7 Steps to Higher RevPAR

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7 Steps to Higher RevPAR

By Lisa Terry, Contributing Editor - 03/01/2004

Revenue management has a reputation in some circles as being a fair weather tool, built for the boom times but less helpful when occupancy is reduced. It's overcoming that reputation through improved algorithms and other software enhancements. A growing number of users say revenue management has become a key tool contributing to the optimization of booking practices and ultimately impacting the bottom line in lean as well as in boom times.

But there is still a good bit of art to revenue management, both in selecting a tool that truly meets individual business conditions and the market approach of a particular enterprise, and then employing it intelligently. HT talked to new and seasoned users to uncover their secrets:

Lay a solid foundation. Particularly for centralized solutions, standardization of data can be an essential foundation for revenue management. Just ask Theresa Surrin, VP of revenue management for 20-property Loews Hotels. Surrin is leading a multi-year effort to pave the way for acquisition of a revenue management tool in 2005.

The project has included upgrading and restructuring the central reservation and global distribution systems to standardize nomenclature and brand its hotels. In 2003 Lowe's deployed a central database, populating it with property management and other data, then third-party data provided by companies such as TravelCLICK (travelclick.net).

The deployment will continue this year and next with sales automation and financial data. "Once we've streamlined and standardized the processes, we will get a tool," Surrin says. "We have standardized down to the transaction level, significantly more than what we need for revenue management, but it will give us the ability to do total revenue management" such as space management.

Investigate development philosophies. Know "how they arrive at key indicators using different factors," advises John Eslick, director of IT for Gaylord Hotels. "For example, how important is lost business?" when performing calculations. With a high percentage of group business in each of its three properties, it was essential that a tool accommodate the unique challenges of that traffic, such as booking five to seven years ahead and acknowledging the influence of catering usage on total profitability. That led Gaylord to co-develop a separate group module with IDeaS (eyield.com).

Look beyond room revenue. "Anywhere you're producing revenue has the potential for having yield management techniques applied against it," says Gaylord's Eslick, including physical space management, catering, banquet event management, and even the special events Gaylord hosts such as Grand Ole Opry events or the Christmas Fantasy on Ice show.

Ensure accurate history. "Try to get as much accurate information as possible from past history," says Harold Henning, Jr., revenue manager for The Peninsula New York, which uses a solution from Micros (micros.com). "You need that to get up and running correctly."

"Having only two years of data can be a limiting factor," adds Stephen Zanoni, VP sales and marketing for the Madison Concourse Hotel, Madison, Wisconsin, which is employing EasyRMS (ezrms.com). "Say one group cancelled for a two-day, 250-room booking. That may not be the norm, but the system will project that into the future," something revenue managers need to correct by properly labeling that data.

Accept shades of grey. "People believe that there are black and white steps to take--they don't understand why we're constantly changing things," notes Ed Martinez, corporate director of revenue management for 15-property Tarsadia Hotels in California, which uses a Datavision Technologies (datavisiontech.com) tool. "Part of revenue management is to adapt to change. There is a big misconception that there are black and white standards or rules."

This is a particularly handy skill for organizations with multiple brands, some of which maintain very stringent operating standards impacting revenue management.

Consider third-party data. Some compare tapping only internal data to working in a vacuum. That's fueling increased interest in linking to external sources for competitive pricing data. And some are going a step beyond that. InterContinental Hotels and Resorts already uses IDeaS and a proprietary reservation solution for revenue management in its properties, linking via its CRS to all sales channels. Now it's considering taking it to the next level.

"Most revenue management systems take a download of prices or assume prices at which to open and close. We want to do the precursor--are you offering the right prices," explains Craig Eister, director of global revenue management. "We want to measure price elasticity--how demand is changing based on the pricing you offer. The key thing real-time pricing brings is quick reaction time."

Intercontinental is considering a tool from Zilliant (zilliant.com) that analyzes price elasticity and buying habits of customers when faced with different price levels.

Study agent compensation. The best revenue plan can be taken down at the knees by a reservation agent who is not properly prepared to work with it. "If they're incented to book X number of rooms a day, then they're not going to book the smartest rooms," says Gaylord's Eslick.

Properly incented, "they may not book much more revenue on sold out dates, but they might add incremental revenue for a time period where you would not have had it at all." In the end, having a smart revenue solution is just good business.