Before you look forward to 2017, look back…
Some new revenue systems are moving away from considering historical information at all… They look only at future internal and external influences but as I have mentioned in past blogs, I absolutely don’t agree with that thinking. I believe that like all things in life, we have to look back both on what we did right and also what mistakes we made, so we can learn from both. So before you spend too much time planning for 2017, please go back and look at what went right and more importantly what went wrong in 2016. Some suggestions for you:
It is not enough to look at revenue in isolation
Before we start planning our sales and marketing campaigns for 2017, shouldn’t we evaluate which segments or channels were actually the most profitability for us. I know that hotels often have a desire to ‘get all of the business, all of the time’ but the fact is that there is business out there that is good for our business and there is business out there that is not. So how do we decide on a plan for next year? Well start by looking at your Segments. Break down performance by month of year and also day of week. Look at occupancy and ADR for each segment but is this enough? No. You need to refine your metrics and add in Adjusted ADR (AJADR) which takes not only the middle layer of the sandwich (being the rate you sold at), the bottom slice of bread (which is your true cost of sale) and then your top layer (which is the incremental spend that segment brought). All of these metrics will give you a true understanding of just how beneficial a particular segment or channel actually is to your business. And don’t forget to really drill down on that cost of sale. We have discussed this in previous blogs but just some tips: obviously remove VAT, breakfast and the cost of sale of having a room occupied but also what about commission? Or perhaps marketing fees which would include PPC advertising. How about the cost of having your sales person attend 10 trade shows or Fairs to promote yourselves to that particular segment – are you taking those costs into consideraton? And then the spend on top? Are the customers in the segment spending in your bars or restaurants or walking straight out the door to the funky new bars in town? If it is a wedding segment, are they taking all your bedrooms and blocking transient business which means your spa or restaurant are empty? You may for example, have a segment that you discover has a high ADR but a low AJADR – a segment that costs you a lot to bring in and has very little spend onsite when they are with you. Is that really good business? All these things need to be considered before you start spending next year. If you don’t know where you have been, how do you know where you are going?
So what about occupancy?
Another key metric to review and you need to have a deep understanding of is when your guests from each of your main segments or channels are staying? Midweek? Weekend? What is their lead time? When do they book? What rates are they buying? What is their price point? And something that is often over-looked, when are they cancelling? By understanding these key metrics you will be able to asses what business has a positive impact and also your customers price point. If you do the analysis you could perhaps discover that your customers love certain packages and no matter how fab you think that ‘stay 2 get the 3rd right free’ offer is, you might find your customers just don’t buy it! Or perhaps that once you push a certain package past say Rate Level 3 (if you are yielding your packages which I hope you all are), then perhaps your business stalls – so you know that pushing rates on that package too high will stop business coming your way. So is it better to hold the rate on certain packages to encourage business or are you happy to stop-selling? Your decision. And with regard to cancellations, this is a metric I feel that few of us are measuring properly – especially on the OTA’s. You should have a tight handle on the knowledge of how many cancellations to expect (they will happen as we allow such flexible cancellation policies on these aggressive OTA’s). Cancellations have a huge impact on how we should be forecasting and ignoring this metric can be costly. We also need to evaluate when the guests in each segment stay. Do you get lots of OTA business for Saturday nights or during your summer season when you could have (with hindsight and better management) received directly and at a much lower cost of sale?
This is part 1 of ‘Looking Back to Look Forward’ so there is more to come. However, the metrics and data don’t lie. Use the data your revenue manager or revenue system can provide and learn from the good stuff and the bad. Isn’t that what life is about anyway? 🙂
Best of luck and if you need any help just email firstname.lastname@example.org