Đề tài Hotel revenue management

TỔ CHỨC KHAI THÁC HÀNG KHÔNG 1GVHD: Nguyễn Nam ThanhThực hiện: Nhóm 6HOTEL REVENUE MANAGEMENT 1/ Introduction 2/ Peak period revenue opportunities3/ Communication 4/ Market segmentation 5/ Opaque pricing 6/ Performance measurementINTRODUCTIONVeritec LodgeA hotel with 300 rooms.An annual occupancy percentage of 65%.Table 13.1 Impacts of increasing occupancy percentageIncrease occupancy percentage from 65% to:Increase in room nightsIncremental revenue gain (%)65.1% 1090.1565.5%5480.7566%10951.5Table 13.2 : Impacts of increasing occupancy percentageAnnual occupancy (%)Annual revenue($ million)Incremental revenue gain (%)Annual net revenue ($000)Incremental gain in profits (%)658.90n.a445n.a65.18.910.154562.565.58.970.7750012.3669.031.555424.6How can a hotel achieve these gains? 5 opportunity areasImproved pricing and demand management during peak demand periodsCommunications: among hotel staff and with prospective customersMarket segmentationOpaque pricingPerformance measurementPricing and revenue management3 objectivesStop demand Using forecasts of future room supply Demand at alternative price levelsSteer An effective pricing programStimulateStimulate additional demand by promotional prices Table 13.3 Comparison of impacts from LOS controls versus increasing priceIn this scenario, not all of the hotel rooms are occupied on Wednesday night, reflecting the uncertainty associated with holding back rooms for longer stay reservation requests. In actual implementation of LOS controls, some hotels have claimed revenue increases of 8­10 percent or even more when compared to increasing rates on peak nights (Aeronomics, 1992).Accepting reservation requests beyond hoteL capacity. Although not strictly an element of pricing, another component of a successful pricing program is determining how many reservation requests to accept beyond the hotel’s capacity. As the number of future cancellations and no-shows are not known with certainty, this reflects the level of risk the hotel is willing to take to ensure that every room is occupied on a soldout night.Unoccupied rooms on a sold-out night are termed spoiled rooms. These are rooms that could have been sold but are not, because the hotel decided to stop taking reservations, effectively turning away demand in advance of the check-in date. Unoccupied rooms on dates that are not sold out are not spoiled rooms, as there was insufficient demand to fill them. Spoilage can be measured as a percentage of available rooms or as an absolute number.Many hoteliers take a conservative approach to managing spoilage. That is, they are cautious about the number of bookings taken in excess of the hotel’s capacity. They are willing to let a few rooms go empty on a sold­out night in order to avoid the situation where guests with reservations show up to check­in, but the hotel does not have rooms to accommodate them.While this is reasonable, it is also costly. Hoteliers frequently fail to realize that this forces potential guests to stay at competitor properties, rather than allowing them to stay at their most preferred location. If the hotel does have empty rooms on the sold­out night, then not only did the hotel give up revenue it could have received, but the hotel also ends up falling short on customer satisfaction.The following example illustrates why this foregone revenue can be significant and worth pursuing. In addition, the example provides some insight into why we call this invisible revenue. Consider a hotel with 250 rooms, a 70 percent annual occupancy rate, an ADR of $150 and 30 sold­out nights during the year. Further, assume a two night average length of stay and that the average occupancy on sold­ out nights is 97.6 percent. That means that on, six rooms are empty on dates that the hotel stopped accepting reservations. What is the financial impact of reducing the number of empty rooms on sold ­out dates to three? It may be worth noting that with 97.6 percent occupancy on sold-out nights, there may not be strong pressure for analysing why the occupancy rate was not higher. Reducing spoilage by 50 percent to three rooms, that is, increasing the occupancy rate from 97.6 percent to 98.8 percent on a relatively small number of nights per year may not be deemed worthy of significant effort. When approached from an annual revenue or occupancy perspective, the impacts seem minor Annual occupancy rate would increase by approxi­mately 2/10 of 1 percent. Annual revenue would increase by approxi­ mately ¼ of a percent.The impact of the incremental revenue on the hotel’s profitability is much larger. If the hotel’s profits were 5 percent of gross revenue and if 80 percent of the incremental room revenue from selling these three additional rooms on the 30 sold­out nights goes to the bottom lineThe hotel’s annual profits might increase by more than 4 percent!NOW THAT probably would attract the a ttention of many hotel executivesWhen more aggressive booking policies are adopted, a hotel also needs to adopt policies and procedures that enable staff to deal effectively with guests with reservations wanting to check ­in when the hotel does not have rooms available.And that’s why we frequently refer to the revenue that comes from decreasing spoilage as invisible revenue. No one may pay attention to its absence, but when the additional revenue has the potential to increase the hotel’s profits by several percentage points, everyone appreciates its presence.Does this mean that more expensive rates should always be quoted first? For example, when a customer enquires about the lowest rate available, it may simply be best to start with that rate rather than force the customer to first listen to the wonderful options that come with more expensive rooms. Hotels with the most successful pricing programs have also recognized the value of obtaining input from multiple departments.MARKET SEGMENTATIONMarket segmentation  EZStay is a regional, limited service, midrange hotel chain in the USA. Primary customer segments include budget-minded salespersons, corporate staff from small businesses, overnight travelers and budget-minded groups such as club sport teams. Weekday hotel occupancy tends to be low, although weekend occupancy rates are quite high. Competitor chains tend to have stronger brand equity and loyal followings due to their loyalty programs. Thus far, EZStay has not initiated a loyalty programLess than 10 percent of EZStay’s guests pay the full rack rate. These rates vary by hotel, ranging from $69 to $129. More than 60 percent of the guests receive a discount of at least $20. Although EZStay’s rates are generally similar to its competitors, perhaps slightly lower, its physical product is equal to and probably better than most of its competitors. Many corporate travelers, however, tend to stay at competitor properties. This may be due in part to EZStay’s regional rather than national presence and also due to its lack of a loyalty program. The pricing department has organized a meeting to discuss what actions it might take to improve the financial position of EZStay. What should be done? Which market segments currently provide customers?Provides a framework for evaluating how to prioritize deeper penetration into the customer segments that currently provide customers versus stimulating demand from other customer segments, as this helps frame the challenges with stimulating additional demand from different sources. Which segments are not currently providing many customers but could be? →21www.PowerPointDep.net2 questions simultaneously2 approaches can be takenA rather common tactic is to take a broad and relatively untargeted pricing action. Frequently, this translates into offering a discounted price. An alternative approach is to take a more directed action that is targeted to reach a specific set of customer segments. These customer segments may or may not be ones that currently provide the hotel with many guests. In our experience, this second approach tends to be a far more effective way of increasing revenues and profits. To illustrate the potential risks of a broad discounting program, consider a hotel that receives an average price of $70 for its rooms and has an occupancy rate of 55 percent. To stimulate demand, suppose the hotel reduces its price to $56, approximately a 20 percent reduction. How much additional business does the hotel need to generate to ensure that the discount increases its revenues and profits? To generate less revenue than what was earned at the higher rate , is rather high. Demand for the hotel has to increase quite significantly for the discount to be profitableAs increased occupancy levels result in additional variable cost, the occupancy level required to break even is higher.Corporate travelers seem to be a customer segment worth pursuing.One way to attract COPORATE TRAVERLES in the absence of a loyalty programOn the first night of their stayOffers A small amenity On each subsequent night of stayAdditional and potentially more significant amenities can be offeredThe product can be offered toBusiness traverler package Frequent traveler packageNote that the potential for revenue dilution is  very small. The frequent traveler package is estimated to be dilutionary only if it attracts less than one  incremental guest per night. It is also possible that the program will be  financially beneficial if it induces some guests to  “buy up.”Aimed at attracting less price  sensitive guestsEZStay has incentivized  travelers to try one of their properties  rather than stay at a competitor property, but has done so in a  way that minimizes the risk of revenue dilution.OPAQUE PRICING IS A WAY THAT COMPANIES SELL THEIR MERCHANDISE AT HIDDEN, LOWER PRICES. One type of price discrimination.The target product is one who will purchase a product or service primarily based on price and not based on the company’s amenities, reputation, etcThe website will reveal the name of the hotel but doesn’t allow for refunds, changes or cancellations.Use these rates for dates that you do not feel you will sell out, and using the opaque system, you will receive revenue for rooms that you would normally not sell.Quiet periodsGuests are demanding too much for what they pay, or whether resorts are raising people’s hopesGuests hopes by offering lower rates and then not delivering the desired experienceLoyalty club membersMay not have good feedbacks.Capacity control and pricing decisions are highly intertwined. Consider a somewhat simplified situation where you have only one room left to sell in a hotel for an upcoming Tuesday night. You receive a request for a one-night stay from someone who is willing to pay $120 for that night. If you turn down the request, you believe there is a 50 percent chance that you will receive a request for a four-night stay from someone else who is willing to pay $120 per night. But, if you turn down the request you believe there is a 50 percent chance that the room will go empty on Tuesday night. 1. What should you do? 2. Does the hotel’s reservation system support what you want to do? 3. How do you demonstrate that you made the right decision? The scenario in which you refuse the one-night stay reservation request in anticipation of receiving a four-night stay request, but that demand does not materialize and you end up with an empty room. In short, you may have taken the action that in the long term would maximize the hotel’s profits, but not necessarily have done so in this particular instance. Performance measurement tools become absolutely essential. Having suitable performance measures, quantifying the impacts of your pricing decisions and providing feedback to staff on the impacts of their pricing decisions are critical for estimating the level of success of a hotel’s pricing program and justifying investments to further enhance it. As the saying goes, “you get what you measure.” Choose the wrong performance measures and your hotel is likely to be led down paths that are not as financially productive. Performance measures such as occupancy and average daily rate are only part of what’s important. Revenue per available room, or REVPAR, provides a way of combining both of those measures into a single performance measurement. While that’s better, it’s still not enough as REVPAR also reflects the impact of factors external to price. It is important to define measures that estimate the impacts of pricing decisions. In some cases you can use narrowly defined performance measures, such as those that focus on spoilage levels. In other cases, more elaborate methods such as the method of comparable challenges may be needed. This method enables making quantitative estimates of the impacts of pricing decisions by normalizing for market conditions existing at the time of the decision By doing so, this method provides greater insight and accuracy than more standard approaches such as year-over-year comparisons or comparisons to competitive sets. Conclusion As discussed in this chapter, pursuing profit maximization through enhanced pricing capabilities requires a combination of advanced pricing analytics and adopting appropriate internal business processes. Although the financial benefits of improved pricing may be as great, if not greater, than those resulting from changes in operations or purchasing supplies (Marn et al., 2004), the benefits are not nearly as obvious; implementing performance metrics and establishing feedback mechanisms designed to measure, illuminate and communicate these benefits are essential to establishing an effective pricing program. Otherwise, a hotel’s scarce resources of staff time, as well as money for investing in business improvements, are likely to be prioritized for other areas.