Planning, Earnings, and Diversification

By Timothy R. Wiersma, Vice President of Revenue Management, Red Roof Inns Inc., and a member of HSMAI’s Revenue Optimization Advisory Board

As revenue optimization continues to evolve, it’s more important than ever for hospitality professionals to collaborate and share ideas. I facilitated an open discussion during a recent call for HSMAI’s Revenue Optimization Advisory Board (ROAB) during which members identified the present issues that are most important to them. Here are three of them: 

1. Planning seasons: One ROAB member asked how long the planning season for the industry takes and if there is any focus on efficiencies. Another member replied that for his company, the process usually begins in August and is finalized with owners in November or December, but they are trying to cut back on calls and other time-consumers. He said it is a focus of his company to cut down that timeline.

Another ROAB member suggested a rolling 18-month forecast instead of a solid budget, which keeps the numbers better aligned. “What’s happening in the market, rather than a budget getting almost dictated by corporate, just meet their number,” the member said. “And you get an interesting dynamic and conversation and I think better alignment with the owners.”

Because my own company is such a short-term brand, we’re very focused on forecasts more than budgets. We know in November that we’re not going to hit January, for example, and so are already planning for that — shifting focus to where we can achieve optimal potential for that month versus budget.

2. Second-quarter earnings: According to a recent survey of revenue-optimization professionals in the lodging industry by the Cleveland Research Company, many respondents reported that they missed their first-quarter goals and are not feeling confident about the second quarter. On average, they’re anticipating a range of 2.5 to 3 percent growth. Overall, ROAB members responded that while the first quarter wasn’t great, they are hopeful that they will see growth in the second quarter. “For the most part what we’re hearing is that for the long term there is still a positive outlook, barring any type of unforeseen event,” one RAB member said.

3. Diversification of hotel offerings: Members also discussed Marriott’s recently launched “Homes and Villas” project, which allows customers to rent out rooms or entire homes for long-term stays. It is launching in 100 markets, including about 40 in the United States. Several ROAB members wondered if Marriott would be able to maintain its brand standards or might apply a different level of standards and quality for the new business venture.

“I just think, to me, there’s still a wide band of consistency and standard and security, things like that within the home industry that I think Marriott’s going to really have to figure out how to properly select inventory and have a very good screening process,” an ROAB member said. “Who they’re going to allow, who they’re going to sell or kind of be able to attach inventory to the Marriott name.”

Another member noted: “Overall, I think it’s pretty smart of Marriott to just own the travel space. So, from all aspects, whether it’s business travel, group, leisure travel at hotels, leisure travel at a residence — it’s pretty smart.”

Categories: Revenue Management, Forecast
Insight Type: Articles