The emerging trend of hotel Total Revenue Management

23rd August 2019

Revenue Management

Total Revenue Management relates to capturing mostly untapped revenue and profit potential, associated with hotels’ non-room revenue-generating opportunities, including food and beverage, function space, catering, spa, retail, golf, and other services.

Today purely heads on beds is not enough. The hospitality sector is beginning to diversify product offerings and looking at how to improve revenue throughout the duration of the guest's stay. For properties that offer more than rooms, there is the opportunity to implement new revenue practices to improve the overall value of the guest. Room-only properties should look at businesses and services in the local area to support the delivery of additional products. 

Total Revenue Management is about adjusting hotels' sales approach from revenue per available room (RevPAR) - the traditional way of measuring revenue - to revenue per guest (RevPAG).

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Embracing change: aspects of Total Revenue Management

'63% of hoteliers believe the revenue management discipline will move towards Total revenue management in five years' Skift


The key foundation principles 

To truly prepare and implement Total Revenue Management it requires a focus on four key areas:

1. People and process

The business culture is paramount to successfully implement full Total Revenue Management, ensuring that all hotel employees share a common vision of what needs to be achieved.

Staff need to be engaged and motivated to present more products to guests, while also logging and sharing the data. It is important to create an environment where opportunities are identified and celebrated with transparency.

The revenue management department cannot be expected to achieve this alone. Therefore regular meetings and cross-departmental performance reviews, together with collaborative working initiatives, will set a clear structure.

2. Tools

The data and technology required to support the successful implementation of Total Revenue Management is not readily available to most hotels yet. Most departments have acquired systems at different times from different vendors, but the systems need to be interconnected. 

Technology is developing fast with new tools emerging every day that will soon provide the key links between disparate systems, so that they can work together and allow for the seamless transfer of data. The better connected the systems are from property management systems (PMS), to point of sale systems (PoS) the greater the chance to optimise price points and support management forecasts.

The emergence of automated revenue management systems is also helping to ensure pricing across revenue streams responds to market conditions in real time.

3. Data

Hoteliers are making more data-driven decisions than ever before. Guests expect greater personalisation, and data will provide the transparency needed to identify market segments and build accurate profiles, from room preferences to welcome amenities to better targeted promotions and offers. 

Revenue management systems (RMS) are beginning to slice and dice data to show behavioural patterns and the contribution of each segment in all revenue streams, allowing the hotel to improve the performance of each service for increased guest satisfaction. 

Multiple data sources collected from internal and external systems will provide the visibility for long-term forecasting strategies to fine tune revenue optimisation while also deploying shorter-term tactics. 

Role of departments 

All revenue sources need to be reviewed and optimised to produce enhanced performance and feed into the wider revenue management strategy. This will depend on the size of the hotel and the range of services and departments provided. Key revenue drivers will include:

1. Rooms

As the central revenue driver, optimising the performance of rate is critical to success. Therefore it will be important to hold regular performance reviews, which will assess room rates, pricing structures, booking channel commissions, and seasonal patterns. It will also be important to look at market segmentation to optimise specific aspects of selling rooms rather than sticking to the status quo.

Identifying opportunities for upsell will improve revenue generation. This might be looking at multi-night packages, multi-room bookings, data-sensitive dates, early check-in or late check-out. 

It's essential to involve housekeeping to contribute additional guest service ideas, and to revise room turnaround schedules to support flexible check-in/ check-out times.

2. Food and beverage

Other than the typical package options which include breakfast, or an evening meal for two, technology can play an essential role in promoting special offers and reminding guests of food and beverage options. Using a mobile app to allow guests to make in-room orders allows your products to be more visible.

Taking the time to assess how and when guests use food and beverage services, by looking at table turnaround, seating, order analysis, staff productivity and menu engineering, can improve service delivery and guest satisfaction. This data also helps to assess the value of each guest and to calculate the likelihood of extra revenue per guest. 

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3. Corporate events and business services

More businesses need access to space for co-working, training, and regular meetings, which are all potentially lucrative revenue streams. Startups always need a space from which to grow or interview candidates, WeWork is an example of how co-working in social spaces could be a perfect fit for hotel environments, or freelance photographers needing a space for a photoshoot. 

Reviewing high-value corporate and business clients based on revenue by hour and lifetime value will enable the hotel to focus on specific corporate segments. Furthermore, providing guest services to corporate bookings will work as an additional driver of revenue. 

4. Spa and leisure

Hotels are beginning to see the value of spa and leisure services beyond their guests to the local community. Opening the availability to local people can bring a new lease of life to the facilities while generating easy revenue. 

If you have no spa or leisure facilities, partnering with a local provider can add real value to your overall offering. 

In addition, being part of a loyalty scheme can ensure you have returning customers. Therefore offering location-based special offers will drive interest during quiet periods. Any customer of the spa and leisure facilities can also use the food and beverage facilities. 

Ancillary product 

It's important to look at how to expand the guest experience. Creating themed offers including family, romantic, relaxation, or pet-friendly packages helps target specific groups, enabling the bundling of services and high-category room types.

Introducing a hotel app for guests and developing partnerships with local restaurants, attractions or experiences will help add more product if there are limited facilities at the hotel. Offering business travellers co-working spaces or business services or making parking available, adds to the range of options. 

Creating a list of possibilities with the wider hotel team can identify products and services that are ripe for becoming ancillary products, and begin to change their mindset to focus on revenue-generating opportunities. 

Role of the revenue manager 

With Total Revenue Management, the revenue management role needs to be fit for purpose, especially when it needs to manage revenue across the entire organisation. Beyond the analytical skills to review rate performance, forecasting, and price optimisation, the modern revenue manager will also need to possess a number of essential character traits to achieve key business goals, including impeccable communication, influence and leadership skills. 

Revenue managers will have significantly more data sets to work with and, while overall profitability will be the focus, other metrics will need to be re-examined to adjust to this new approach that will provide more accurate forecasts. 

Finding the right talent and experience to fulfil this role may be a lengthy process, but one that shouldn't prevent the hotel from making the first steps to implement the Total Revenue Management approach. 

How Criton can help you

Criton is an award-winning technology provider which enables hotels and serviced apartment operators to take the guest experience to the next level with a sophisticated mobile app. Criton helps hotels to streamline the entire guest journey and maximise in-stay revenue. Get in touch today to find out how we can help your business. 

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