Hotel asset managers generally have a lot on their plates, from managing a hotel’s capital improvement strategy to monitoring covenants in loan agreements and management contracts, to overseeing the profit-and-loss statement. Compound that by the number of hotels in a portfolio, and it can be challenging to find enough hours in the day to touch on all the issues that need attention.
The discipline that knits together each of these other areas is the hotel’s revenue-management strategy. Generating sufficient revenue, but more importantly, the right kind of revenue, helps ensure that covenants can be met, capital will be available for improvements and the P&L flows.
It’s critical for an asset manager to be involved actively in a hotel’s revenue-management process. Luckily, there are a number of ways for asset managers to participate in and add value to the revenue-management process.
Ensure that the hotel has an overall RM strategy
Make sure that the hotel has a strategy in place and that it’s not simply reacting. Help set the revenue-management strategy during the annual budgeting process and then allow the team to execute to achieve the goals of that strategy throughout the course of the year.
The overall strategy should guide the direction of the tactics employed by the revenue-management team and should work toward achieving the goals set forth in the hotel’s budget. In setting the strategy to work in conjunction with the budget, all team members, not just those in revenue management, are working under the same set of guiding principles.
Regularly track the accuracy of the team’s forecasting
Accurate forecasting yields a more successful revenue-management strategy. Look back historically to gauge how accurate the team’s forecast has been at various periods in time. Highlight points of strength to ensure continued focus on these areas and help bring to light areas that could use more attention. Look forward to understand what data is being used to make future pricing decisions, understand how to interpret that data and be an active voice in the ongoing conversation.
Understand and pay attention to the relative cost of distribution channels
It should be abundantly clear by now that not all revenue is created equal. Each of the various distribution channels at a hotel’s disposal comes with a different price tag. Understand the cost of selling rooms through these channels and help to reframe the revenue conversation to focus on profit contribution. Pay particular attention to the hotel’s most used channels and always consider alternatives that may yield a higher contribution.
Don’t be afraid to test out new tactics
Operators can often be adverse to risk, so encourage the team to be creative and to test out new revenue-generating tactics. Provided that there is a guiding strategy, experimentation often can lead to positive results. Help create an environment in which experimentation is encouraged, which means that occasional failures or disappointing results must be accepted. That being said, a savvy and engaged asset manager should know when to pull the plug because sometimes the tried and tested methods are the best.
Asset managers can and should be participants in the revenue-management process, thereby becoming a valuable resource to the team. Just be sure to be an educated voice in the conversation. Understand the strengths and weaknesses of the team and try to fill the gaps with beneficial data and analysis that can shift the focus to profit contribution and not just top-line revenue generation. Spending time in this discipline can have beneficial downstream effects on all the other areas that require your attention.
Natalie Francoeur is an Executive Vice President with Pinnacle Advisory Group specializing in asset management and in providing long-term strategic planning for clients in transition periods, including asset repositioning, restructuring of management, development of operational policies and practices and budget planning and development. During her 10+ years at Pinnacle her work has encompassed market and financial analyses for proposed hotels of all types, strategic planning for corporate guidance related to acquisition, disposition and renovation of hotel assets and hotel impact studies.
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