Elevating Group Sales in the Revenue Management Mix
Hoteliers have long understood the need to employ revenue management techniques as part of their sales strategy. They use it to make informed decisions and discover actionable insights to maximize revenue within the hotel. Ideally, it is a dynamic process fed by a large amount of data that can segment demand into distinct customer behaviors.
Revenue Management Systems (RMS) have been in place for decades to optimize revenue generation by helping hoteliers strategically price and allocate hotel rooms. Most applications have been very successful to that end, and the prominence of the discipline has matured. With the successes and advances in the underlying technology, the aim has been to refine the room nights process further and extend this winning formula to other revenue areas of the hotel.
Non-room revenue optimization, however, has been far more elusive. This is due to typically difficult access to the necessary data and the frequent lack of specific, usable patterns, particularly in the area of group sales and the revenue channels it produces.
Total Revenue Management
When hoteliers refer to Total Revenue Management (TRM), they are referring to expanding the traditional scope of revenue management systems to a holistic strategy for all revenue-generating aspects of a hotel’s operations. It encompasses not only room revenue but all other revenue sources within the hotel as well: food and beverage, meeting and event spaces, spa services, etc. TRM aims to optimize revenue from all available sources in order to maximize overall profitability. It’s about looking at the big picture and ensuring that every revenue-generating aspect of a hotel’s business operates at its fullest potential.
Group Sales and Revenue Management
A vital part of the hotel is its meeting space. With it comes revenue-generating events and demand for hotel rooms. Despite being an essential part of the hotel, group sales have often been overlooked as an area to implement traditional revenue management strategies. This is not a surprise due to the historical difficulty of accessing relevant data and the unique nature of group business.
With room-based revenue management, if the application has been properly segmented for the hotel’s customers, price levers can typically be pulled. Marketing campaigns can be engaged. These can increase or decrease segment demand, matching inventory with the dynamic demand patterns found in the data as the date of arrival approaches. This is not nearly as straightforward with meeting and event demand.
Demand for events can be highly volatile. Seasonal trends, economic conditions, and unforeseen circumstances like the COVID-19 pandemic can dramatically impact demand. In addition, event groups can vary significantly in size, purpose, and budget. Managing pricing and packages for this diverse clientele can be complex. Even with decent forecasting, managing the hotel’s meeting space inventory is essential to avoid overbooking or underutilizing event spaces and resources. When is it okay to let a group book the main ballroom during a potentially high-demand period? If a local event occupies the meeting space, does that put room nights under pressure?
Bringing Technology into the Picture
Even though traditional revenue management is less straightforward with group sales, historical event data can be collected and analyzed to identify trends and demand patterns. For example, sales and catering (S&C) systems and good data entry processes provide the data needed for forecasting models to predict future demand. At a minimum, this can inform proper decision-making around pricing, availability, and fit of a group to trends. Budget segments can be built around this to solidify tiered pricing options further.
Cloud services have removed the technical barriers to data access. The integration of APIs (Application Programming Interfaces) has proliferated, and value-added applications have grown in availability and capabilities. More efficient access to sales and catering systems, POS transactions, customer profiles, and historical group data are among the intelligence coming together to bring us closer to Total Revenue Management.
Alongside the interconnectivity improvements, AI/ML (Artificial Intelligence/Machine Learning) tools have exploded. This has accelerated and expanded the foundation for TRM solutions that depend on large processing models to make sense of all this data. Bringing all this data and modern AI/ML tools together can unlock the revenue and profitability potential of group sales and the rest of the hotel under the TRM umbrella.
Barriers That Still Exist
The world continues to expand its dataset and has indeed provided avenues for the hospitality industry to access that data. Gone are the days of rooms-only focused revenue management tools and other ancillary applications.
That being said, while data is much more technically accessible in the cloud, security and privacy issues remain. There is often a misconception that because data is in the cloud, vendors can build and expand solutions around it. This is not necessarily true. Hotels are hesitant to share most of their data, and it requires a lot of vetting, partnerships, and the implementation of secure methods to ensure ongoing data security.
Even when an integration partnership can be arranged to share data between a hotel, the hotel system vendors (ex: PMS, S&C, etc.), and a third-party application (ex: CRM), the business arrangement needs to be agreed to with a mutually agreeable level of security and privacy maturity between all parties.
Are Trends, Forecasts, and Pricing Enough for Group Sales?
With this new breadth of data now available, hoteliers must ask themselves how best to integrate it into their current commercial strategies for group sales. The meeting and event business for many hotels is critical to increasing profitability as part of TRM. This has become evident with the return of groups and the uncertainty of business and leisure travel.
Having access to historical group data insights beyond what RMS systems provide will ensure sales and marketing teams know which business to focus on. In fact, this type of data has quickly become a “need to have” for any hotel looking to succeed in the competitive group sales market.
Now, more than ever, sales, revenue, and marketing need to move beyond the silos of the past and work collaboratively within TRM. Activities across the hotel are converging to create a connected commercial strategy organization. For TRM to maximize its potential, it is more than simply predicting future behavior and recommending actions; it is also unleashing your sales, revenue, and marketing teams with actionable group insights to leverage clients for maximum profitability most effectively.
Gone are the days of “we don’t know what we don’t know.” Gaining insight into which groups are meeting, what segments are driving those meetings, and what the competition is booking will make all the difference. Without incorporating group data into sales and revenue management strategies, we can never completely accomplish total revenue management. It’s time for sales and revenue management to take a holistic view of commercial strategy by using a full data set for stronger decision-making.
ABOUT THE AUTHOR
Rob Landon leads the software development and IT efforts at Knowland with a focus on enhancing the role of AI and machine learning to drive predictive analytics for group data. He brings over 25 years of software industry experience across a range of operations, from innovative startups to large enterprises. For the past decade, he has focused on software solutions to help hoteliers maximize their revenue in both the transient and group spaces. Landon has a BS in computer science from Louisiana State University and holds an MBA from the Terry College of Business at the University of Georgia.