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EASY AND EFFECTIVEREVENUE MANAGEMENT
WIHP Academy • Barcelona • 2014
A BIT OF HISTORY
1900
1910
1920
1930
1940
1950
1960
1970
1980
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2010
2020
2040
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NEW ERA IN THE AIR
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1978 Airline Deregulation
Tickets Price Went Down
(-40% compared to 1978)
Volume Went Up
(+300% compared to 1978)
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THE 4 LEVERS
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
RateDefined according to the market and profitability
InventoryAvoid over/under-selling by
giving inventory smartly
DemandMarketing actions generate
demand and thus price
DistributionDistribute through channels according to their customers
1. Rate 2. Inventory 3. Distribution 4. Demand
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Key Definitions
Fixed Cost:The costs that do not change with the increase or decrease of occupancy rate.
Fixed costs are mortgages, loans, taxes, employee salaries, rent, insurances, internet landline, electricity bills, etc. These costs do not increase with more rooms but do not decrease either. This cost can be calculated on the financial yearly statement
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
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Key Definitions
Variable Costs:The costs directly related to hotel occupancy. As occupancy increases, they increase; as hotel occupancy decreases, they decrease as well.
Variable costs are laundry, food and beverage, guest room amenities, telephone calls, externalized cleaning/waiter staff
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
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Key Definitions
RevPAR:Revenue per Available RoomCalculated by taking into account the total room revenue divided by the number of rooms you have available to sell during the same time period.ADR x Occupation Rate
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
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Key Definitions
N-RevPAR:Net Revenue per Available RoomCalculated by taking the room revenue, minus commissions, travel agent fees and other sales costs.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
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Key Definitions
Bottom Rate:Rate under which it’s not profitable to sell.Variable Costs + Distribution Costs / Rooms
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
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Key Definitions
PICKUP:Pickup is the speed with which reservations are made over a certain period of time.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
April May June July ...
April 85% 75% 60% 35% ...
May - 90% 65% 50% ...
June - - 85% 55% ...
July - - - 75% ...
... ... ... ... ... ...
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Key Definitions
Spillage:When a hotel sells it’s rooms too quickly and has to close availability. This usually happens when the rate strategy is not adapted to Pick-up or when a hotel gave too many rooms in allotments to Tour Operators or OTAs.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
#WIHPACADEMY
Key Definitions
Spoilage:This is when a hotel has too many unsold rooms and has to sell them at a too low price. The danger with spoilage is that you can get re-bookings of guests thus losing revenue and rate.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
#WIHPACADEMY
Study the Distributors Booking Window
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
120
Days90
Days60
DaysLess than 30 Days
Arrival
Groups M.I.C.E Tour Operators OTAs and Direct
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Study the Distributors Booking Window
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
90
Days60
DaysLess than 30 Days
Arrival
USA China Italy & Europe
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Reputation
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
+Reputation = +Revenue
According to a Cornell University Study if a hotel increases its reputation by 1% it can increase RevPAR by 1.42%
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Reputation
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
+Reputation = +Bookings
87% of travellers reads review sites to plan their holidays
TripAdvisor has 260 millions visitors/month=220 millions potential customer
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Marketing generates the demand
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
- Advertising- Bloggers- PR- Social Media- Billboard effect- Renovations and upgrades- Staff training and more
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THE 4 LEVERS
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
RateDefined according to the market and profitability
InventoryAvoid over/under-selling by
giving inventory smartly
DemandMarketing actions generate
demand and thus price
DistributionDistribute through channels according to their customers
5 REMINDERS FOR REVENUE MGMT
WIHPHOTELS.COM #WIHPACADEMY
1. Use all 4 levers, not just 1The four levers are: Rates, Inventory, Distribution and Demand. 2. RevPAR is the Key, not ADRADR is good for your ego, but will not pay your bills!
3. Study data, don’t worship itThe easiest way to increase rates is to increase service and guest satisfaction; because you can’t move the hotel nor renovate it over-night.
THE 4 PILLARS OF HOTEL MARKETING
4. Take a look aroundYou may not be interested in the upcoming GaudiExhibition but your guests are!
5. Unsold rooms means you did it wrongDon’t get obsessed with the cost of occupied room and remember that the cost of a unsold room is always higher!
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