Getting Started with Hotel Revenue Management

Getting Started with Hotel Revenue Management

WEDNESDAY, MARCH 18th - 9:00AM (PDT) Duetto Educational Series

About Duetto

Rapid innovation, new

product features

released weekly

Disruptive

Thought

Leadership

Committed to the success

of our customers

Customer Service

FocusedBest-in-Class

Team

Innovative

Philosophies

Marquee

InvestorsIndustry-Leading

Founders

World-Class Technology

Development

Best-in-Class

R&D

About: Nathaniel “Nat” Estis Green

Senior Global Solutions EngineerDuetto family member since Dec. 2012

Agenda

▍ Revenue Management Introduction▍What is it?

▍ Simple Steps to get started

▍ How Revenue Management Can Increase Profits▍ Booking Curve Management

▍ Effective Yielding

▍ Moving Forward▍ Revenue Management is critical in today’s world

▍ Questions?

4

Ever leave money on the table?

250,000 + People

Ever leave money on the table?

250,000 + People

LOSANGELES

LASVEGAS

Ever leave money on the table?

250,000 + People

Ever leave money on the table?

250,000 + People

$99per night

Strip Sell-Out@

Ever leave money on the table?

250,000 + People

$99per night

Strip Sell-Out@

$1,000per night

Walk-Ins@

Industry at a Crossroads

10

1970s 1980s 1990s 2000s 2010s 2013

Separation of ownership, brand, and management

Product segmentation; financial engineering

First online booking; enter Expedia

Online distribution explodes complexity

Crowded value chain

Meta search; enter tech giants & new gatekeepers

Historically Travelers Booked Directly with Stay Brands

11

Consumer Stay Brands

Courtesy

Booking Brands Now Dominate Consumer Point of Entry

12

Consumer Stay Brands

v

Booking Brands Courtesy

Commissions Rise at 2x the Rate of

Revenue Growth39%+

2009 2010 2011 2012

%Increase

Commission

Increase

13

20%

Total Acquisition Costs

Room Revenue

Sales & Marketing Expense

Total Revenue

Retail commissions onlySource: HAMA Study 2013-2014

Courtesy

Customer Acquisition Comparative Costs as % of Revenue

14

Revenue

Cost %

3-6% 4-6%

15-25%

Do you manually make rate changes in the PMS & CRS or through a revenue system?

Poll Question I15

Revenue Management Introduction

“The application of disciplined analytics that predict consumer behavior at the micro-market level and optimize product availability and price to maximize revenue growth.

The primary aim of Revenue Management is selling the right product to the right customer at the right time for the right price and with the right pack.

The essence of this discipline is in understanding customers' perception of product value and accurately aligning product prices, placement and availability with each customer segment.”

Cross, R. (1997) Revenue Management: Hard-Core Tactics for Market Domination. New York, NY: Broadway Books.

Inventory /

Capacity Demand

Price

$

Getting StartedRevenue Management 101.

How to Get Started

▍ Segmentation

▍ Forecasting & Budgeting

▍ Pricing

Segmentation

The Right Segmentation

for YOU

Segmentation: to divide the marketplace into parts, or segments, which are definable, accessible, actionable, and profitable and have a growth potential.Economic Times

OR

Are you pricing your rooms using seasonal rates, Best Available Rates (BAR), by LOS, or by Open Pricing?

Poll Question II

Forecasting & Budgeting

Constrained

Forecasts

Unconstrained

Forecasts

Demand controlled by hotel capacity

Demand if capacity is not a factor

Pricing Types

22

Seasonal

Pricing Types

23

Seasonal

Best Available Rate (BAR)

Pricing Types

24

Seasonal

Best Available Rate (BAR)

BAR by LOS

Pricing Types

25

Seasonal

Best Available Rate (BAR)

Open Pricing

BAR by LOS

How Revenue Management Can

Increase Revenues

▍ Booking Curve Management

▍ Effective Open Pricing

Booking Curve ManagementUnderstand demand trends.

Monitoring Booking Trends

▍ Pace: Rate at which you are getting bookings

▍ Pick-Up: Amount of bookings over a certain time interval

Web Site (IBE) Activity

Be proactive, not reactive, with demand trends.

▍ Review search date, stay

dates, rate code, room

type, rate, source, and

country

▍ Understand high-demand

periods before you sell-

out supply

Effective YieldingTackle rising cost of acquisition.

Take Back Control

▍ Independently price every single segment, offer and room

type

▍ Maximize revenue over high demand and need periods

▍ Keep all channels open and benefit from the “billboard effect”

Traditional Pricing

Day 1 Day 2 Day 3 Day 4

CAPACITY

AAAPromo Rate

10%

20%

✔✔

AAAPromo Rate

10%

20%

✔✔

✖ AAAPromo Rate

10%

20%✖

AAAPromo Rate

10%

20%

✔✖

Open Pricing

Day 1 Day 2 Day 3 Day 4

CAPACITY

AAAPromo Rate

10%

20%

✔✔

AAAPromo Rate

10%

20%

✔✔

10%

20%

✔ AAAPromo Rate✔

AAAPromo Rate

10%

20%

✔✔

Moving Forward

▍ Understanding your segmentation is the most important thing for proper

forecasting which impacts pricing and other decisions

▍ Managing the rising acquisition costs requires flexible pricing to optimize

profits

▍ Effective yielding through keeping most channels and discounts open

maximizes revenue over high demand and need periods

34

Questions?

WEDNESDAY, MARCH 18th - 9:00AM (PDT) Duetto Educational Series