Growing Hotel Revenue

Written by Norm Leslie
CEO & President
National Hospitality Services

Many consider Revenue the outcome of a mysterious array of happenings that somehow, someway end up showing in the till.  Sure, you may have some general concepts as to what is happening and a pretty good idea of those “big events” that impact your city and hotel but – do you think of Revenue more as a mystery or a science?  Your answer may determine whether your hotel investment (be it a career, owner or lender) is growing or in jeopardy.

So, how much value are you missing out on by not managing your Revenue?  Let’s assume that you have a competitive hotel (brand, condition and location) and that it is generating $2,000,000 in revenue and has a 90% RevPAR Index.  You are short $222,000 in Revenue to get to the average of your competitive set!  Assuming a 35% flow-through of this additional Revenue, you are missing out on about $78,000 a year in cash flow.  What’s worse?  You are likely to see a lower value on your  hotel – somewhere between $800,000 and $1,000,000 lower!

A management company should manage Revenue like a maestro conducts a symphony.  The strings, woodwinds and brass replaced with the Sales Department, Revenue Management and Media.  Each working together to deliver a purposeful and wonderful result.  The Percussion section is the management team providing the steady oversight and adjustments to keep the music playing.

With Sales Department strategy one must be cognizant of; not just what the department must produce but also how to produce it.  Often, Sales Representatives are given goals with no practical direction or activities as to how to achieve these goals.  Absent these basics, a Sales Representative is severely limited in meeting his/her goals. 

We utilize a number of methods & models to set meaningful goals and follow up with weekly and monthly performance.  No matter what system is used, be sure that your team is acutely aware of the WHAT their goals are and HOW to meet those goals. Then, track the weekly activities.  This process should in and of itself should improve hotel Revenue.

Revenue Management has revolutionized the industry over the last decade.  Use best in class methods and the impact to Revenue can be profound.  Pretend Revenue Management is for the big boys and your hotel will languish.

Today, Revenue Management systems allow us to evaluate absorption, track competitor rates & inventory and keep a vigilant eye for high volume dates.  We have markets where we modify rates and plans several times a week and even daily.  This allows us to get the highest average daily rate while jealously protecting occupancy. 

Media is an important component to driving Revenue.  We utilize media primarily to drive revenue from the leisure segment.  Purchasing online ads (through OTAs, Guest Rank and Social Media venues) are an efficient method of attracting leisure travelers.  In certain markets, we will drive winter room nights by utilizing more traditional media (Television, Billboards) to drive local leisure traffic.   Keep an eye on your ROI – as it’s easy to get into a trap with Media where you are simply exchanging dollars.

While the actions of the sales department, revenue management and marketing plan should be very impactful, one must be acutely aware of having the best available staff.  Meaningful performance compensation can translate to great service to retain the business you have worked so hard to get.  We obsess about this element, recognizing guests and organizing activities that build an affinity, all the while working hand & glove with the sales effort.

Even if your hotel has a 100% RevPAR Index – ask yourself, should you be performing better than just average?  Take steps to get the most of your hotel by lifting the Mystery of Revenue and implement the basics to move your investment to the next level.

Copyright National Hospitality Services 2015