DALLAS — With revenue management and optimization, profitability has traditionally only entered the conversation in long-term decisions, but Ashford Inc. senior director of revenue optimization Raheel Moolji said that needs to change.
Speaking during the "Three Things You Can Do Tomorrow to Improve Profit Optimization at Your Property" at HSMAI's Revenue Optimization Conference, Moolji said profitability needs to be at the forefront of day-to-day discussions about different segments and pieces of business.
"We should really end up looking at things a little bit more on ... how profitable are a lot of these segments," he said.
He's hopeful that profitability discussion will become more widespread across the industry as automation takes care of more of the busy work associated with revenue-management jobs.
"We're trying to get there, and a lot of the revenue-management systems are now automating a lot of the tactics, so the time [of revenue experts] should be spent more on the analysis," he said.
Alexa Montgomery Krnjaic, vice president of distribution and channel management for Sonesta International, said revenue managers should be working right now to familiarize themselves with more profitability metrics and understanding profit-and-loss data.
She said it's also imperative to gain a better understanding of the hotel distribution landscape and how it impacts profitability.
"Distribution can be, in some cases, kind of an unsung hero where if you have a great knowledge base, you can keep up with the recent trends, keep up with the recent connectivity models and learn how to connect and do your business more efficiently and more cost effectively," she said, adding hoteliers should take the next 18 months to really transform that part of their businesses.
Soojin Kim, vice president of asset management at Roch Capital, said it's important to analyze beyond the segments of travelers to understand guests on an individual basis to drive profitability.
"It's about really knowing who these people are behind your rate plan and channel mix," she said. "That's also your profit optimization tool, to know what is their willingness to pay. Probably they're booking your opaque rate today, but probably they were willing to pay your retail yesterday, but somehow they saw something out there and just booked it."
Moolji said revenue professionals need a more holistic view of acquisition costs, similar to what owners would consider. He said Ashford takes a close look at marketing costs as part of its revenue optimization efforts.
"Obviously we're in a slightly different phase than we were a couple years ago where we're probably looking at every dollar a little differently than we were before, but the metrics ... that we're looking at is what's the return on investment," he said. "If we're getting a high return, we're as an owner wanting to continue to fund [that marketing] ... if it's a profitable channel, if it's lucrative business, and if the demand is still there, then we want to continue to capture it."
He also said that having a better understanding of operations and guest behavior can boost profitability, citing the example of rates that include food-and-beverage credits.
"If we sell a package with a [food-and-beverage] credit, the expectation is they're probably going to take this [food-and-beverage] credit and probably spend more at the outlets because they're already engaged and there versus just booking a room," he said. "Now they have a choice saying, 'Hey, we can go spend our money really anywhere.'"
Kim said revenue managers must recognize that in an era with extremely tight budgets across the hotel industry, accurate forecasting of both revenue and occupancy is vital to the property operations teams in a way they historically haven't been.
"When you go to your revenue forecast, that really enables your [general manager] or whoever to decided 'Can I buy linen this month?' and 'Do I have the money to pay for this expense next month?'" she said. "If you're not going to have much revenue next month, they need to really know."
She said this is incredibly important to staff appropriately during a labor crisis.
In forecasting, she suggests building out a best-case scenario and a worst-case scenario that revenue managers look at daily with their general managers.
"Keep your GM really up to date so they can be responsive or proactive," she said.
Montgomery Krnjaic said her company is more focused on metrics such as average length of stay and the lifetime value of guests, and she also stressed that the hotel industry's traditional performance metrics are still important even with an added focus on profits.
"We're still really looking at [average daily rate] and what ADRs are booking again," she said. "I know these are just baseline metrics, but they matter when it comes to profitability."