Resort asset management and rooms revenue management

For most mid and smaller sized independent resorts one does not have to invest in a revenue manager to reap the rewards of applying some simple rooms revenue management  tactics to your asset management program to improve your bottom line.

This role is a key daily component of the Manager and whoever is overseeing front office operations.

It can be a bit over the top when you get involved with revenue management experts who seems hell-bent on making this process sound more complicated than it need be.

Simply put revenue management is a process of anticipating hotel occupancy and market demand and to determine how it will affect your hotel, once you can anticipate your market demand then you can correctly positioning your rates.

Firstly put your occupancy and average room rate to one side and think of your hotels revenue income per available room, this is called Rev Par. You can calculate this taking your occupancy (70%) and multiplying it by your average room rate (S$ 100), therefore the result is 0.7*100 equals $70.

Most of us know that in general terms improving ones average room rate generates more profit than just increasing ones occupancy. The added revenue generated is not subjected to operating costs associated with improving occupancy. So we need to focus on both in tandem. This is a bit is a waste of time if ones occupancy is always so low that one never has those peak and high demand periods, but lets assume you like most hotels you have some.

Please note here that lowering ones rates in general across the board to drive occupancy tends to be a fools game, only rarely will this result in improved bottom line profit. Say you increase your rev par to $72.25 by dropping your rates from $100 to US$ 85 and by some miracle that stimulates sales to 85% occupancy. A 15% drop in price has some how generated a 21% increase in rooms demand.  Not very likely. Then you take the associated operational costs, and that includes maintenance and replacements applicable for those  additional rooms sold, and guess what, you are worse off. Then you have to figure out how to get the rates back to where they where.

Revenue management simply takes advantage of increased demand periods.Take that competitors study you have just competed which will detail all your competitors pricing and ask yourself:  are my rates correctly positioned for my market, do we offer value, are we truly competitive. With that knowledge the revenue management process you apply is simply having complete knowledge of the market demand for hotel rooms for your local area and ascertaining how that will affect you property, and with that knowing what rate strategies you can apply to improve your rev par through room rate pricing. Maximizing your yield potential. The process is to create a “base” of business through a range of rates to appeal to a wide range of potential clients.

Once this base business is booked, by whatever market mix, lower rates can then be closed for sale and higher yielding rates can apply The key to successful revenue or yield management is to review advance reservations and make rate close-out decisions as often as might be necessary; generally, three times per week.

Hotels practicing revenue management gain an insight into the ebb and flow of business, knowledge of reservations booking pace, and a true understanding of factors which impact occupancy and average rate. Nothing complicated, and although there are many different strategies one can use it just boils down to good old common sense that need not be over complicated by those experts.

Larger more complicated resort hotels have far more complex revenue management  models, where some expert asset management advice will go a long way to reap better financial returns.

Contact us for assistance in creating your resort asset management plan incorporating winning revenue management strategies that will cost you far less than the financial reward you will reap.

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