Is your hotel healthy? Here are the vital parameters to find it out
Doing a Revenue consulting work often means wearing a white coat – metaphorically, it’s obvious. First of all, you have to make a complete check-up on the hotel. Only when you know its “sickness”, you can intervene with the right treatment.
In order to restore the situation of a hotel, first of all we have to start analyzing the applied rates. Then, we can move to the “therapy”, that is to say, the strategies to follow to reach the market goals.
Today we will deal with the deep knowledge of the “patient”. In order to do it, we have to start from his first “wail”, that is his origins. Well: sometimes we realize that some hotels were born more for sentimental reasons (a specific connection with a place or an idea) than for economic possibilities.
In other words: irrationality gains the upper hand on choices suggested by logic. What is sure is that there are countless evaluation mistakes. Just as true is that there is a remedy to that. In the end, the Revenue Manager’s mission is precisely this: boost the hotel that asks for his consultancy.
The reasons why the hotel has been built up in a place forgotten by God and the world can’t and must not concern him. Except for evaluating whether a specific facility can be taken over or built in a specific area.Once the “genesis” of a hotel is clear, it’s necessary to know its PMS (property management software), analyze the rates and commercial strategies adopted from the start up to now and understand if the hotel is properly managed or if there are some mistakes that need to be corrected and possible growth margins.
To do a complete “check-up” from a Revenue point of view, we need to bear in mind the following “vital parameters”: occupancy and average daily rate, average length of stay, direct/indirect channel, direct/pending payment, brand reputation.
Let’s start from the average daily rate and the occupancy. Well: these data need not to be considered singularly, but crossed, so as to obtain the RevPAR (revenue per available room), that is the total turnover divided by all the rooms of the hotel.
Without going into details (being faithful to calculations though), we can state that a good management is characterized by an important ADR on a yearly (or seasonal) basis, and – at the same time – a minimal difference in the occupancy values.
To put it simply, this means that during high season you can just host those customers who are disposed to pay more, whereas in low season you can aim for those who are attracted by cheaper prices. Sometimes, though, it happens exactly the contrary.
The average length of stay is just as important: the higher it is, the more it helps to cut the variable costs. This is fundamental in the Revenue Management’s point of view. By means of a rate restriction policy, it is possible to extend the stays. This causes positive repercussions as, for instance, the costs for the cleaning of the rooms would be reduced, the internal facilities would be used more and – Why not? – it would start fidelization and boost the brand reputation.
Intermediation is a word often hard to digest for hoteliers, since they have to pay a commission to the tour operator, the OTA (online travel agency)..etc. Actually, this cost is alleviated by the promotion of the hotel. On the web, advertising is naturally a cut above (it’s the case of the OTA).
Differently, a pending payment can cause annoyances and currency issues. However, by applying the RM properly, the problem doesn’t exist: all the commercial choices are directed to those channels that offer better payment guarantees. Another “vital” element to take into account is the Brand Reputation. We will talk about it into deeper details next time.