Take your next great revenue management strategy to new heights
- Revenue per square foot/meter is the great equalizer, much like RevPAR for guest rooms
- The combination of metrics allows hotels to be more flexible and thoughtful about their demand-based pricing strategy
- It is critical to monitor the success of an M&E revenue strategy and provide tangible benchmarks to help improve revenue results
The discipline of revenue management continues to evolve and expand into more revenue-generating areas of a hotel. As hotels start to think about some of these key areas where revenue management can have a major impact — meetings & events (M&E) is often at the top of that list. Hotels have ADR, occupancy, RevPAR and even more profit-focused metrics like GOPPAR to evaluate the success of their guest room strategy. When building a strategy for M&E, here are the key performance indicators (KPIs) that can help your next great revenue management strategy take flight.
Revenue Per Square Foot/Meter
Revenue per square foot/meter is the great equalizer, much like RevPAR is for guest rooms. Hotels can fill their meeting space with all kinds of catering business, or use their meeting space to fill sleeping rooms, but to properly measure the success of an M&E strategy this metric is pivotal. Understanding your revenue performance, in relation to the available space, allows hotels to set benchmarks for M&E performance which leads to the effective utilization of space.
Once hotels have insights into their revenue per square foot/meter they can compare performance by day of week, month or even by function room. This insight helps hotels understand their highest revenue-generating space and deploy pricing based on a clear picture of demand. Revenue per square foot/meter provides commercial opportunities for a hotel by knowing which space is most valuable and could possibly be underutilized.
Attendee Density
Attendee density is the percentage of actual attendees in relation to the optimal capacity for the given venue. As an example, if a hotel had a small ballroom that held 100 persons and on a given day sold it to a group that had 75 attendees, then the attendee density for that ballroom would be 75%.
Hotels establish the optimal capacity for a meeting room based on the ideal capacity in a non-theater style seating such as classroom or banquet rounds. This is because these types of seating styles generally have additional revenue, like food & beverage, tied to them. By achieving optimal density, you can begin to calculate your optimal revenue, which leads to the next KPI below.
Revenue Per Attendee
Revenue per attendee is simply the revenue for a given date range divided by the total number of actual attendees for that given time period. This crucial metric helps hotels understand the relationship between how busy M&E space is (utilization) and how much revenue is being generated within that meeting space. As hotels begin to monitor attendee density in relation to revenue per attendee, they can identify where they have maximized their revenue opportunity and find additional opportunity where space utilization is high and revenue is low.
One may ask, why worry about the revenue per attendee if there is a minimum of $10,000 on a ballroom. If the minimum is achieved, there may be little concern if there were two or 200 attendees. While that may be true, how does a hotel establish that $10,000 is the revenue minimum for the given venue?
If hotels can establish their minimum revenues for venues, and their optimal attendee density, they can calculate their minimum revenue per attendee when the venue is occupied at the optimal attendee level. Knowing this, hotels can decide when to flex their pricing based on demand, so that minimums don’t have to be static across different days of week, months or seasons.
In high demand time periods, you can either strictly enforce the optimal number of attendees or the resulting revenue from the optimal number of attendees. The combination of these metrics allows hotels to be more flexible and thoughtful about their demand-based pricing strategy for meetings & events.
Conversion Performance
The last metric moves away from physical venue metrics on actuals. The focus here is sales and catering performance around conversion of revenue from inquiries into definite bookings. Conversion performance is the percentage of revenue booked in relation to the potential revenue for all inquiries that were either booked, turned down or lost.
This metric is often illuminating to hotels. Not only can you monitor the performance of sales and catering teams, but you can prioritize bookings based on their likelihood to go definite. Conversion performance can be measured by date range, market segment, team member, event type and number of inquiries. It is critical to monitor the success of an M&E revenue strategy and provide tangible benchmarks to help improve revenue results.
Each of these key performance indicators provides insight and value to an organization that is looking to streamline their M&E revenue strategy. Hotels often take a “set it and forget it for a year” approach. If you’re looking to assemble your M&E strategy, consider these KPIs as your starting point, and if you’re looking to revolutionize your M&E business, click here to learn more about IDeaS’ innovative solutions.
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