What should impact those ‘last minute’ revenue decisions?
In our last blog, we looked at just how important making clever revenue decisions far in advance can be to your business. But how on earth do you react to that last minute business? How do you ensure you have all the boxes ticked; have assessed all you need to review and have come up with the very best rate strategy? You can sum this up in 3 simple questions?
- Am I too restricted?
- Am I restricted enough?
- Am I maximising revenue potential?
Understanding how to revenue manage with only a few days to go is what we call ‘managing the diamond dust’. What that really means is that the opportunities in those last few days before arrival are what can really make you the most revenue. Being brave and holding for rate is super important; being brave and closing expensive OTA’s can give you revenue super powers but equally, understanding when the demand is just not there and finding that ‘sweet spot’ of occupancy versus rate is actually where the genius happens.
So let’s start at the beginning and run through a simple check-list that might help you make some really clever decisions:
- Start with the basics – how many rooms do you have sold; how many days before arrival and what do you expect to pick-up between now and then? If you don’t have a revenue management system then you will need to track pick-up manually. So for example: if you are looking at a Thursday in June – how many rooms do you normally pick-up within 8 days of arrival? What happened this time last year? Are you ahead or behind? And don’t forget, not to look at not just the same Thursday last year but also Thursdays in that month as looking at only one day can throw up ‘bad data’. What do I mean by ‘bad data?’ Well if you have 60 rooms sold today for Thursday 14 June and you look at last year and Thursday 15 June 2017 had 90 rooms sold, do you need to panic at being 30 rooms behind or were 90 booked last year because you had a group in-house? Is 60 more normal when you consider the other Thursdays in the month last year, 8 days before arrival? Simple tracking will help you work this out.
- Now look at the breakdown – out of your 60 rooms sold, how many are guaranteed and how many are un-guaranteed? By this stage I am hoping that few of you would have rooms at un-guaranteed status with only 8 days out but if you have, convert them to definite or consider cancelling them off.
- What about groups – if you have groups in-house will they actually take their full allocation? How do you know that? By understanding patterns of similar groups in the past. Track and evaluate and adjust your strategy if you need to
- Allocations – love them or hate them, most of us have them. How many rooms do you have on a 72/48/24 hour allocation and exactly how likely are they to materialise?
- What is you cancellation probability – out of the 60 rooms you have booked, we now need to look at where exactly those booking have come from; so which channel or source. As an example, we all know that an average of 47% of all booking.com bookings will cancel – that is their statistic, not mine. Is this true for you? Again if you aren’t tracking then I urge you to do so. Know your cancellation probability and if certain segments or sources are more likely to cancel then make sure you factor this in to your decision making
- Which room types have been booked – most hotels will fill their lowest grade rooms first due to price point and often the reverse of that – the suites or highest grade rooms fill next due to aspirational sales. What you are often left with in the middle are your superior or deluxe rooms. Of course you can’t downgrade someone who has paid and is expecting a suite but you can of course over-sell your standard rooms. If you know you won’t have the demand for your superior rooms then don’t turn away business – oversell and make sure your booking engine reflects this selling decision
- Distribution – Managing your distribution channels effectively during those last few days before arrival is actually where the real magic works. The absolute basics are: make sure you have the maximum availability you can on your brand site and make sure you are limiting expensive OTA’s when you have expected demand. I say again… OTA’s should be used for selling distressed inventory and should never be considered part of your overall sales strategy.
- Are you corporate reliant – if so, what are your pick-up trends? We all know corporates book at the last minute but more and more often they are booking through OTA’s not agents and are cancelling more often. What considerations do you need to make for this market?
- Walk-ins and N0-shows – the positive and negative attributors to any revenue strategy… know your walk-in rate and understand the potential of no-shows. Track and do the maths. Whether you believe it or not, everything has a pattern, so track, track and track again…
- Events – whilst events usually have more of an impact on long-range revenue decisions, you still need to understand what is happening in your area and how a concert or conference typically behaves. For example, if there is a conference in the city and you are NOT headquarters hotel, should you expect a higher impact of last minute corporate bookings as the HQ hotel can’t accommodate their regulars and you can mop up all that displaced business at a high rate?
- Capacity – in my home city we have seen a massive increase in bed numbers in the past few months and this without doubt is impacting every established hotel in the city centre and to an even greater degree, the hotels on the outskirts (which would normally have benefitted from overspill). If you have had an increase or decrease in stock you need to take this into consideration
- Competitor selling rates – to be honest, competitive selling rates have differing impacts depending on what type of hotel you are but it is always good to have an understanding of where everyone else is sitting. My advice though is not to knee-jerk react to a competitors price strategy as after all, their revenue manager may be an idiot! Look at your own business first and then make a decision that is right for you – not your neighbour down the street.
This blog could go on forever as there are dozens more metrics a good revenue manager or a brilliant revenue system will take into consideration – air passenger numbers / rate types / transient versus package behaviour / yieldable versus un-yieldable rates / lead times / economics / cost of sale / incremental spend /days before and after / weather and even lovely maths, formula and probability theories to name but a few.
But I end the way I started – all of these considerations should lead you to one of three considerations:
- Am I too restricted and do I need to open up channels and rates to allow more fluid selling? Should I open packages and not push too hard on rate?
- Am I restricted enough and should I increase rates and close expensive distribution channels? Should I limit certain rates or room types and perhaps consider length of stay policies?
- Do I have the right selling rate to maximise profit? Don’t forget that dropping rate rarely stimulates more demand and you need to ask yourself, ‘if I dropped my rate by £10.00 will that really impact someone’s buying decision?’ .
All these questions are of course market dependent and you know your market better than anyone but I hope the above has given you some food for thought.
Happy yielding and for all things revenue, just firstname.lastname@example.org