Evolving Revenue Management – Total Revenue Management & Profit Optimization

Anthony Rose, CRME, Director of Sales at IDeaS Revenue Solutions, HSMAI Rising Revenue Optimization Leader Council Member

A great white whale our industry has been looking to achieve is evolving revenue management beyond just the room rate. Looking at the total revenue or profit we can achieve per room, the biggest challenges are capturing relevant data around both ancillary spend and costs, as well as implementing said data into our revenue management strategy.

The HSMAI Revenue Optimization Rising Leaders Council recently discussed related successes, opportunities, and challenges in our current environments. Read on for some highlights of our discussion and questions to think about.

Success Stories

We collate all our booking data and then pull out all the market segments with all the potential costs associated with that certain market segment. Everybody thinks direct bookings are the least acquisition cost, but that’s not necessarily the case.
Where are we going to push people to achieve the maximum net profit that can be generated? It’s a daily profitability exercise on the room type level. We must understand each unit’s commissions and costs – and then apply that to what we have to sell. We use that as the baseline for our top-line strategy.

We find people with increased ancillary potential through acquisitions. You can acquire a digital acquisition list and do AB testing with your marketing team with different messaging and see who converts, whether it’s a spa or a local day pass.
Instead of only looking at the data, we talk to our concierge desk. Then we will know which guests are spending the most on activities.

Opportunities

Some hotels are performing ancillary revenue management for cabanas, casinos, and venue management. How can we calculate the whole picture across all these different lines of business by market segment, which likely are all sitting in different systems or platforms?

How do you segment out non-guest spend in your outlets?
To go small and granular when obtaining data, leveraging technology like Resort Pass or Day X can help with activities or recreational management.

Challenges

Data is the number one drawback we have in this industry.

Many PMS’ lack full integrations to small scale point-of-sale systems where your ancillary revenue streams from your food & beverage outlets, your resort outlets of golf, spa, etc., don’t necessarily integrate into the same reporting structure. You’re having to pull 6, 7, or 8 different reports to look at the same data. There’s that technological gap that makes it that much more difficult to truly have a comprehensive, actionable view of total spend and total guest and non-guest revenue streams.
If you don’t own your food & beverage operations, you’re just collecting a rental fee. If you don’t own your activity desk, you’re just charging for a monthly rental and a percentage of revenue. Do you consider those as ancillary revenue? If so, are you calculating it into your total hotel revenue, and it is an extra revenue outside of rooms?
One of the biggest pieces that we need to overcome as revenue management leaders is the people. We need to get the full buy-in of everyone to understand that the revenue manager wants to become more involved in these different ancillary revenue streams, but they’re not trying to take it over. They are trying to get a better understanding and maximize the profitability of those specific outlets.

There is a school of thought that if occupancy is too high, then your ADR is too low. In 2022, many hotels are increasing their ADR or point redemption levels, potentially resulting in occupancy decreasing substantially. It is an interesting way to remedy the widespread labor and cost challenges. If your organization is content with running 70% to 80% of occupancy because their ADR is so high, then, despite the decrease in occupancy, there could be a higher potential profitability (through reduced operating and acquisition costs).

By capping at a certain percentage occupancy, you can further prioritize your most profitable segments and room classes because you’re basically a smaller hotel. However, this requires a data-driven understanding of costs and the ability to forecast future market segment profitability, all while accounting for sudden, unforeseeable changes in the marketplace – a challenge that remains for the industry.

How are you incorporating profitability or total revenue into KPIs within your organization?

Contributors from the HSMAI Rising Revenue Optimization Leader Council Members include:

Matt Acker, Director of Revenue Management, Marcus Hotels and Resorts
Emily Bardin, Area Director of Revenue Strategy, Aimbridge Hospitality
Emma Dow, CRME, CHRM, Corporate Director of Revenue Strategy, Oxford Collection
Guadalupe Fisher, CRME, Supervisor, Revenue Optimization Services, Radisson Hotel Group
Natalie Fournier, CHDM, CRME, Director of Revenue, Wild Dunes Resort, Hyatt
Sadie Garside, CRME, Senior Manager, Kalibri Labs
Haley Maltz, Director of Revenue Strategy, CoralTree Hospitality
Anthony Martely, Regional Sales Leader, OTA Insight
Yvonne McDowell, CRME, Revenue Manager, Kaanapali Beach Hotel
Cheryl McMaster, CRME, Senior Manager, Distribution & Channel Management, RLH Corporation / Sonesta Hotels Franchising Division
Anthony Rose, CRME, Director of Sales, IDeaS Revenue Solutions
Scott Schachter, Account Manager, Booking.com
Emma Scher, Consultant, ZS Associates
Danielle Wurtzell, CRME, Area Director of Revenue Strategy, Remington Hotels