market condition
Hypothesis
Data Collection In system – cancellations – No shows – Historical data – Market segRoom nights – Average Rate – Length of stay – Revenue – Capacity
Data Day of week – Patterns/Trends – Booking Pace – lead time
Organization
Data Analysis Special Events – unconstrained – Group Wash – Tentative/Definite – Demand
Recommendations & Opportunity/Gaps/Peaks – Financial performance
Decisions
Take Action Yield Restrictions – Pricing - Overbooked
Forecasting
Organizing Data – continued
How best can we display the data so that it shows, patterns, trends, seasons and events.
Graphs and simple tables tend to work better than detailed figures. Summaries are essential and gives the reader a brief overview if they do not have the time to go further.
Always take into consideration that the reader is extremely busy and has very little time.
Forecasting
Organising Data – continued
Forecasting
Pace report
0
10
20
30
40
50
60
70
80
90
100
Pick-up report
Data Analysis
Short Range Forecasting Pick up Pace Demand
Pick Up – What bookings are in the system now for a future date/period
Pace – What is the current trend or lead-in time
Demand – What is the future demand for accommodation
Forecasting
Forecasting
Group forecasting Transient forecasting
Groups Historical utilisation Booking pace Sales estimates Type of group Wash down
Transient Historical Booking pace Sales events Public holidays
Forecasting
Action Plan
Low Demand
Pursue market share Keep discount categories open Sell value and benefits Increase allotment allocations Target email blasts Remove stay restrictions Involve all staff
High Demand
Manage demand to optimise rev. Raise prices to be consistent with
competitors Control room rates and availability
through rate restrictions Focus on other revenues Up-sell Tighten guarantees and cancellation
policies Apply full price to suites and executive
rooms Involve all staff
Yield Management
Definition of yield management
Yield management techniques
Impact of yield management
Displacement of costs and effective negotiations.
Definition of yield management
The process of managing customer demand through the control of differential pricing and inventory allocation in each price category in
order to maximise gross revenue
Managing customer demand Differential pricing Inventory allocation Maximise gross revenue
Yield Management
Revenue cycle
Create demand
Reservations request
GuestRepeat customers
Retain demand
Manage demandForecast demand
Strategic Planning & Action
Yield Management
Yield Management
How can we measure yield management
Occupancy % X ADR = RevPar
Volume X Unit price
= Profits
Yield Management
How to drive yield
Automated Revenue Management systems
Length of stay (LOS)
Displacement costs analysis
Overbooking
Yield Management
Automated revenue systems
The most popular system is probably IDeas – but there are many others
Length of stay Minimum number of nights Maximum number of nights Close days to arrival
Examples:-
If each of your guests stayed one extra night how would this effect your occupancies. If you had to restrict length of stay for peak periods or high yield days What happens if your demand days in a week are to high how will you sell shoulder days
The aim is to establish the maximum revenue from a high demand period not the maximum average rate or occupancy.
Yield Management
How do you control Length Of Stay
You need a good unconstrained forecast
Understand your length of stay profile
Do not wait until you have 90% occupancy on the books
Use minimum length of stay rather than closing out lower rates
Do not over use minimum length of stay – we still need to fill the peak nights
Yield Management
40100
120100
30
Mon Tue Wed Thu Fri
100 rooms
Yield Management
40 70100
6030
Mon Tue Wed Thu Fri
100 rooms
Yield Management
LRA ?
What is Last Room Available
If the Best Available Rate (BAR) is available for a standard room type, for a given length of stay, the client’s negotiated rate for that room type will also be available for the
same length of stay.
If the BAR for a standard room is not available for the given length of stay, but is available for the next negotiated room type, then the client’s available rate for that
room type will also be offered
The clients negotiated rate is subject to black out dates as defined by the RFP
Yield Management
Displacement Cost Analysis
This refers to contracted business
Groups
Corporate
Airlines
Tour Series
One must be aware of how much business is contracted at a lower than average rate and then manage how much of that business is booked over
peak times/days
Yield Management
Overbooking
Internal factors No Shows Cancellations Unexpected departures Stay overs Human error
External factors Season or day of week Supply and demand City wide conferencing or events
Yield Management
Remember the Revenue cycle
Create demand
Reservations request
GuestRepeat customers
Retain demand
Manage demandCreate optimaldemand
Strategic Planning & Action
Revenue Management
Influence Strategic Actions -Make recommendations on business mix to create optimal demand at the
right time based on forecasts.
Yield Management
Channel Distribution
Channel Management
Channel Distribution brings together our reservation channels, distribution strategy and channel operations so we can simplify the way customers get to our brands and our
brands get to market.
How do customers book
Direct with the Hotel
Central Reservations Office
Global Distribution Systems
Third Party Intermediaries
Online Distribution
Channel
Direct Bookings
Hotel Reservations department –Brilliant
Customer
Phone
Fax
Walk-in
Who uses direct channelTransient corporate
Leisure
Groups
Contracted clients
Conference organisers
All market segments
All Local bookings
Channel
Central Reservations Offices - Voice
Customer
Phone
Fax
PACRO or
HACROREZVIEWBrilliant
Who uses VoiceTransient corporate
LeisureGroups
Contracted clientsConference organisersAll market segments
All Local and regional bookings
Channel
Global Distribution Systems - GDS
Customer
Amadeus
Galileo
Worldspan
Saber
Pegasus switch
Rezview or
Utell
Brilliant
Who uses GDS
Contracted & non contracted companiesLeisure
ConsortiaTravel Management companies
Business Travel Agencies
Channel
Third Party Intermediaries - TPI
CustomerBrilliant WWWPegasus switch
OR
PACRO or
HACRO
Expedia
Orbitz
Priceline
Venere
Lastminute
Who uses TPI
Non contracted companies – once offLeisure
Transient
Channel
Online Distribution
CustomerWWWBrilliant
Who uses direct channel
All non contracted customers
Channel
Cost per channel
CHANNEL RVNG RCVL RCVL UTELL
Monthly retainer 120.00 150.00
GDS – Rack 13.84 6% 6.66
GDS – Neg 11.84 3% 6.66
Online 5.50
TPI 3.50 +10% 3.55
PACRO 4.00
UTELL – CRO 10%
Channel
Key learning from Channel
Manage rates
Maintain parity where possible
Different channels attract different market segments
Instant results
Content management
Keep inventory open
Global internet access
Channel
Adding New Properties
Register with Utell and Pegasus or both
Load property information
On-boarding information
Wait for Utell or Pegasus to open inventory and rates in Rezview or Netrez
Start booking
Channel
Pricing
A Mckinsey & Ass Survey conducted amongst 2,400 companies across a range of industries showed the impact on the bottom line of various business initiatives A 1% reduction in fixed costs improves profitability by 2.3 % A 1 % increase in volumes increase profit by 3.3 % A 1 % reduction in variable costs increases profit by 7.8% A 1 % increase in pricing can boost profitability by 11%
Price right and you will achieve the ultimate goal
Increase ADR and bank your RevPar
Pricing
How easy is it to raise your prices
Realising price increases is not as easy as we’d like it to be
A 2 litre of Coke often has the same price tag as it did in 2005
Laptop prices are at low low prices
Airline tickets can cost up to 25% less than they did 5 years ago
Pricing
Pricing is an industry wide problem
Consumers are confused with irrational and overwhelming amounts of choice
72% of hotel guests agree that they like to shop around Hotels need to sell on benefits and confidence that the guest is getting
the best deal – there should be no elements of risk Consumers know and will accept fences, Fences should become part
of the overall value proposition
Pricing
5 pricing principles
Pricing is approached holistically with supportive segment structures Offer constrained set of differentials & clearly target products using the BAR
as the benchmark Customers will have to do something or give away something to get a
discount Product messages must be clear, descriptive, consistent and inline with
brand positioning Price points are based on marketplace demands and compressed to
encourage buy up
Pricing
Questions to ask when considering a price change
Product Is this product different in the customers eyes If discounting, what specific behaviours does this customer exhibit that
will allow me to target this specific customer and prevent cannibalization
Place How does this impact each distribution channel and the customers that
use them Price
How will the price relate to the benchmark and other price points Is it compressed and rational in relation to other price points How price sensitive is your target market
Promotion How do you intend on promoting the value of this product to customers How will your message clearly, rationally and consistently identify the
differences between products, both physically and in terms of sale
Pricing
African Sun’s Pricing policy 2010
100% 100%
> 10%>15%
> 20%
> 30% > 30%
> 40% > 35 - 40%
> 35 - 45%
Rate strategy for African Sun
Tactical
Cost per room
Negotiated - corp
Weekend
leisure STO
Series/Groups
Corporate Hotel Leisure/Resort Hotel
RACKRACK
Corporate
BTA
BA
R
Pricing
Rate strategy guidelines.
Rate Rate description Rate guidelines Market segments Definition Fences Channel Risks
Rack Highest published rate. Acts as a benchmark for other rates
100 % - Full published rate All markets - Should always be last room available -
No fences and LRA All
Always ensure that this is rate managed when occupancies start to fall
Best available rate
The lowest unrestricted rate. Public rate available which can vary based on demand
High BAR – 100% Mid BAR – 80% Low BAR – 70%
All bookers
Should never be closed out unless the hotel is full. Rate can fluctuate based on demand.
No fences and LRA All
BAR is a flexible rate so needs to be managed based on occupancies and should never be lower than contracted or negotiated rates
Corporate
Standard corporate rate with no restrictions. Available to all non-negotiated corporate clients.
90 % - commissionable Individual Corporate clients – no contracts
Provides hotel with a rate to offer all corporate clients with low volumes and non-contracted business
No fences DIRECT PACRO GDS
No real risks – just needs to be managed
BTA rates Contracted rates with the major BTA,s and consortia.
Min 80 % - 75%
All major consortia, BTA,s and TMC.
Contracted on an annual bases through RFP,s or contracted separately based on demand. Always liaise with head office before entering into an agreement
No Fences and LRA
GDS PACRO DIRECT
These rates are fixed for the year and cannot be re-negotiated once contracted and the rates must be respected
Corp Negotiated Rates
Contracted rates between hotel/African Sun head office and a multi-national corporation, eg IBM.
Rate can vary based on volume. Generally 10-20% off BTA rate
Multi-national corporation or global company with managed accounts
Enables the hotels and head office to negotiate rates and load these on the GDS
No fences and LRA
GDS DIRECT PACRO
These rates are fixed for the year and cannot be re-negotiated once contracted. Sometimes they are commissionable check contracts.
Weekend rates
Hotel specific with a high corporate market segment
Demand dependant and can vary dependent of property but should be between 75 & 85%
Leisure and discretional corporate business.
To drive volumes over weekends
Fences – restricted to Friday and Saturday nights only
All
Leisure rates Preferred Group / Series
Tour operator rates 80 – 70% depending on volume business and type of operator
Tour operators with leisure business
To incentives the tour operator to package the hotel for a wider distribution through their supply chain
No Fences if resort hotel, if not then bookings restricted to non-peak days
PACRO DIRECT
Always be aware of leisure business taking over your peak midweek period, Tue – Thurs.
Tactical A promotional rate that Drive volumes over distressed Discretional Dependent on low season Must have fences Online Maintain fences and add
Pricing
Managing Channel & Revenue
Research Understanding the business
Analyse Problem solving & decision making Innovation
Convince Leading & developing people Impact & Influence Adaptability
Execute Planning & organising Drive for results
Measure Take responsibility Asses strategy
The End
Well done you have now completed your first phase Revenue and Channel training
module.