Consulting Services answers recent client questions about hotel revenue management
The dust has now settled on the 2018 FIFA World Cup, which proved to be one of the most exciting in decades (especially if you’re French!). But it also proved to be a sporting event that was very difficult to forecast. Along with most of my country, this Englishman’s modest expectations certainly did not anticipate a tantalisingly close run to the final—and who would have predicted the shortcomings of the mighty Argentina, Germany and Spain all failing to light up the tournament with early exits?
There was also a great amount of demand uncertainty for the event, given political and socio-economic situations in Russia, yet at the same time, the relatively weak ruble, tempting inbound tourism for the finals.
Michele Pasqui, Senior Analyst – Forecast & Research at STR Analytics, noted this week that “our data shows hotels have benefitted from the FIFA World Cup tournament in Moscow. The 10.6 percent increase in occupancy for the month of June saw occupancy sky rocket to the highest levels for the month since 2004. ADR also benefitted from this demand, up 15.2 percent, growing by a staggering 204 percent. The positive trend seems to have continued into July, according to preliminary figures from STR, which expect that ADR would exceed its level by 216.7 percent. However, occupancy seems to have been more subdued, where we record an increase of 3.4 to 79.2 percent.
“While there is no doubt that mega events are likely to boost demand and ADR, the performance experienced in Moscow is quite exceptional as the two previous World Cups did not achieve such increases, with ADR growing on average of 100 percent in both Rio de Janeiro and Johannesburg. This confirms the solidity of the hotel market in Russia, which has survived the economic embargo of recent years and has now demonstrated that it can continue to thrive internationally.”
Against this backdrop, it got me to thinking, how are revenue managers today effectively pricing key events like the 2018 World Cup, and what innovative new tools can be deployed to optimize even further?
The IDeaS Consulting Services global team works with our clients to help develop people, processes and the use of technology, like our G3 RMS solution. It’s obviously tricky to model events like the World Cup, which, as we’ve seen from the STR data, can provide wildly different results. Repeating events such as Chinese New Year, however, are examples of where good commercial revenue management practices should be observed to maximize revenue opportunities. Sharing strategies recently with my colleague and counterpart in China, Yuanyuan Wang—she pointed out some key data points critical in a recent client project on this subject:
- China 2018 Chinese New Year key tourism destination cities comparable hotel market performance trends analysis
- Attendance growth trend analysis – incorporating analysis to hotel forecast and pricing strategy
- Market Segment performance and strategy – channel strategy impact
- Chinese New Year pricing efficiency evaluation – did we set up the right price at the right time for the targeted peak days?
- Room type performance and strategy analysis
- Hotel cluster peak season revenue strategy – compete with each other or need a unified strategy?
Most revenue managers will claim to have a robust event (revenue) management SOP in place, but are they exploiting all the capabilities of available technology that can help exceed forecasted projections? Some examples include:
Special Events: G3 RMS reviews all past instances of the special event within the last two years to determine the specific impact of the event and select the most appropriate models to use to estimate the future. In addition, G3 RMS assesses price sensitivity for Special Events, and then selects the most appropriate rate plan for the period. Revenue managers are also encouraged to configure pre and post nights to allow the system to apply the complete observed pattern from the past instance to the next repeat event forecast.
“What-If”: Innovative new functionality enables revenue managers to take more informed and detailed revenue projections, anticipating the impact of price change/promotions. Some event periods may require stimulation of business on shoulder/trough nights for example.
Channel Intelligence: IDeaS Business Insights can provide performance and profit analysis for each channel that helps hotels evaluate trends and create an optimal channel optimization plan. This takes on extra significance during critical key event periods. This should also be extended to competitor strategy—is our rate-shopping and demand tracking monitoring acutely tracking our competitor event management tactics?
Forecasting & Pricing by Room Type: Revenue managers today have a great opportunity to apply more price sophistication at key event periods. For example, if we only define the BAR for basic room type and just sell the higher room types according to pre-defined fixed room supplements, the price may exceed the market acceptance. Understanding the demand by room type and pricing based on that demand forecast can really help hotels sell out all room types with the optimal rates during the peak event days.
The list is by no means exhaustive, but following some of these key steps will certainly help mitigate some of the variables and uncertainties that come with optimizing revenue during major events. Right, I’m off to dream about “football coming home” to England and the Qatar 2022 World Cup Finals!
Hey, don’t leave now—the fun is just beginning. Here are more industry insights making the rounds this week:
- Voice Activation – Novelty Gimmick? Think Again: The Oracle Hospitality team examines the role voice-interaction technology might play in the hotel industry of the tomorrow.
- 2018 Hospitality Technology Study Reveals Alignment Between Hoteliers & Suppliers: Researchers at Fuel helped launch a new study that examines perspectives from hoteliers and suppliers on industry technology.
- Top Hotel Marketing Subject Lines of August 2018: Subject lines are tricky. The “professors” at Revinate University have been hard at work to uncover subject line insights to help inspire your next campaigns.
- Why Do Hotels Need BI Tools?: Find out as SnapShot Travel explains what a BI tool is and why it’s a daily essential.
- Total Revenue Forecasting Is Coming…Rome - July 13, 2021
- Can Hotel Revenue Management Ever Satisfy a Finance Leader’s Forecast & Budget Demands? - September 16, 2020
- Bed & Brexit – Can Futurecasting Help Hoteliers Accommodate the UK’s Bumpy Departure? - December 5, 2018
