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Building a Revenue andChannel Culture together



Key ObjectivesBroaden awareness of Revenue Mgt and Business strategiesFocus on the development of critical analysis and strategic thinking skills with afocus on enhancing competitive positioning and driving total revenue growthDevelop influencing behaviours and strategies for planning and preparing fortrade reviews and board reports.Optimise channel contributions through clear understanding of the hotels marketsegmentationIncrease the awareness of all channel distribution points by linking into the salesand marketing function.Develop competencies and skills of revenue champions at hotel levelCommunicate, share and enhance best practice between revenue/channel andhotel

Drive revenue generation through strategic promotions across all 4 channels



Key drivers to achieve our goals

ResearchUnderstanding the business

AnalyseProblem solving & decision makingInnovation

ConvinceLeading & developing peopleImpact & Influence

AdaptabilityExecute

Planning & organisingDrive for results

MeasureTake responsibility

Asses strategy



Course agenda

Market segmentationData Collection & AnalysisForecastingYield management

Channel managementPricing



Market segmentation

What is a market segment – Dividing a market into dist inct groups of buyers who might requireseparate products, have different needs or show different

behaviour Each property m ay have different market segments depending on their foc us or lo cation.

City hotel Corporate

BTALeisureIndividuals

Resort HotelLeisureIndividualsTravel AgentsCorporate

Conference hotelCorporateConference organisers

Long stay hotelsCorporateBTA

Transient hotels

CorporateleisureIndividuals



African Sun’s Mkt Segementation African Sun/Staff Business Travel AgentsConference organisersCorporateGovernment

LeisureIndividualNon-Government OrganizationsSporting groupTour Operators

Associations



Benefits of accurate market segmentation

Accurate forecasting

Optimising market mix

Developing targeted strategies to attract specific customers

Effective and targeted pricing strategies



Data collection

Where does one look to extract the information needed tomake an informed decision on generating increasedrevenues

PMSMarket share reportsMarket trendsEvents calendar Sales reportsLocal news papers

Why do we need to analyse data out side of what the PMS cangive us ?



Key metrics associated to room revenue

Occupancy Average daily rateRevPar



Quick calculation

Revpar / ADR = Occ%

Revpar / Occ = ADR

ADR X Occ = Revpar

Which of the above is the most s ignificant measurement forRM to consider ?



RevPar

Revenue per available room

Gives a measure of performance against all available rooms asopposed to just sold rooms

A key measure in ensuring that pricing and occupancy decisionsgive the best possible returnRate reduction decisions to drive occupancy must be consideredvery carefully – increased occupancy carries increased costs

Increased price can result in a drop in occupancy but also give abetter RevPar result



Key performance indicators

MPI – Market penetration indexHow our occupancy compares to our competitive set

ARI – Average rate index

How our ADR compares to our competitive set

RGI – Revenue generated Index

How our RevPar compares to our competitive set



Market Penetration Index

Our occFormula =

Market occ

Hotel MarketExample Occ 84.1% 77.1%

MPI 1.09





Revenue Generated Index - RGI

Our RevPar Formula = -----------------

Market RevPar

Hotel MarketExample RevPar $60.55 $63.17

RGI 0.959



Monthly Performance Data

Job Number: 957984 Staff: Dave Bunyard Created: July 30, 2009 Currency: ZAR - South African Rands

Date Index RankMy Prop Comp Set My Prop Comp Set

Jan 2009 27.1 48.7 47.1 60.8 55.7 5 of 5Feb 2009 44.8 65.8 64.7 85.6 68.0 5 of 5Mar 2009 36.8 64.3 60.6 76.4 57.3 5 of 5 Apr 2009 35.5 56.4 61.8 71.0 63.0 5 of 5May 2009 40.0 66.2 53.7 70.6 60.4 5 of 5Jun 2009 62.7 73.4 72.3 70.5 85.4 4 of 5

Date Index Rank

My Prop Comp Set My Prop Comp Set

Jan 2009 1,477.43 1,597.50 1,353.60 1,413.37 92.5 5 of 5Feb 2009 1,654.56 1,714.76 1,621.49 1,623.36 96.5 4 of 5Mar 2009 1,531.95 1,685.61 1,547.68 1,533.24 90.9 5 of 5 Apr 2009 1,417.14 1,644.37 1,562.50 1,554.71 86.2 5 of 5

May 2009 1,411.16 1,762.26 1,549.00 1,578.67 80.1 5 of 5Jun 2009 1,431.85 1,910.03 1,561.15 1,602.23 75.0 5 of 5

Date Index RankMy Prop Comp Set My Prop Comp Set

Jan 2009 400.21 777.43 637.02 858.83 51.5 5 of 5Feb 2009 740.67 1,128.09 1,048.57 1,389.80 65.7 5 of 5Mar 2009 564.36 1,083.65 937.64 1,171.51 52.1 5 of 5 Apr 2009 503.48 927.09 966.04 1,104.13 54.3 5 of 5May 2009 564.46 1,167.38 831.66 1,115.04 48.4 5 of 5Jun 2009 897.20 1,401.98 1,129.16 1,128.85 64.0 5 of 5

ADR

This Year Last Year

My Property : The Grace In Rosebank #133104

RevPAR

Comp Set: Hyatt Regency Jo hannesbu rg #111222, InterContinental Johann esburg SandtonTow ers #111489, The Michelangelo San dton Squ are #127993, African Prid e Melrose Arch

Hotel #137159, Excludes Subject Property

This Year Last Year Occupancy

This Year Last Year



Other revenues

SpendPAR

RevPOSRevPasRevPASH

SpendPAR

Total in-house guest / Total Rooms = SpendPARRevenue Available

$12,375 / 100 = $123.75

This excludes events, banqueting & conferencing revenues



RevPos & RevPas

RevPos – Revenue per occupied space (sq m)RevPas – Revenue per available space (sq m)

Total revenueRevPos = -------------------

Occupied square meter

Total RevenueRevPas = -------------------

Available square meter



Teak 0 42.84 0 85.68 27-Jul Acacia 30 8550 8550 2 28.56 57.12 57.12 100% R 149.68 R 149.68

Baobab 35 9975 9975 2 198 396 396 100% R 25.19 R 25.19Boardroom 0 36.69 0 73.38 Mahogany 9 315 315 2 28.22 56.44 56.44 100% R 5.58 R 5.58Seringa 0 138.84 0 277.68 Teak 0 42.84 0 85.68

Jul Acacia 113 39170 1500 1230 41900 26 28.56 742.56 1771 42% R 56.43 R 23.66Baobab 346 73280 4500 14300 92080 20 198 3960 12276 32% R 23.25 R 7.50Boardroom 4 0 0 180 180 2 36.69 73.38 2275 3% R 2.45 R 0.08Mahogany 115 35350 1500 1605 38455 32 28.22 903.04 1750 52% R 42.58 R 21.98Seringa 259 60140 15000 16425 91565 22 138.84 3054.48 8608 35% R 29.98 R 10.64Teak 161 62225 0 8000 70225 26 42.84 1113.84 2656 42% R 63.05 R 26.44

Date Room No of Pax Total DCP Venue hire Extras Total Rev No of Periods Square meters Occupied Available % Occ RevPOS RevPASTotal 998 270165 22500 41740 334405 128 473.15 9847.3 29335.3 34% R 33.96 R 11.40

Cost per square meter

Date Room Total Cost Square meters Occupied Available % Occ RevPOS RevPASJuly Total 257000 0 9847.3 29335 34% R 26.10 R 8.76

Profit per square meter

Date Room uare mete Occupied Available RevPOS RevPASJuly Total 0 9847 29335 R 7.86 R 2.64

Example of Hotel C&B RevPos & RevPas



RevPash

RevPash – Revenue per available seat hour

Benchmark to establish revenue generation for food and beverageoutlets

Takes into account perishable products of a seat and outletopening times

Total outlet / Nr of available / hrs open = RevPASHRevenue seats

$13,000 / 100 / 10 = 13



Variable V’s Fixed costs

Variable costs – a cost that is proportional to the volume of theinput produced

Examples:-Guest suppliesUtilities

Food & Beverages

Fixed costs – A periodic charge that does not vary with businessvolumes

Examples Admin & GeneralSales and MarketingSalary burden



Gross operating profit

GOP – Calculation Increase increase ADR Occ

Total Hotel Rev $15,000 $18,000 $18,000 _

Variable costs $4,500 $4,500 $5,800 _

Fixed Costs $5,000 $5,000 $5,000

=

GOP $5,500 or $8,500 or $7,20037% margin 47% margin 40% margin



Forecasting

Forecasting should drive at least 50% of your actions

Forecasting Revenue MathMarket segmentation

Channel Man

Pricing

Yield Man



What is forecasting

Estimate the company’s share of market demand based on defined marketsegments and an assumed marketing environment

Predicting market demandIn each market segment

Based on predicted market conditions

Forecasting



Building blocks to achieve accurate rooms forecast

Opportunity/gaps/peaks Short Term In system No shows

Yield Restrictions Long term Booking Pace Cancellations

Financial performance Historical Data Day of week Budgets

Demand to come Room nights Market seg Patterns/trend

Pricing Average Rate Length of stay Tentative/definite

Overbooking Revenue Uncertainty Groups Wash down

Market conditions Unconstrained Special Events Capacity

Forecasting

Forecasting



Organizing the data

Questions & Short term – Long term – Uncertainty – Budget – Market condition

Hypothesis

Data Collection In system – cancellations – No shows – Historical data – Market segRoom nights – Average Rate – Length of stay – Revenue – Capacity

Data Day of week – Patterns/Trends – Booking Pace – lead time

Organization

Data Analysis Special Events – unconstrained – Group Wash – Tentative/Definite – Demand

Recommendations & Opportunity/Gaps/Peaks – Financial performance

Decisions

Take Action Yield Restrictions – Pricing - Overbooked

Forecasting

Forecasting



Organizing Data – continued

How best can we display the data so that it shows, patterns, trends, seasonsand events.

Graphs and simple tables tend to work better than detailed figures. Summaries

are essential and gives the reader a brief overview if they do not have thetime to go further.

Always take into consideration that the reader is extremely busy and has verylittle time.

g

Forecasting



Organising Data – continued

g

Pace report

0

10

20

30

40

50

60

70

80

90

100



Pick-up report

Forecasting



Data Analysis

Short Range ForecastingPick upPaceDemand

Pick Up – What bookings are in the system now for a future date/period

Pace – What is the current trend or lead-in time

Demand – What is the future demand for accommodation

Forecasting



Forecasting

Group forecastingTransient forecasting

Groups

Historical utilisationBooking paceSales estimatesType of groupWash down

TransientHistoricalBooking paceSales eventsPublic holidays



Action Plan

Low Demand

Pursue market shareKeep discount categories openSell value and benefitsIncrease allotment allocationsTarget email blastsRemove stay restrictionsInvolve all staff

High Demand

Manage demand to optimise rev.Raise prices to be consistent withcompetitorsControl room rates and availabilitythrough rate restrict ionsFocus on other revenuesUp-sellTighten guarantees and cancellationpolicies

Apply ful l pri ce to sui tes and execut iveroomsInvolve all staff



Yield Management

Definition of yield management

Yield management techniques

Impact of yield management

Displacement of costs and effective negotiations.

Yield Management



Definition of yield management

The process of managing customer demand through the control ofdifferential pricing and inventory allocation in each price category in

order to maximise gross revenue

Managing customer demandDifferential pricingInventory allocationMaximise gross revenue

Yield Management



Revenue cycle

Create demand

Reservations request

GuestRepeat customers

Retain demand

Manage demandForecast demand

Strategic Planning & Action

Yield Management

Yield Management



How can we measure yield management

Occupancy % X ADR = RevPar

Volume X Unit price

= Profits

Yield Management



How to drive yield

Automated Revenue Management systems

Length of stay (LOS)

Displacement costs analysis

Overbooking



Yield Management



How do you control Length Of Stay

You need a good unconstrained forecast

Understand your length of stay profile

Do not wait until you have 90% occupancy on the books

Use minimum length of stay rather than closing out lower rates

Do not over use minimum length of stay – we still need to fill the peak nights

Yield Management



40100 120 100

30

Mon Tue Wed Thu Fri

100rooms

Yield Management



40 70100

6030

Mon Tue Wed Thu Fri

100rooms

Yield Management



LRA ?

What is Last Room Available

If the Best Available Rate (BAR) is available for a standard room type, for a given lengthof stay, the client’s negotiated rate for that room type will also be available for the

same length of stay.

If the BAR for a standard room is not available for the given length of stay, but isavailable for the next negotiated room type, then the client’s available rate for that

room type will also be offered

The clients negotiated rate is subject to black out dates as defined by the RFP

Yield Management



Displacement Cost Analysis

This refers to contracted business

Groups

Corporate

Airlines

Tour Series

One must be aware of how much business is contracted at a lower thanaverage rate and then manage how much of that business is booked over

peak times/days

Yield Management



Overbooking

Internal factorsNo ShowsCancellationsUnexpected departuresStay overs

Human error

External factorsSeason or day of weekSupply and demand

City wide conferencing or events

Yield Management



Remember the Revenue cycle

Create demand

Reservations request

GuestRepeat customers

Retain demand

Manage demandCreate optimaldemand

Strategic Planning & Action

Revenue Management

Influence Strategic Actions -Make recommendations on businessmix to create optimal demand at the

right tim e based on forecasts.



Channel Distribution



Channel Management

Channel Distribution brings together our reservation channels, distribution strategy andchannel operations so we can simplify the way customers get to our brands and our

brands get to market.

Channel



How do customers book

Direct with the Hotel

Central Reservations Office

G lobal Distribution S ystems

Third P arty Intermediaries

Online Distribution





Channel



Global Distribution Systems - GDS

Customer

AmadeusGalileo

Worldspan

Saber

Pegasusswitch

Rezviewor

Utell

Brilliant

Who uses GDS

Contracted & non contracted companiesLeisure

ConsortiaTravel Management companies

Business Travel Agencies

Thi d P t I t di i TPIChannel



Third Party Intermediaries - TPI

Customer Brilliant WWWPegasusswitch

OR

PACROor

HACRO

Expedia

Orbitz

Priceline

Venere

Lastminute

Who uses TPI

Non contracted companies – once off LeisureTransient

Channel



Online Distribution

Customer WWWBrilliant

Who uses direct channel

All non contracted customers

Channel



Cost per channel

CHANNEL RVNG RCVL RCVL UTELL

Monthly retainer 120.00 150.00

GDS – Rack 13.84 6% 6.66

GDS – Neg 11.84 3% 6.66

Online 5.50

TPI 3.50 +10% 3.55

PACRO 4.00

UTELL – CRO 10%

Channel



Key learning from Channel

Manage rates

Maintain parity where possible

Different channels attract different market segments

Instant results

Content management

Keep inventory open

Global internet access

ddChannel



Adding New Properties

Register with Utell and Pegasus or both

Load property information

On-boarding information

Wait for Utell or Pegasus to open inventory and rates in Rezview or Netrez

Start booking

PricingPricing



Pricing

A Mckinsey & Ass Survey conducted amongst 2,400 companies acrossa range of industries showed the impact on the bottom line of variousbusiness initiatives

A 1% reduction in fixed costs improves profitability by 2.3 %

A 1 % increase in volumes increase profit by 3.3 % A 1 % reduction in variable costs increases profit by 7.8% A 1 % increase in pricing can boost profitability by 11%

Price right and you will achieve the ultimate goal

Increase ADR and bank your RevPar

How easy is it to raise your pricesPricing



How easy is it to raise your prices

Realising price increases is not as easy as we’d like it to be

A 2 litre of Coke often has the same price tag as it did in 2005

Laptop prices are at low low prices

Airline tickets can cost up to 25% less than they did 5 years ago

P i i i i d id blPricing



Pricing is an industry wide problem

Consumers are confused with irrational and overwhelming amounts ofchoice72% of hotel guests agree that they like to shop aroundHotels need to sell on benefits and confidence that the guest is gettingthe best deal – there should be no elements of riskConsumers know and will accept fences, Fences should become partof the overall value proposition

lPricing



5 pricing principles

Pricing is approached holistically with supportive segment structuresOffer constrained set of differentials & clearly target products using the BARas the benchmarkCustomers will have to do something or give away something to get adiscountProduct messages must be clear, descriptive, consistent and inline withbrand positioningPrice points are based on marketplace demands and compressed toencourage buy up

Questions to ask when considering a price changePricing



Questions to ask when considering a price change

ProductIs this product different in the customers eyesIf discounting, what specific behaviours does this customer exhibit thatwill allow me to target this specific customer and preventcannibalization

PlaceHow does this impact each distribution channel and the customers thatuse them

PriceHow will the price relate to the benchmark and other price pointsIs it compressed and rational in relation to other price pointsHow price sensitive is your target market

PromotionHow do you intend on promoting the value of this product to customersHow will your message clearly, rationally and consistently identify thedifferences between products, both physically and in terms of sale

Pricing



African Sun’s Pricing policy 2010

100% 100%

> 10%

>15%

> 20%

> 30% > 30%

> 40% > 35 - 40%

> 35 - 45%

Rate strategy for African Sun

Tactical

Cost per room

Negotiated - corp

Weekend

leisure STO

Series/Groups

Corporate Hotel Leisure/Resort Hotel

RACKRACK

Corporate

BTA B A R

Pricing



Rate strategy guidelines.

Rate Rate description Rate guidelines Marketsegments Definition Fences Channel Risks

RackHighest published rate.Acts as a benchmark forother rates

100 % - Full published rate All markets- Should always be last roomavailable-

No fences andLRA

AllAlways ensure that this israte managed whenoccupancies start to fall

Bestavailable rate

The lowest unrestrictedrate. Public rate availablewhich can vary based ondemand

High BAR – 100%

Mid BAR – 80%

Low BAR – 70%All bookers

Should never be closed outunless the hotel is full. Ratecan fluctuate based ondemand.

No fences andLRA All

BAR is a flexible rate soneeds to be managed basedon occupancies and shouldnever be lower thancontracted or negotiated rates

Corporate

Standard corporate ratewith no restrictions.Available to all non-negotiated corporateclients.

90 % - commissionableIndividualCorporate clients –no contracts

Provides hotel with a rate tooffer all corporate clients withlow volumes and non-contracted business

No fencesDIRECTPACROGDS

No real risks – just needs to be managed

BTA ratesContracted rates with themajor BTA,s andconsortia.

Min 80 % - 75% All majorconsortia, BTA,sand TMC.

Contracted on an annual bases through RFP,s orcontracted separately based

on demand. Always liaisewith head office beforeentering into an agreement

No Fences and

LRA

GDSPACRODIRECT

These rates are fixed for theyear and cannot be re-negotiated once contractedand the rates must berespected

Corp NegotiatedRates

Contracted rates betweenhotel/African Sun headoffice and a multi-national corporation, egIBM.

Rate can vary based on volume.Generally 10-20% off BTA rate

Multi-nationalcorporation orglobal companywith managedaccounts

Enables the hotels and headoffice to negotiate rates andload these on the GDS

No fences andLRA

GDSDIRECTPACRO

These rates are fixed for theyear and cannot be re-negotiated once contracted.Sometimes they arecommissionable checkcontracts.

Weekendrates

Hotel specific with ahigh corporate marketsegment

Demand dependant and can varydependent of property but should

be between 75 & 85%

Leisure anddiscretionalcorporate business.

To drive volumes overweekends

Fences –restricted toFriday andSaturday nightsonly

All

Leisure rates

Preferred

Group /Series

Tour operator rates 80 – 70% depending on volume business and type of operator

Tour operatorswith leisure

business

To incentives the touroperator to package the hotelfor a wider distributionthrough their supply chain

No Fences ifresort hotel, if notthen bookingsrestricted to non-

peak days

PACRODIRECT

Always be aware of leisure business taking over your peak midweek period, Tue –Thurs.

Tactical A promotional rate that Drive volumes over distressed Discretional Dependent on low season Must have fences Online Maintain fences and add

Managing Channel & Revenue



Managing Channel & Revenue

ResearchUnderstanding the business

AnalyseProblem solving & decision makingInnovation

Convince Leading & developing peopleImpact & Influence

AdaptabilityExecute

Planning & organising

Drive for resultsMeasureTake responsibility

Asses strategy



The End

Well done you have now completed your first

phase Revenue and Channel trainingmodule.

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