In the past eight weeks, I’ve spoken at three different conferences as well as a widely broadcasted Webinar. At every event, I’ve been asked: as a revenue management consultant what would I recommend to deal with the current economic downturn? Certainly, my first advice is to hold rates—price-cutting does not create volume as much it decreases revenues. But I’m quick to add that the adoption of a Total Revenue Management approach is equally important.
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| Bonnie Buckhiester |
The concept of Total RM is not new; hotels have always endeavored to choose the best pieces of business. The difference today is the desire to make this profit maximization approach more sophisticated and move beyond a rooms-centric revenue management effort. Simply put, Total RM is about finding the most profitable guest, about optimizing revenues and profits from all revenue streams (rooms, food and beverage, parking, spa, golf, retail, entertainment, et cetera).
The trends driving this transition to Total RM are many, but perhaps the most obvious is the pressure to preserve asset value and to increase (or at least stabilize) profitability overall. Other trends include the evolution of the Internet (particularly Travel 2.0) and the convergence of technologies. Research indicates that one billion mobile devices were shipped worldwide in 2006 alone, and so the manner in which consumers research and purchase hotel stays is changing rapidly. The availability of extreme amounts of market intelligence data is also affecting the move toward Total RM—we are able to “slice and dice” data a thousand different ways.
So what are some of the characteristics that define the Total RM phenomena?
-ROGR (catering Revenue per Occupied Group Room)
-RevPSF (Revenue per Square Foot),
-ProPSF (Profit per Square Foot)
-RevPASH (Revenue per Available Seat Hour)
Increased participation in F&B benchmark reports—although occupancy, average daily rate and RevPAR are the primary metrics tracked in benchmark reports, F&B statistics are getting more attention. This trend may be driven faster than expected due to the impact of Asia-Pacific hotels where F&B revenue and profit levels can exceed rooms’ division performance. This certainly is not a definitive list of the elements driving the Total RM trend. Suffice to say that if hotels are going to raise the bar in their RM efforts, it’s these types of initiatives that must be considered. And a Total RM approach is one of the best strategies to compete intelligently and create a competitive advantage in these fiercely competitive markets.