Increasing revpar without sacrificing margins or brand value

Increasing RevPar without sacrificing margins or brand value

Hotels are being pummeled by the economy, and the hospitality industry is suffering in every corner of the globe – what else is new?

In the current climate, most hotel experts are expecting RevPar (revenue per available room) to drop by as much as 11%, perhaps even more. And with occupancy rates already at all-time lows, this isn’t good news for the hotel business. In such a climate, many hoteliers will compete on rate, but this only creates a downward spiral of price competitiveness, and more pain for the long-term growth and sustainability of hotels’ revenues once the economy bounces back.

So how can hotels compete in this weak economy, looking beyond discounts? Is it possible to flourish, even during such a travel slowdown?

The answer is yes. I have seen proper revenue management take a struggling hotel from barely surviving to thriving, even as the recession bites deeper. One Miami-based property was struggling to maintain a 45% occupancy rate. After overhauling its revenue management system, occupancy jumped to 90 to 94%, with an increase in revenues of 70%. Too good to be true? Absolutely not. A fundamental building block of revenue management, RevPar is one of the most important metrics of the hospitality industry and absolutely possible with the right system in place.

For hotels, RevPar is key determinant of profitability. It’s what keeps the doors open, yet many hotels and chains still handle room occupancy and pricing in an old-fashioned and haphazard manner – reactively and rarely scientifically.

Times like these require greater efficiencies in everything from improving customer relationships and boosting loyalty initiatives, to improving direct marketing programs and not cutting back on service. None of these, however, can be sustained without optimising cost centers and profits. And on that basis, effective revenue management becomes an operational imperative, not an option. It’s time for hoteliers to think beyond discounts and so I have created a list of tips on how hotels can increase their RevPar, without sacrificing margins or brand value:

Supercharge your internet sales
Only web-based internet sales can compensate for what has not been sold in advance to fill your hotel. In 2009, the meetings and corporate market is slowing even more so sales efforts should be focused on the internet. This is the channel that discount-hungry travelers are using more and more frequently when booking travel, so it is vital to manage your hotel’s web presence to gain greater visibility and better positioning… which of course, means more sales.

Open your sales office at night
Hotel staff cannot manage Online Travel Agencies (OTA) allotments 24/7. So if you’re not adapting in real-time and making updates as travelers are out there shopping (even internationally) when you’re asleep, you are missing out on valuable RevPar dollars. As supply and demand fluctuate non-stop, you need to automate your pricing at night to increase your hotel’s profitability.

Increase sales by changing your rates more often
Once the OTA allotments are filled, your hotel is closed for business, with no one to reopen the online booking allotment. But as more bookings arrive, hotel rates should successively increase. Many hotels, however, leave money on the table because there is no one to change prices in real-time. In this economic environment where every dollar can make the difference between boom or bust, changing rates only once or twice a day does not make sense, or cents, anymore.

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