hsmai.org If you need technical assistance with the webcast, contact us at [email protected]and we will assist you immediately. “Maximizing Revenue in a Downturn” webinar will be begin shortly. hsmai.org “Maximizing Revenue in a Downturn” Tuesday, December 2, 2008 2 – 3:30 p.m. EST presented as part of the series “Leading Through the Economic Crisis and Preparing for Recovery” by Hospitality Sales and Marketing Association International (HSMAI) 2
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“Maximizing Revenue in a Downturn”webinar
will be begin shortly.
hsmai.org
“Maximizing Revenue in a Downturn”
Tuesday, December 2, 2008
2 – 3:30 p.m. EST
presented as part of the series
“Leading Through the Economic Crisis and Preparing for Recovery”
Leadership Synergies, LLC is a company that specializes in sales strategy consulting,
sales training and sales audits.
Before forming Leadership Synergies, John Parke worked for Marriott International for more than 18 years, most recently as
Vice President of the Global Account Sales Organization. In that capacity, he was responsible for overseeing more than 200 senior sales executives and $1.3 billion of annual revenues. Under Mr. Parke's leadership, the Marriott sales force was rated Number 1 by Sales & Marketing Magazine for 3 consecutive years.
Mr. Parke was profiled in the March 2004 and June 2007 issues of Selling Power Magazine.
Mr. Parke is a visiting lecturer at Cornell University and teaches the Sales and Marketing Management program.
Mr. Parke is a frequent public speaker on sales cultures, organizational branding, and personal branding. He has published articles in Velocity (Strategic Account management Association) Board Member (Center for Nonprofit Boards), Executive Update (American Society of Association Executives), The Meeting Professional (Meeting Professionals International), Convene (Professional Convention management Association) and CMP Update (Certified Meeting Professionals).
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HSMAI Alliance Partner
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HSMAI Alliance Partner
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POLL QUESTION #1
How many people are participating in
this webinar at your location today?
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� 8 or more
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Program Goals
This session will help you address:
� Implications for revenue management strategies
� The decisions you make today that will shape the profitability of your business in the next 1-3 years
� How to manage owners’expectations when the demand falls
� How to manage customers that expect more negotiating leverage
Dr. Bill Carroll is a Senior Lecturer at the School of Hotel Administration at Cornell University. He teaches courses in economics, yield management, pricings and marketing distribution.
He is also CEO of Marketing Economics, a consulting firm specializing in travel industry pricing, distribution, yield management and strategic planning. Dr. Carroll holds a B.A. degree in economics from Rutgers, an M.S. in labor studies from the University of Massachusetts, and a Ph.D. in economics from Penn State.
As CEO of Marketing Economics, Dr Carroll works with a variety of clients across the travel industry including global distribution systems, hotel service companies and travel intermediaries. He also works closely with PhoCusWright, Inc. a travel industry research, consulting and publishing company where he has written a number of reports and articles. His most recent reports covered the evolution of hotel distribution and its impact on major chains and intermediaries.
For over 25 years Dr. Carroll held a variety of senior positions in the travel industry:
•Division Vice President for Global Marketing Planning at Hertz where he was responsible for global pricing, yield management, marketing information systems, and counter sales. •Global Vice President for Reed Elsevier’s Travel Group which included responsibility for Travel Weekly, the Hotel and Travel Index, the Official Hotel Guide, and the Official Meetings and Facilities Guide. •Assistant Professor of Economics at Drew University where he taught courses in econometrics,
public finance, labor and environmental economics.
Bonnie Buckhiester is the principal of Buckhiester Management USA Inc.,
the leading Revenue Management training and consulting firm in North America for the hospitalityindustry. Founded in 1995, now with offices in Seattle, Vancouver and Washington, DC, Buckhiester Management is the creator of REVRoadMap®,
a proprietary Revenue Management (RM) business process designed to enable clients to develop RM as a core competency with full integration of both strategic and tactical skills.
� This process is supported by REVolution®, a one-of-a-kind comprehensive set of practical Revenue Management decision support tools, interactive workshops and coaching sessions for Revenue Managers and Yield Teams. This “toolkit” is made up of easy-to-use resources designed to guide users through the most critical components of RM in both rooms and food and beverage. It offers a perfect bridge between common practices and high-tech solutions.
� With this proprietary approach and hands-on toolkit, Buckhiester Management offers RM development at all levels focusing on practical application rather than theory. Buckhiester’s unique processes have yielded extraordinary incremental revenue levels for over 600 hotels and resorts in 20 countries, with ROI results typically less than 8 weeks.
� Ms. Buckhiester’s career in travel, tourism and hospitality spans over 30 years including positions as Senior Vice President, Operations for a major North American hotel REIT; General Manager for two 4½-diamond hotels, and General Manager Operations for a major tour operator. Her diverse product knowledge of hotel, tour, cruise, air, rail and car rental inventories offers a unique cross-fertilization of industry strategies.
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PanelistDan KowalewskiVice President, Revenue Management SystemsWyndham Hotel [email protected]
Dan Kowalewski oversees Wyndham Hotel Group’s revenue management services function
including pricing strategy, policies, inventory and rate management best practices, revenue management technology and delivery of centralized revenue management services to its portfolio of managed and franchised hotels globally. He also oversees Wyndham Hotel Group’s information services function which supports the performance reporting and business intelligence needs of WHG’sdepartments.
�He previously was a consulting executive in Accenture’s Travel Services Strategy practice in Reston, Va., where he focused on defining and implementing operating models and technology strategies in the areas of reservations, distribution and revenue management.
�From 1999 to 2001, Kowalewski served LEAPNET, a start-up professional services firm in Chicago, as a vice president and director responsible for business development, daily operations management, project delivery, methodology design, personnel management and overall client satisfaction.
�His experience crosses many segments of the travel industry including lodging, timeshare, gaming, rental car, tour operator and cruise.
Tom Walker is Managing Director of RoomRevenew, a consulting enterprise focused
on maximizing hotel and casino client revenue through leading revenue managementand sales and marketing practices.
Previously, he has held the positions of:
�Vice President, Revenue Management with Omni Hotels
�Executive Vice President of The Rainmaker Group, responsible for ensuring that clients achieved maximum benefit from their practice of revenue management, whether or not supported by automation.
�Vice president of alliances at Passkey, a firm that specializes in group reservations solutions for meeting planners, convention and visitors bureaus, and hotels.
�Business Consultant & Product Marketing Manager at Aeronomics (later Talus Solutions, then Manugistics), a boutique firm that developed and implemented automated revenue management systems. He led consulting engagements with such firms as Harrah’s Entertainment, Marriott International, Hilton Hotels Corporation, Hyatt Hotels, Omni Hotels, Red Roof Inns, Accor, Preferred andForte, as well as with firms outside the hotel industry.
�11 years with what then was ITT Sheraton Corporation, where he held property level and corporate positions in rooms operations, managed central reservations sales, and served as a national account manager and director of sales and marketing.
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The Economy
• Credit Market Crisis
• Recession Recovery Rebound
• Pessimism Confidence Exuberance
• Cyclical vs. secular trends:
– Rise of the East vs. West
– “Gray” wave
PanelistDr. Bill Caroll
Senior LecturerSchool of Hotel Administration
Cornell University
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The Hospitality Market
• Excess supply: construction properties still in
the pipeline plus lodging alternatives
• First into a downturn and last out in recovery
• Variance in impact:
– Upscale vs. mid-scale
– Business vs. leisure
– Group vs. small group
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Impact on Hospitality Revenue and
Distribution Management
� Demand exceeds supply
� Groups: Cancellations, postponements and a late recovery
� Downgrading:
• Upscale to mid-scale
• Vacation choices: near vs. far & reduced spend
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Impact on Hospitality Revenueand Distribution Management- continued
� Pricing under downward pressure:
� Leisure … more shopping and price sensitivity
� Corporate … more aggressive negotiations
� Groups... more aggressive event planner negotiations
� Increased reliance on OTAs
� Mass market reach
� Media vs. transaction models
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Issues and Opportunities
� Plan for each phase: Recession, Recovery and Rebound (R3)
� Manage costs in the near term
� Preserve price integrity for the long term
� Rightsource IT and marketing rather than just outsource
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Issues and Opportunities
� Peaks still exist, so unmet demand can be shifted
Peak Peak Peak
Unconstrained demand
Yield Managed Capacity
Occupancy
Days
100%
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Issues and Opportunities – continued
� Protect the brand when discounting
� Ad value rather than discount
� Reward the loyal guest; rather than all guests
� Use opacity and packaging
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Issues and Opportunities, continued
� Integrate marketing with yield to optimize promotion and marketing spend
� Make the best from what you get though up-selling and merchandizing
� Negotiate shorter corporate deals to provide flexibility in the recovery
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Total RM -Trends Driving Transition
� Pressure to preserve asset value & increase profitability overall
� Evolution of the Internet (Travel 2.0)
� Supply growth, demand decline
� Technologies convergence
� Technology integration
� Extreme amounts of market
intelligence data available
� Interdependence of disciplines
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PanelistBonnie Buckhiester
President & CEOBuckhiester Management USA, Inc.
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Finding the Most Profitable Guest
Guest A Guest B Guest C Guest D
Room Room Room Room
F&B Outlets F&B Outlets F&B Outlets
F&B Catering F&B Catering
Spa
Retail
Entertainment
Optimize entire asset – think RevPAC!21
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VFR vs. Radar vs. GPS
Navigating with eyes,ears & instinct
…with science
…with satellites
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Reality Check
Revenue Managers spend
98% of their time
on rooms revenue management
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Characteristics of Total RM
� Tracking contribution by segment
� Identifying “net-net” rates
� Tracking/dollarizing upgrades
� Detailed displacement analysis
� Using new metrics
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Displacement Analysis
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Crunch the Numbers
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New Metrics
ROGR – Catering Revenue Per Occupied Group Room
Sample data
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Characteristics of Total RM
� Establishing dynamic transient baselines
� Unconstrained demand forecasting
� Advanced menu engineering
� Emerging participation in F&B benchmark reports
� Capitalizing on Travel 2.0 trends
� Using break even analysis to make pricing decisions
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Break Even Analysis
August 3rd Party IDS $40 Discount
Rooms Sold 315
ADR $239.00 $199.00
Required Revenue to Break Even $75,285
Required Rooms Sold @ New Rate to Break Even
% Increase in Rooms sold to Break Even
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Break Even Analysis
August 3rd Party IDS $40 Discount
Rooms Sold 315
ADR $239.00 $199.00
Required Revenue to Break Even $75,285
Required Rooms Sold @ New Rate to Break Even
378 (+63)
% Increase in Rooms sold to Break Even + 20%
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Break Even Analysis
August 3rd Party IDS $40 Discount
Rooms Sold 315
ADR $239.00 $199.00
Variable Cost $35.00 $35.00
Profit $204.00 $164.00
Required Profit to Break Even $64,260
Required Rooms Sold to Break Even 392 (+77)
% Increase in Rooms Sold to Break Even
+ 24.4%
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Customer Centric Revenue Management
Collaborating with Marketing to Improve Traditional Revenue Management Tactics
� Customer Centric Emphasis
� Analyzing demand streams
PanelistDan Kowalewski
Vice President Revenue Management Services
Wyndham Hotel Group
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The 80/20 Rule of Revenue Management
20% Peak Days
80%
Arrival
Days
Soft Days
What demand to accept/reject?
What demand to stimulate?
Customer Centric Revenue Management Tactics are best defined in
the context of the everyday decisions that revenue managers face.
How should Revenue Management and Marketing collaborate to make each
of these tactics more customer centric?
Availability Decisions
Fenced Rates
Direct Marketing
Today’s Focus
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Analyzing Demand Streams – Fenced Rates
In a down industry cycle greater emphasis is placed on analyzing demand
streams to identify where they are weaker than expected.
Arrival Date
Lead Time
Jan 1
Jan 15
Jan 29
Feb 13
Feb 27
Mar 13
Mar 27
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Fenced Rates
Direct Marketing Promotion
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Fenced Rates – The Customer Centric Issue
Traditional approaches to fencing rates no longer work in the complex
world of electronic distribution.
• Online sites are ideal for tailoring and merchandizing offers
• However, this can also be a challenge if not managed correctly since customers want to know exactly what they are paying for
• They are willing to trade preferences for price if the tradeoffs make sense and are meaningful
• To effectively fence rates in this environment Revenue Management and Marketing must work closely to understand:
• At what price they are willing to make tradeoffs
• What preferences are valued by customer segment
• How should the offer be merchandized across channels
• How preferences align with demand segments
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Customer Centric Fences and Implications
Traditional Fences translate well into Revenue Management Strategies but
Consumers do not always find them meaningful.
• Translates into Pricing Strategy
• Conducive to Inventory Control
• Measureable and Adjustable
• Easily Supported by Technology
• Not Always Clear to Consumer
• Risk of Dilution if Set Wrong
• Clear Value Proposition
• Aligns with Customer Segments
• Unproven – Requires Analysis
• Harder to Implement
• Affiliation
• Loyalty Membership/Level
• Number in Travel Party
• “Green” Room
• “Pure” Room
Customer Centric Fences
• Lead Time
• Stay Dates
• Length of Stay
• Stay Day of Week
• Refund/Cancel
Traditional Fences
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Why is it Important to Collaborate on Direct Marketing Efforts?
Forecasted demand segments by Revenue Management do not map to the
customer segments Marketing uses to reach target customers.
• Travel Occasion (Family Vacation)
• Destination (Beach)
• Feeder Market (East Coast)
• Hobbies / Interests (Volleyball)
• Travel Companion (Children)
• …
How Marketing Segments to Reach Customers
• Lead Time (Days, Weeks,…)
• Booking Pattern (Day of Week)
• Length of Stay (1,3,5 Nights)
• Price Elasticity (High)
• ...
How Revenue Management Forecasts Demand
“We need business on shoulder
days the 4th week of August.“We are running a summer campaign
targeting family beach destinations.”
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Customer Centric Direct Marketing
Through collaboration Revenue Management and Marketing can define more
successful direct marketing campaigns.
Offer
Channel
Creative
List
20%
20%
10%
50%
What drives a successful response?
Source: US Direct Marketing Today
• Designed to stimulate specific demand streams
• Combines consumer and inventory focus
• Distinct from rate strategy or tactics (e.g. Fencing)
• Delivered through a repeatable process
• Fast cycle times
• Effective use of marketing funds
Key Elements of a Customer Centric Direct Marketing Campaign
Key Areas of Collaboration38
Summary
20% Peak
80%
Arrival
Days
Soft
How should Revenue Management and Marketing collaborate to make each
of these tactics more customer centric?
What demand to stimulate?• Ensure fences and promotions are meaningful and rational to customers
• Design programs that stimulate distinct demand streams (fenced versus
promotional rates)
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Blocking & TacklingPanelist
Tom Walker
Managing Director
RoomRevenew
“The application of disciplined tactics that predict consumer behavior at the
micromarket level and optimize product availability and price to maximize revenue growth.”
- Robert G. CrossRevenue Management:
Hardcore Tactics for Market Domination
Revenue Management Defined
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Market (Consumer) Behavior
Sample Demand Curve
0%
20%
40%
60%
80%
100%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Weeks left
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Value Tiers
As demand begins to threaten capacity, lower value customers are progressively restricted until remaining space is available only to highest value customers.
Highest
Lowest
Product Availability Ideal
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Value Tiers
Anticipating strong future demand, lower values are restricted far in advance.
As DOA approaches, demand looks less strong…
…and property retreats progressively to lower prices.
Product Availability in Practice
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Product Availability in Practice
Date of Call Dates Requested
Group Question
Y/N
Hotel Voice Quote Hotel Website Expedia
11/17 1/28 & 29 N $349/$399 $374 $374
11/20 1/28 &29 N $309/$349 or $299/$339 in lesser view
� Mark Tunney, Managing Director, Convention Sales, Chicago Convention & Tourism Bureau
� John Washko, VP of Sales & Marketing, The Broadmoor
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You will also find links to the HSMAI and HSMAI University websites in the LINKS section, should you be interested in more information about the association who presented this webinar today.
