Cornell Guest Blog

As a winner of the 2019 IDeaS Cornell Scholarship in the Certificate in Advanced Hospitality Revenue Management: Pricing and Demand Strategies, Junius De Silva, the director of revenue for the Sebel Melbourne Docklands & Residencies in Australia wanted to give back by providing IDeaS an inside peek at life in the revenue management trenches.

Fostering a Culture of Revenue Management

Revenue management has long been considered the “dark science” of hospitality, and revenue managers were looked upon as the “sorcerers” doing their “witchcraft” in a lonely corner of the hotel’s back-office where often no one dared to visit. This sentiment was no different when I walked into my current role two years ago.

Often, I have experienced resistance to revenue strategy that occurs from a lack of knowledge and awareness of the subject matter. My game plan at Sebel was to create a revenue culture within the hotel where all staff members would be equipped to think like a revenue manager.

Being friendly and welcoming everyone into my space initiated a two-way conversation, where most of them felt comfortable and wanted to know more about revenue management. Also, I have shared revenue topics during monthly staff meetings where the revenue presentation is something the staff now looks forward to with enthusiasm. I have seen a positive shift in their mindset and knowledge now that I sometimes get front desk staff saying things to me like that I should increase my rates for a day because a new concert has just been announced.

I firmly believe today’s revenue managers could reduce resistance to their revenue strategy simply by educating the stakeholders of the hotel (e.g., hotel general manager, director of sales, front desk, reservations, etc.). Once they gain knowledge, they will also feel a sense of inclusiveness. The more open and honest the revenue manager is willing to be, the more information can be shared—both ways.

Overbooking has typically been a topic our reservations and front desk staff have dreaded after some bad experiences having to relocate guests in the past. After introducing a manual on overbooking strategy and communicating the benefits of smart overbookings and its advantages, it is now integrated into their daily routines with ease. They now know overbookings do not mean guest relocations but a smart strategy to use the room types with higher demand to drive revenue into the room types with lower demand.

I no longer have resistance and tension from the sales team as we have built a revenue culture where we collaboratively decide whether a piece of business is the right business to accept, such as group inquiries.

Successful Revenue Management Strategies

Pick-Up and Pace by Rate Code and Room Type

Commonly, hotels use “pick up” and “pace” information, which is easier to obtain at the hotel level. However, this does not entirely indicate the real price sensitivity of the guest. Drilling down to the rate code level will indicate more details about what’s pacing ahead or behind.

For example, tracking pace by rate code will reveal trends between the flexible best available rate (BAR) versus the cheaper prepaid rate and enable a clear decision-making process on when to open or close them. You might be able to uncover if your campaign rates are cannibalizing your BAR rates by comparing pace for those rate codes only.

In addition to rate code, I also analyze my pick-up and pace reports at the room-type level. This enables me to understand the price sensitivity of the guests for lead-in versus premium room types. This information assists me in aligning my rate strategies to match the demand for each room type. For instance, price sensitivity for larger, premium room types is low over weekdays and high over weekends. This information is vital when offering a higher rate for lead-in room types over the weekdays and reduce the rate differential of the premium room types, therefore offering a more attractive price over those low-demand weekdays.

Lead Time by Market Segment

Instead of using lead time data at the hotel level, I prefer to use it at a market segment level where I can see the corporate booking window opening at a certain period where they demonstrate price sensitivity within that period.

My leisure/public segment follows a different booking curve where they demonstrate a higher degree of sensitivity for price variations. How well do you know your booking curve and lead-time for each market segment? Does your RMS or PMS provide you that data or do you think you have the ability to model this data in a sensible way?

Market and Competition

The price sensitivity of guests is also influenced by the market and competition. For example, price sensitivity is low when the market is constrained due to a special event such as a concert or sporting event. Guests will be willing to pay a higher price.

At times, my competition reacts to my rate adjustments. This in turn will affect the price sensitivity of my potential guests.

Sharing for the Greater Good

I believe life is a journey of constant learning and the application of that learning. I would like to thank IDeaS and Cornell University for this tremendous opportunity to continue to advance my revenue management knowledge and skillset.

At this stage in my career, I have identified two goals:

Firstly, to become a regional revenue professional who devises a revenue strategy for a cluster of hotels in a given geography. Secondly, and the one I am most passionate about, to make use of that role to contribute to and influence the future of aspiring hospitality revenue managers by sharing my experiences and knowledge.

 

The five-course Certificate in Advanced Hospitality Revenue Management: Pricing and Demand Strategies, developed by Dr. Chris Anderson, revenue management expert and faculty member at Cornell University’s School of Hotel Administration, builds on the fundamental principles of revenue management and provides students with the advanced tools and techniques that guide strategic pricing decisions, set inventory controls, and encourage demand manipulation in a way that not only drives profits, but improves overall organizational performance. Learn more about IDeaS Cornell Scholarship here.

Director of Revenue, The Sebel Melbourne Docklands & Residences