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Robust
Revenue Management systems have been the drivers behind the industry's ability
to drive ADR and REVPAR in 2004 and will continue to be the drivers for the
foreseeable future. Consider the following forecast from PKF.
Demand is expected to increase by 2.8%. Supply is
anticipated to increase by only 1.6% but ADR is forecasted to increase by a
whopping 4.7% resulting in an average REVPAR increase of between 7.7 and 8.4% in
2005. "In 2005, ADR will be the main driver of REVPAR improvements," says (R.
Mark) Woodworth. (Mr. Woodworth is the Executive Managing Director of the
Hospitality Research Group of PKF Consulting, author of Perspectives on the Road
to Recovery, US Lodging Industry 2005, HRG/PKF, HotelOnline, November 2004.)
In a typical urban/suburban mid level corporate
transient property, the mid-week peaks are dominated by business travelers whose
rate sensitivity is less as they, individually, are not paying the bill. While
corporate travel departments are continuing to try and manage the cost of
travel, the reality is that in prime locations, room rates are increasing and
they find themselves negotiating higher rates in their RFPs than in previous
years.
Another factor to consider is that bookings from
all electronic sources have increased another 30-40% from 2003. This includes
all channels from the GDS systems, e-commerce channels and the franchise web
site. These bookings are also driven by an increase in leisure travel that has
been induced by the lowest airfares in a decade. While airfares remain low, this
segment demonstrated in the summer of 2004 that they were willing to pay higher
hotel rates than in past years.
The dilemma for hotel sales departments is to
locate and manage group business to fill in the blanks mid-week and weekends,
often from market segments and demand generators that press for lower rates.
They also are dealing with third party meeting planners attempting to negotiate
the best (read lowest) rates for their clients.
The Revenue Manager is pressing for a higher
rate, group booking contacts are pressing for lower rates and the sales person
is under pressure to meet their booking goals -- it is a stressful situation for
the sales department!
The solutions are varied but hinge upon the
ability of the sales person and department to understand and be able to measure
the impact of potential bookings and rates upon the hotel's revenue management
strategy. Once they understand those parameters, they can then align their new
business development activities in relation to the client profiles that fit the
revenue management model.
It is both the lack of understanding and/or the
inability to measure their potential contracts prior to negotiating and booking
that provokes the criticism that "sales only wants to book the lowest rates." My
firm belief is that they will stand their ground if given the tools in order to,
first of all, develop new business in line with the revenue management strategy
and secondly, measure the value of a group to the hotel's top line. In other
words, understand the difference between good business and bad. The following
are a few suggestions:
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The Revenue Management
Strategy. Those who are involved in
developing the strategy have "buy in" to its successful execution. A hotel
company that I work with has taken the position that they want to reduce the
number of locally negotiated rate contracts and increase the rate on the
remaining ones in order to drive a higher ADR in the mid-week period which is
the period of the greatest ADR potential. Sales is fine with the understanding
that their ADRs for groups during the weekends will remain the same as the past
year and maybe even be a bit reduced in order to attract SMERFE business. It is
a deal that is cut so that everyone knows what the expectations are. The Revenue
Manager is part of the sales team rather than a direct report to the Rooms
Division.
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Develop Client
Profiles for Each Rate Period. In
order to be more effective in locating prospects that will fit into the
management, it is imperative to know what you are looking for. In other words,
which types of groups in market segments and sub segments will fit within the
rate and catering parameters that will align with the revenue management
strategy. Attempting to meet these goals through only responding to telephone
inquiries and working the trace files is insufficient to attain the goals. First
of all, there is no control over the kind of prospects calling and the pressure
builds to respond to their requests if this is your only means of prospecting.
Secondly, the accounts in the trace files may or may not be in alignment with
the new revenue goals in terms of rates and meeting configurations. A client
profile should be driven by market segment, where the bookings are likely to
originate, their rate sensitivity or history and their meeting configurations.
For example, in the SMERFE market, a group of wine enthusiasts may be less rate
sensitive and more inclined to spend money on F&B than a group of students. A
group originating in a city with a higher ADR may be less rate sensitive than
those that originate locally.
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Develop a New Business
Development Strategy. Once the client
profiles are developed, it becomes a matter of developing a strategy to locate
and qualify these prospects. Strategies might include using the Internet to
locate certain organizations within a market segment from a specific geographic
location or getting on an email distribution list or mailing list for
organizations that have the potential to produce groups for the hotel is another
one. There are web sites that specialize in producing leads for groups for
hotels in various market segments. These can be sorted by geographic location
and often give the rates, meeting specs and history of where the group last met.
www.grouoperleads.com
is an example of one of these. No strategy is complete without an action plan
for implementation.
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Provide a Group
Revenue Management Tool. A revenue management tool can be as
simple as a spreadsheet of the group rooms budget by month into which the
parameters of the group can be entered so that the sales person can see how the
number of rooms at the proposed rate effects the room revenue of the entire
hotel for the period. It can be as sophisticated as a computer program that
measures the revenue of a group on all profit centers. These take various forms
and often are included with the sales contact management system such as the ones
offered by Delphi. Some of these products interface with the property's PMS and
Revenue management systems. |
(Please note that as a matter of
principle, CVCT (Carol Verret Consulting and Training) receives no consideration
from products that may be mentioned. -- they are included as good examples and
good products.)
The
future of the hotel sales is in being able to first of all, locate groups that
fit the revenue management strategy and secondly, measure the viability of a
group in the date ranges and rate requested in relation to the hotel’s revenue
management strategy.
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CVCT,
Carol Verret Consulting and Training, offers consulting and seminars on
incorporating and using e-tools to enhance productivity and functionality as well as
revenue management and customer service. Our associate, Tony D'Angelo,
specializes in HR consulting and seminars.
Carol Verret, in association with
HotelTraining.com has an online sales training module that deals with New
Business Development and developing client profiles by market segment.
Contact Carol at
carol@carolverret.com and log onto the company web site
www.carolverret.com. The company can be reached by
phone at (303) 618-4065. Log on for info about live web casts and online
training modules that also address these issues. |
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