In this guest blog, Patrick Bosworth, co-founder of leading revenue management solution Duetto, whets our appetite for what we can expect from 'Revenue Management and the Connected Customer', as he prepares to present his vision of driving more profitable revenue.
Let’s cut to the chase. 2019 is setting up to be quite a challenging year for the hotel industry, and not least in the UK and Europe, where Brexit looks set to potentially add a further layer of uncertainty. I know it’s early days, but all the indicators point to a bleak outlook when it comes to profitability.
Not what you were wanting to read? Sorry, but forewarned is forearmed.
According to the latest data from STR, Europe continues to struggle when it comes to pricing power. This has proved a challenge since the global economic recession in 2007. Prior to 2008, ADR growth led demand growth, not the other way around. Things change.
Profitability will be dampened because of: new supply, increased running costs and rising distribution costs.
The good news is that revenue growth will remain strong – because demand is strong. CBRE has forecast a revenue increase of between 2% and 3% in 2019.
This means that hoteliers who get strategic can and will see profit margins improve – but you will have to work at it.
How to increase profitability
When it truly comes down to it, there are only two ways to increase profitability: cut costs or drive revenue. As we are seeing, driving revenue through occupancy growth does little for the bottom line, so the only remaining answer is to push rate.
Our mission at Duetto from the beginning has been to help hotels stay innovative in a fast-evolving market and continue to drive rate and profitability. In our experience there are three ways hotels can work towards this:
Work together. Break down departmental silos and make sure your sales, marketing, revenue and operational teams are making coordinated data-based decisions.
Let revenue take the lead. Your revenue team should lead all of the functions related to generating and optimizing demand, including distribution, digital marketing, database/loyalty marketing, sales, etc.
Focus on business mix. Place a focus on optimizing business mix and driving the most profitable business. Look at new ways to drive ADR, such as taking advantage of upselling opportunities and yielding room types appropriately.
Use data to unlock profit
In today’s data-driven age, hotels need to understand how to use the available data to make more profitable decisions. We know Machine Learning can help drive operational efficiencies. Take it further and analytics can help you identify golden opportunities for profit too.
For example, we recently did an analysis with some of our partner hotels in San Francisco. We found that the hotels were making 80% of their revenue on about 30% of their days. This means revenue managers need to trust the data and you need to not be afraid to push your pricing on high-demand days.
Remember: fortune favours the brave.
We are delighted to welcome Patrick to ‘Revenue Management and the Connected Customer' where he will share more of his vision for driving profitability in 2019. Listen, debate and network with industry leaders, as we discuss how customer's increasing demands will shape your revenue agenda in 2019. Conference website here www.opportunity2019.co.uk