NASHVILLE, Tennessee — Revenue management and hotel ownership experts say driving ancillary revenues, shifting the focus of revenue management to total revenue rather than revenue per available room and improving technologies are a few ways to evolve the discipline and lead to better hotel margins.
“If you're still running hotels the way you were two years ago, three, four, five years ago, or still using your strategies, you have to adjust. You have to change,” said Gilbert Arredondo, senior vice president of revenue strategy at Remington Hospitality. “We need that next level of data to kind of move forward.”
Priya Chandnani, vice president of revenue and distribution strategy at Pyramid Global Hospitality, said during the “Courageous Revenue Management” panel at the 2023 Hotel Data Conference that investing in better data technology to evaluate customers’ spending trends can be perceived as a risk, but it’s a worthwhile opportunity to analyze the true spend over several revenue channels and not just room revenue.
Over the past few years, Pyramid has been prioritizing total revenue per occupied room rather than RevPAR, as it allows for a better comparison based on the performance of ancillary revenues such as food and beverage, Chandnani said.
With RevPAR still lagging behind 2019 levels, Arredondo said hotels should focus on optimizing ancillary revenue streams and strive to be the market leader in their competitive sets.
“Have your fees or other ancillary revenue streams kept up with the rate of inflation at the same pace as your [average daily rate] has? If they haven’t, you probably have an opportunity to go back and look at those and adjust those to try and drive more incrementality. And what that does is it really drives profitability to the bottom line, because there's no labor involved with driving that additional revenue,” he said.
Kari Carr, senior vice president of asset management at Pebblebrook Hotel Trust, said the tightening of margins over the past few years has forced revenue managers to home in on driving additional revenues elsewhere. Bringing in the right customer who will spend on extra services will lead to several returns on investment, she said.
“At the end of the day, you do need margins to run a hotel and to continue to reinvest, whether that's capital or technology or people. You need to continue to look at that,” she said. “It's something we're challenging our teams to sort of redefine what it means to be the ideal guest at their hotels, and then what are the revenue strategies around that to drive?”
Empowering Revenue Management Teams
A key to encouraging revenue-management teams to perform at their best is a willingness to experiment, said Tom Crider, senior manager of software development at IDeaS.
“In an organization where people are looking after each other, where one person’s success is not perceived as another person's failure, or vice versa, where we're competing with our competitors and not our colleagues — those organizations are really good,” he said.
Remington’s guiding principles include being bold and tenacious. Arredondo said when those two words are baked into the culture, it has to come with the expectation that failure is going to happen, and that’s OK.
Any risks taken are done as a team, and whether it’s successful or not, the whole team learns a lesson and wins or loses together, he said.
“It’s not the revenue managers over here taking this risk by themselves. You get buy-in, and whether that be from the owner, or whether that be from the [general manager], you get buy-in, and it's a collective risk,” he said. “We're taking this together as a team, we believe in this and everyone is looking forward; everybody's on the same page.”
Having the confidence to take a risk is vital, and so is learning from it when it doesn’t work out. Chandnani said some letdowns in the past have come from the revenue-management team trying to achieve a goal without the help of other departments.
“It was more of us learning the art of collaboration, that ability to say we’re a team and we're working together,” she said.
Chandnani said collaboration can go beyond working with neighboring departments in a company, though.
“Don’t be afraid to call a colleague with another company and say, ‘Hey, I’m trying this out. You want to do it with me?’” she said. “And we test it together because I do think so many amazing ideas come from that part of collaboration.”