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Revenue Management: How to Act Big When You’re Small

By Alex Gaggioli, February 5, 2016

Introduction

Earlier this week, we posted a tangible guide to revenue management. We discussed how small and medium sized hoteliers can act like the big chains. Simply put, large properties have a lot more human hands and resources to meticulously manage their revenue. But, there are many ways smaller properties can effectively manage their revenue. We sat down with Cloudbeds’ Customer Coach, Cebert, a former revenue manager from a large branded hotel in South Beach, Florida.

He sheds light on how large hotels operate and gives advice to small properties.

Responsibilities as a Revenue Manager

Revenue Management for A large hotel is not all that different than a smaller property

Cebert was a revenue manager for a large property in South Beach, Florida. He was a member of a four-person on-property reservations team. The team consisted of two people group coordinators, a transient wholesale coordinator, and a revenue manager (Cebert).

Property Reservations Team Responsibilities  

Group Housing and Reservations

This team was responsible for managing and maintaining special groups that were staying at the hotel (think weddings, conferences, family reunions, etc.). They built contracts, created promo codes, handled special rates, and handled reservations for closed groups

Transient Wholesale Reservations

One of the most interesting things I learned from my conversation with Cebert was how manual their reservation system is. Major OTAs connect directly with his former hotel’s reservation system, but many wholesale partner reservations were added to their reservations system manually.

He said what is really funny is that Cloudbeds’ product, myallocator, connects to many of the channels that his hotel did not. Even large properties have their own unique inefficiencies.

Managing Wholesale Channels and Rates

Large properties are very careful about managing special rates given to wholesalers. When the hotel reaches a certain occupancy level, they stop sending availability to wholesalers. Wholesale bookings produce less revenue than direct bookings, so they want to maximize return.

Liaison for Off Property Reservation Center

Many large brands have regional reservation centers that manage many properties in the area. It’s more profitable for chains to use a central reservation center rather than have an on-property reservation team. The revenue team is the liaison to the reservation center and ensures that everyone knows the latest events, rates, etc.

Revenue Reporting

The on-property reservations team was also responsible for revenue reporting. They created the daily pick-up report, which outlines the bookings the property received that day. The team also created the weekly sell strategy report and the holiday pace report. The revenue management team then uses these reports to adjust rates on all proprietary and wholesale sites.

The team would also create the 16-day forecast report which influenced every department in the hotel. The report influences rates, staffing, and ordering for the upcoming two weeks.

Common Problems in Revenue Management

Revenue Manager Revenue

Like any job or task, problems arise. We wanted to know what struggles Cebert experienced as a revenue manager. Then, we asked him to relate his experience to small hoteliers.

System Outages

No system is perfect, even those that large hotel brands use. Sometimes things go haywire and dealing with a system outage takes patience and resilience.

Reporting Mistakes

In our interview, Cebert mentioned that reporting mistakes are not uncommon. Because large properties use many different systems to run their reports, a single error could result in a large mistake. Sometimes data would not run on time or appeared on the wrong day. When mistakes happen, they have to be identified. After they’re identified, you need to fix them. The entire process could take hours.

Impact of Mistakes

Reporting errors can delay accurate information by just a few hours and cause major revenue missteps. For example, if a pricing decision is delayed from 9am to 12pm, the property could lose a lot of bookings or marginal revenue differences.

Cebert’s property was located in South Beach, which he tells us is an instantaneous market. Demand can change quickly and his property needed to respond appropriately. If the revenue management team does not have the current accurate reports, they can’t make decisions fast enough.

Revenue affects the entire organization. Not only do mistakes affect the revenue management team, they affect the Director of Revenue, the General Manager, the Area Director of Revenue, as well as brand executives.

Long story short, reporting problems cause a domino effect.

Impact at a Small Property

Now, your property doesn’t have an entire team of executives waiting for reports that a revenue team produces. So, how do mistakes affect you? Cebert says that most smaller properties don’t look as closely as they should at their reports. And it’s not a matter of whether or not they have the information. Many small hoteliers have the information they need to succeed, they just need to take the time to analyze that information.

He also stresses the importance of comparing the right numbers to each other. For example, you don’t want to hop on a competitor’s website and just copy their rates. You likely don’t have all the information you need to analyze how they arrived at that rate. A large group could have booked at a great rate causing normal rates to rise. Your competitor can afford to raise rates and slow their demand because they met their goal. Needless to say, there are countless variables that can affect pricing decisions.

But, what you can do is focus on your numbers and past performance. Use market research to analyze current travel trends to make the most strategic decision. You should pay attention to what your competitors are charging, but it shouldn’t be your only measurement.

As a small hotelier, you likely have more than a hundred tasks you need to complete each day. Unlike large properties that have people dedicated to just about everything, revenue management is one blip on your radar. So, take all the information you have and take the time to analyze it to make the best decision.

Life at Cloudbeds After the Big Brand

Revenue Management for A large hotel

So, naturally, we asked Cebert what life is like after working at a big brand hotel and how he feels Cloudbeds helps today’s hoteliers.

At his large branded hotel, they had the privilege of designing their own systems. But, the systems were not always efficient. With all the different systems and strategies, operations were not always efficient. The hospitality industry has changed a lot in the past 20 years, and as technology evolved, big companies have not always been able to keep up.

Cloudbeds was built for the 2016 hospitality industry. Because our system is in line with current trends, it offers a more seamless experience, Cebert said. Our system understands that in order for hoteliers to succeed, they need to have a full suite of products that integrate with one another. It’s not always 100% perfect, but it offers the best tools for small to midsize hotels, bed and breakfasts, hostels, inns and more.

In order to run the daily pick-up report, for example, required data from three different systems. With Cloudbeds, it’s all available in one system.

Advice from A Former Revenue Manager

Revenue Manager Advice

To wrap it up, we asked Cebert what advice he has to offer properties that may not have a team of fifteen people managing their rates and availability. Here’s what he had to say.

Focus on The Long Term

Cebert says that smaller properties don’t look at the long-term view of their property close enough. Read our previous post that outlines how you can take a more long-term approach.

The goal is to avoid knee-jerk reactions. Always plan ahead.

Timing is Everything

Create a consistent revenue strategy and analyze your market often. If you slack off one month it could end up in a huge loss for your property. Watch your market and trends to time rates and other decisions appropriately.

Know Your Booking Window

Your booking window is the space and time that the majority of your guests need accommodations. In South Florida, walk-in bookings drove the summer months because local families were looking for a quick getaway. Therefore, in the summer people aren’t booking that far in advance. But in the winter months, people prepare for weeks or months to escape the terrible weather. Understand who your guests are and where they’re coming from. Every property and destination is different, so analyze the information you have available.

Hindsight Revenue Management is Always 20/20

As a revenue manager, you will always look back and ask yourself “what if?” If I had raised rates, would I have made X amount more in revenue? Or if I had lowered prices, would I have made up this month’s misstep? Don’t be too harsh on yourself and learn from your mistakes.

Conclusion

As you can see, revenue management is a blurry puzzle for just about everyone in the industry. Whether you’re a large property with ample resources, or a small independent hotel just starting out, there is an efficient way to navigate revenue management. Cloudbeds has the software that can help.

Special thanks to Cebert for taking the time to share his knowledge with us.

 

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