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Segmentation and the Changing Face of Revenue Profit Optimization

May 25, 2016 Business News No Comments Email Email

At the recent HSMAI Asia Pacific Revenue Optimization Conference (ROC), leading industry figures came together to discuss the state of the industry today and where they expect it to go into the future.

Some key outcomes from the conference underscored the importance of segmentation in the changing face of revenue management in hotels:

  • There’s a big shift occurring between where bookings are derived from as there is a move away from corporate contracts towards booking through online travel agencies (OTAs)
  • There needs to be a greater investment in marketing and digital; resources should be redeployed from sales into these areas
  • With a change in the landscape of distribution, should also come a focus on talent. People recruited into hotel revenue management are paid 3x less than what other industries pay their high performers

“We need more investment into revenue management across the board. The smaller hotels, and specific regions, are not yet investing in revenue management which seems to reside in the large organization, who are making better returns from Revenue Management,” said Jeroen Vaassen, CRME, Senior Director-Revenue Management APAC Starwood Hotels & Resorts Inc and an HSMAI Revenue Advisory Board Member.

He added, “If you adjust your organization to use the host of new analytical tools available, you will see better results in profitability.”

A panel discussion on advances in total profit optimization yielded some interesting insights:

  • Measuring the total value of the guest produces far higher revenue opportunities than by measuring the guest value by room night profitability
  • Revenue management is becoming an integral part of every day business at a hotel, from the front desk to the sales desk; and
  • Driving maximum value from a customer is about selecting the customer segments that are more likely to spend money at the hotel, on extras like spa treatments and food & beverage, rather than outside the hotel.

The moderator of the session, Kelly McGuire, Vice President, Analytics for Wyndham Destination Network kick-started the session by provoking the panelists that two years ago they had said at the same conference, in 2014, “Total Hotel Profit Optimization is here, and this time we mean it.”

Cheng Limin, Director, Revenue Management and Distribution and Marina Bay Sands (MBS) when discussing measuring and optimizing guest profitability said, “In 2013, we started measuring Total Guest Value, that is room profit together with ancillary profit, and mapped that out against the market segment and source market of that guest. It has been so successful that we can’t imagine anyone not doing it.”

By noting the segments and source markets that were most profitable, MBS’ Revenue Management team focused their marketing teams on the right source markets to go after Total Profit Value. Every six months they reevaluate their matrix to make sure they are on the right track.

Building bridges between departments was the key to success with revenue management. Cheng says, “It takes evangelizing constantly, breaking down and talking about the perception of the source markets and how you could use that to plan sales targets in an actionable way.”

She added, “In the end, once the various departments understand how Total Guest Value (TGV) translates into making more money, they got on board with the idea.”

Kathrin Bhalla, Director, Global Solutions Engineering from IDeaS Revenue Solutions says that to make revenue management work effectively, you also need to educate staff to enter data as it occurs. “We found instances where staff were entering all the tickets at the end of a shift, say breakfast time, so we’d suddenly get this spike in sales at the end of their shift which made it impossible to know when our peak periods were. We had to teach them to enter it as it happened so that we could plan for the spikes and understand when the highest demand in the restaurant was occurring.”

James Lee, Director, Financial Services at The South Beach emphasized the need to tap into the present economy that is driving innovation through startup technology companies. He challenged participants, “Are we collaborating enough to tap into new platforms?”

Making it work from the customer point of view means that you need to change your perspective on the situation, according to Jeanette Ho, Vice President of Revenue Management and Customer Analytics at Fairmont Raffles Hotels International (FRHI).

“In May, it is a low period at our property in the Maldives,” says Ho. “Yet we attracted a lot of honeymoon couples from Korea. We embraced the business, but these honeymooners were not spending any additional revenue at the hotel once the package was bought.”

“Through research, we learned the package was being bought by the bridal couple’s families, so, instead of offering discounts we put together value packages that included ancillary services such as spa packages and priced the packages at US$1500, $2500 and $3500 instead.”

To continue driving Revenue Management as a discipline forward, hotel managers need to better reward their high achievers; look for and embrace opportunities that use analytical tools and look at the opportunities that are in front of you to maximize profitability.

HSMAI Revenue Optimization Conference ROC

The HSMAI Revenue Optimization Conference(ROC), held annually in Singapore and in 2016, is being scheduled in Bangkok as well, as part of the Digital Travel Exchange Asia series of events. ROC is the industry’s essential resource for the information and best practices your hotel needs to master Revenue, Distribution & Pricing and help you deliver the highest return. 

The program is created by HSMAI’s Revenue Advisory Board, which comprises of the heads of Revenue & Distribution for local and global brands in Asia Pacific.  The program is designed to bring you up to speed on the latest trends, and issues and help you plan your revenue and distribution strategy.   

The HSMAI difference: We’re non-profit, we are hoteliers creating a program for hoteliers. This is an event organised by Hospitality Sales & Marketing Association International – Asia Pacific Region (HSMAI). 

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