Disaster Planning…from the Revenue Management Perspective

Most hotels have disaster plans in place for operations, giving employees a manual that outlines, step-by-step, how to manage the situation. But most hotels don’t have clear guidance on what should be done when it comes to revenue management when a disaster occurs.

Your hotel’s revenue management response leading up to, and coming out of, predictable disasters – hurricanes, floods, wildfires, or blizzards that you know are coming to your area – has important long-term implications no matter whether you see losses or gains in the short term.

HSMAI’s Revenue Management Advisory Board recommends that you plan now for your response to the next natural disaster facing your hotel(s).

Before It Hits

First and foremost, hotels never want to be perceived to be price gouging (charging in excess of what you normally charge to exploit the situation). The airlines’ responses to Hurricane Irma in September 2017 provide plenty of case studies – good and bad – demonstrating this point.

It can be challenging to balance being fair with leveraging your knowledge to optimize revenue. Predictable disasters present an opportunity to demonstrate the “art” side of revenue management, revealing that the discipline is truly more than just a science.

Once you know a disaster is going to affect your hotel, think about rates for hotels in the immediate impact zone as well as those along the evacuation route. Consider these options:

  • Freeze prices wherever they are at the moment (as soon as it is clear that there is going to be a disaster event).
  • Don’t charge a rate higher than you charged in the last 30 days. It will at least be consistent with what you’ve been offering in advance of the disaster event.
  • Have a plan for what you’ll do once the emergency has passed and people’s immediate needs are met. Be prepared for the post-disaster business influx and apply revenue management principles to the increase in demand that you’ll see AFTER the event.

If you use an automated revenue management system, understand how it will behave in a state of emergency. When it sees 10s or 100s or 1000s of cancellations, will it act like it is a “normal” state of affairs? Is there a trigger that allows humans to take over? Is there a “catastrophic event” mode that will stop the system from taking raw inputs and delivering outputs based on what is a very confusing situation?

Disasters create the need for much more communication among the revenue team – and beyond.

  • When a disaster is on the horizon, get your public relations/marketing team involved in your revenue meeting. You might not maximize your revenues during this time, but you can maximize your PR. They can be helpful in identifying the potential downsides of what could happen if you get your pricing decisions “wrong.” They can also tell the positive story of what you are doing to help the situation.
  • Plan now for how your revenue team members will literally communicate with each other if your hotel (or your remote team) is in the impact zone and facing disruption of regular communications channels. What will you do if the traditional telecommunications infrastructure goes down?
  • Be prepared for how your revenue team – from sales through revenue management – will manage inquiries for big pieces of business that will come in immediately after the emergency (FEMA, insurance companies, construction companies, etc.). Put a plan in place now for how you’ll communicate with the person making the revenue management decisions in the event that primary communication channels might not be available.

Once the Emergency Has Passed

In the days following the emergency, look carefully at your forecasting. In the immediate impact area you’ll see a tremendous influx of demand driven by the response from FEMA and the insurance and construction industries. Your staffing needs will change with that demand. Communicate clearly and often so that housekeeping, front desk, etc., are prepared, and keep those lines of communication open and active.

For future forecasts, you have to take into account what happened. This is a good reminder of the value of 12-month rolling forecasts. For the post-event business influx you’re likely to see, think about creating a market segment of “extended stay” for clearly one-time business. That way when you go to budget for future years the anomaly can be called out clearly to the team (and owners).

Tracking is important not just to evaluate and assess the year-over-year impact, but also to understand the BI (bodily injury) impact. Directors of Revenue Management should talk to their risk and insurance teams to understand how they should be tracking the impacts for BI claims so that everyone is aligned.

Finally, don’t underestimate the value of coordinating your sales team’s response. Especially if you operate multiple hotels, focus on placing the right business in the right property across your portfolio in the affected areas. You may want to consider running all post-disaster business leads through a single regional sales person.

About HSMAI’s Revenue Management Advisory Board

HSMAI’s Revenue Management Advisory Board is advancing the revenue management discipline by providing leading education, a best practices exchange, thought leadership, and networking for revenue management professionals, other sales and marketing professionals, and senior management in the hospitality industry. 2017 members include:

  • CHAIR: Linda Gulrajani, CRME, Vice President, Revenue Strategy & Distribution, Marcus Hotels & Resorts
  • Chris K. Anderson, Academic Director, Cornell University
  • Veronica Andrews, CRME, Director, Digital Data Solutions, STR
  • Christian Boerger, CHDM,CRME, Corporate Director of Revenue Strategy, Pacific Hospitality Group
  • Denise Broussard, SVP, Revenue Management & eCommerce, Interstate Hotels & Resorts
  • Rosemary Browning, President, Global Career Horizons
  • Tom Buoy, EVP Pricing and Revenue Optimization, Extended Stay America
  • Janelle Cornett, Regional Director, Revenue Management, TPG Hotels and Resorts
  • Kathleen Cullen, CRME, Senior Vice President Revenue & Distribution, Two Roads Hospitality
  • Tammy Farley, President, Rainmaker
  • Neal Fegan, CRME, Chief Revenue Officer, Total Revenue Uplift
  • Monte Gardiner, Sr. Director, Revenue Management Services, Best Western Hotels & Resorts
  • Renee Haddad, CRME, Director, Revenue Account Management, Preferred Hotels & Resorts
  • Adam Hayashi, CRME, Vice President of Revenue Management, Accor Hotels
  • Mohamed Khanat, CRME, Regional Director – Americas Account Management, IDeaS – A SAS COMPANY
  • Kelly McGuire, SVP, Revenue Management, MGM Resorts International
  • Karen McWilliams, Vice President of Revenue Strategy, Concord Hospitality Enterprises
  • Chris Nixon, CRME, CHDM, AVP Revenue Optimization, Ashford Hospitality Trust
  • Breffni Noone, Associate Professor, Pennsylvania State University
  • Scott Pusillo, CRME, General Manager (NorthEast USA), Sales & Account Management, Sabre Hospitality Solutions
  • Scott Roby, CRME, Vice President, Revenue Management, Evolution Hospitality
  • Tim Schulte, CRME, Solution Consultant, Infor
  • Jim A. Struna, CRME, Regional Director of Revenue Management, Rosewood Hotel Group
  • Tim Wiersma, Vice President, Revenue Management, Red Roof Inns, Inc.
  • Monica Xuereb, Chief Revenue Officer, Loews Hotels
  • Nicole Young, CRME, Corporate Director of Revenue Management, Rosewood Hotel Group

Categories: Revenue Management
Insight Type: Articles