PwC Downgrades Hotel Revenue Expectations

Although there are signs of economic recovery as well as indicators that the demand for lodging is going up, PricewaterhouseCoopers placed its expectations downwards. The firm expects that demand for US lodging won’t increase for next year. This spells trouble for hotel revenue managers who are already struggling to breakeven at this stage.

For 2009, PwC projects that revenue per available room (RevPAR) to drop as much as 16.4 percent. Meanwhile, the average daily rate is expected to drop 8.8 percent against the period of 2008. Many already expected a downtrend. However, PwC’s current forecast is bigger than the 16.1 percent and 8.7 percent it projected on September 10.

Both the above-mentioned metrics will move downward until 2010. On the other hand, occupancy rate is expected to recover next year. The increase will not be high though because from an occupancy rate of 55.2 percent for 2009, it might go up to 55.8 percent next year. For hotels to survive or even thrive, many hotel revenue management teams are stepping up their online initiatives.

In addition, many are trying to eat up the market share of their competitors. Getting hospitality revenue management software that can predict demand can also boost profitability within the travel industry. Software programs such as RevPAR Guru can help greatly in this regard because it has a variety of functions.
According to Scott Berman from PwC, “To what degree the industry experience recovery is predicted on an improving economy, which facilitates lodging demand growth and operator’s abilities to achieve higher pricing.”

Negotiating Next Year’s Rates: What is to be expected?

Within the hospitality industry, a lot of eyes are looking into what will be accomplished by travel management companies as they negotiate with airlines and hotels on behalf of their corporate clients. This negotiation is an annual process; it encountered some troubles last year as the economy collapsed and dragged down hospitality revenue management with it.

The question in everyone’s mind is how low will the hotels are willing to go and whether these rates will stick throughout the year no matter the economic conditions. It should be noted that the rates were renegotiated many times over last year because of economic instability. At the moment, it is expected that travel management companies are at an advantage over hotels.

Because there is huge inventory within the hotel revenue management field, many yield managers are willing to drive the price down. There is a lot more supply than demand in a significant number of destinations. However, travel management companies might not have as much luck in dealing with airlines. This is because carriers can dramatically cut back on capacity easily. In fact, a lot of American airlines have already done so leaving travel companies with little wiggle room.

Some expects that when it comes down to it, travel management companies may get certain allocation for upgrades and frequent-flier programs. Waiving the fees for baggage and availing of more free services may also be possible. No matter what the incentives are though, the fact remains that too few people are traveling because of financial difficulties.

Corporations are still cutting back on travel expenditure and will continue to do so for some time. Yield management strategies have no room for mistakes or any other errors because the strategy can either improve hotel sales or drive it into the red. The hotel revenue management strategy needs to be planned carefully for it to succeed.

Digital Media: How It Affects the Hotel Industry

If there is a time when the impact of digital media is felt the most, it is now. With the decline in the economy, the popularity of online travel bookings, and the rise of social media, 2010 is bound to shape customer behavior and how they utilize new technologies. Hotel revenue management teams need to be aware of these changes in order to survive and compete in today’s dynamic environment. Among the digital trends to be expected include:

Cloud Computing

Literally all techies would have heard about cloud computing right now. If they didn’t, they would still have an idea about what it is. Open source software are generating revenue because of the cloud computing. And as technology giant such as Google, Microsoft, and Yahoo focus more of their efforts into making cloud computing more sophisticated, people will be more inclined to take advantage of services through the internet. Hotels that are ahead of the game can increase RevPAR and improve hotel revenue.

Social Media Replaces Email

Social networking websites such as MySpace and Facebook are replacing personal email as the preferred medium of communication. Messages are transmitted through the “personal message” feature of these sites. This feature is gaining popularity right now because of its ease and convenience. As of right now, there is not yet that much deluge of spam compared to personal email. Plus, people like it because their friends are there with no address book needed.

Mobile Commerce

Mobile commerce has been tantalizing everyone for a long time. Yet, it actually hasn’t reached its full potential yet. Aside from the fact that a lot of people around the world still don’t have access to mobile internet, there is also the issue of ease of use. The latter is being resolved through the development of various mobile applications. Hotels can benefit from this trend and boost profitability if they act early.

Measuring Social Media Effectively for Hotels

Hotel revenue managers seldom measure the effects of social media, if at all. Most are too focused on updating themselves about the current economic situation and analyzing how this will affect demand. While these tasks are important, it is also critical to realize that social media is playing an increasing role in determining the demand for travel, and most importantly the brand image of individual hotels.

Utilizing social media metrics might be a good idea. Right now, all social media platforms have a set of measurements processes or techniques. The number of options available may be confusing for hotel revenue managers. There should be clarity in what should be tracked and measures.

Look Back to The Hotel’s Marketing Purpose – every establishment want to increase hotel sales and improve profitability. But wanting to increase RevPAR is different from actually doing something about it. Know your goals first and then other factors will follow.

Determine What Metrics can Measure Success – customer behavior and preferences should be understood and met. Once you have determined the goal of the hotel, whether it is energizing clients or supporting advertising objectives, social media can strengthen a firm’s relationship with the clients. It is important to determine what metrics should be used to track consumers.

Choose the Metric Category – after finding out which metrics should be used to boost profitability for the hotel, specifics need to be known. Within the social platform, yield managers should look at reports that are most important. Facebook and Jive can provide certain information, but it is up to revenue management teams to know which reports are relevant to their needs.

There is no denying that social media is affecting a significant number of travelers therefore the hospitality revenue management is affected as a whole. However, it is also essential to recognize that not all information out there is relevant. Yield managers need to pick and choose which ones are appropriate.

Travel Trends Hotel Revenue Managers Should Watch Out For Part 2

In the previous article, we talked about the first three travel trends that hotel revenue managers need to watch out for. As you may already know, the hotel industry is highly dependent on external socioeconomic factors for its profitability. It is a given then, that to increase hotel sales, it needs to continually adapt to the changing trends in the business environment. Below are more travel trends that are increasingly becoming popular today:

Body Scanners
Due to the threat of terrorism, a lot of countries are implementing stricter security measures. One example of this is the whole body scanners that are used in airports. It is expected to replace the traditional x-rays. This technology will enable officials to see beneath clothing and detect any harmful devices, if there are any. Metallic and metallic threats can be neutralized. But how will this affect the hotel revenue management industry? Well, there are certain travelers that might not want to go through the hassle and prefer one type of transportation over another.

Asian Destinations are Becoming Hot Spots
Driven by the surge in the economy of China and India, traveling to Asia today is becoming “hotter”. Other preferred destinations include the Gulf States. Travelers are becoming adventurous in their travels. Also, because travelers are becoming conscious about their money, Europe is getting out of the picture because it is perceived as expensive. Countries like China and India are benefiting from this trend.

Adventure and Eco-Travel
Travelers are developing a taste for the unique. As a result, adventure travel, eco-travel, and high luxury travel are carving a niche for themselves. Yield managers need to be aware of this shift in customer behavior in order to come up with appropriate offerings and boost hotel profits.

Travel Trends Hotel Revenue Managers Should Watch Out For Part 1

Similar to any other industry, the travel industry is continually evolving. And with the advent of the internet, it is becoming more critical to monitor upcoming trends in order to keep up with the competition and the demands of the global market trends. For hotel revenue managers, the task starts with analyzing the reasons behind demand, government policies that are under review and customer attitude in general.

For 2010, the following trends are expected to emerge:

Mobile Integration
The popularity of sophisticated mobile phones and other devices makes it possible for travelers to receive travel alerts, track flights, and plan their itinerary easily and conveniently. This capability is increasingly becoming used today. In addition, the frenzy seen in the development of new applications is feeding the trend. Hotel revenue managers need to look deeply into this emerging trend to determine what the best yield management strategy would be for the year.

Traveler Focused Buying
Managed travel programs are based on the concept that the entire process of traveling should be focused on the needs of the traveler. Because of the internet, it becomes easier than ever to offer this service. Everything within the process can be enhanced to serve the customers and cater to their preferences, profile, and historical patterns.

Video Conferencing
One reason why business travel is not as prevalent as before is the availability of video conferencing. Instead of going to the destination, a lot of corporations are deciding to communicate through videos. It is a significant development that will have a big impact on the hotel revenue management industry as a whole. Yield managers need to come up with ways to make business travel, and their hotels, more attractive.

Managing Online Reputation for Hotels

Travelers all over the world place a significant amount of trust on the feedback of other travelers, websites, and community forms. Research shows that 1 in 5 traveler read up on guest reviews on the internet about their hotel experience before booking their stay. It is also interesting to note that 1 out of 10 web-savvy individuals will share their hotel experience after staying in the establishment. This revelation should give hotel revenue managers a clue about what they should do to improve their online reputation to improve yield management.

The purpose of this article today is to help you manage your online reputation better to increase hotel sales and boost profitability.

Monitor Reviews about Your Hotel

A number of hotel revenue management teams don’t place enough significance on online hotel reviews. Instead, they utilize various methods such as search engine optimization to make their internet presence felt. This is a big mistake on their part. While online promotion strategies are important, the critical part in any success on the internet is the positive review and approval of individual users, which in this case are the hotel guest.

For this reason, monitoring the reviews about your hotel will keep you up-to-date about traveler’s opinions. It will also give you an idea about what aspects you can improve on to increase hotel bookings. Answering complaints in a professional manner is also a sign that you take the business seriously.

Get the Team Involved

The service staff at the hotel should be aware of what’s going on. Trainings and seminars can be utilized to inform them about the impact of online reviews to the profitability of the hotel. It is important to realize that trying to manage everything as a one-man-team is all but impossible. Getting help from the hotel staff, from the marketing department to the revenue management department can help achieve goals faster and more effectively.

Myth and Reality in Hotel Revenue Management

Despite all the available information about revenue management, there are still some myths that persist about this practice. These myths are sometimes quite surprising, given that hotel revenue managers have experience in the hospitality industry. But whatever the case, the myths are there and this article aims to debunk them. So here are some of the common misperceptions you need to be wary of:

1. Myth: Hospitality Revenue Management Can Create Demand
Reality: Yield Management Doesn’t Create Demand, it Manages It

2. Myth: Revenue Management is a complex technique by which you can manage rates, occupancy, and RevPAR at times of high demand. It’s not necessary during off-peak season.
Reality: It should be noted that Hotel Revenue Management is a process which enables hoteliers to strategically manage high, medium, and low demand throughout the year. In the process, the hotel can derive maximum revenue from their inventory.

3. Hotel Revenue Management Just Focuses on Discounting
Reality: Besides discounting, revenue managers follow a business process that is designed for optimize results for every market segment the establishment caters to.

4. Yield management is a “Black Box”
Reality: Many believe that the revenue management software is the end-all be-all of yield management, the truth is, it is just one component in the entire program.

5. Hotel Yield Management is only Good during the Peak Season
Reality: Effective hotel revenue management has the potential to provide long-term customer value.
As you can see, hospitality revenue management is more than what meets the eye. Though many have misconceptions about it, hoteliers who understand what it is and what it is capable of have an edge over the others.

Last Room Availability: What it means to Your Business

Back in the old days, the Last Room Availability (LRA) was mainly associated with hotel revenue management. However, it is becoming an important factor in the negotiations between online travel agents (OTA) and the hotel establishments. But before we proceed further, it might be a good idea to clarify certain things. First, the article is focused mainly on LTA, not availability parity or inventory.

The former is a function of “rate parity” so it ensures that all OTAs have the same opportunity to sell rooms because they are handling a certain level of inventory. LTA is unique because all rooms available on the hotel website must be available to the distribution partner as well. In addition, the details below are not intended to bash OTAs in any way.

Majority of hotel revenue managers do not have current LRA contracts with any OTA. Hotels that target various market segments, from brand-name hotels to independent properties in the US, Europe, and Asia-Pacific region are not bound by this agreement. An estimated 10 percent of hotel revenue management teams have contract with LRA in place. The firms that agree on this are mostly based in Europe and North America.

A lot of hoteliers revealed that LRA is now only starting to be considered. One concern is that hospitality firms usually provide contracted net-rate sales of around 30 percent or more below the published hotel rate. Ultimately, LRA has its pros and cons. It is important for hotel revenue managers to consider this option and determine in signing a contract would be good for the company or not.

It is important to remember that signing agreements with OTA tends to lock you in for five years. The fixed merchant rate is also not something hotels can easily get out of. Large OTAs are unlikely to give some ground. Yet, the recession may be a good time to consider LRA especially if you have previous concerns with your distribution partners and distributed room allocations.

4 Places to Find Travel Deals

Bargains are everywhere – if there’s still a few hospitality companies that are holding out, they won’t hold out for long. Certain establishments claim they “never discount” but in 2010, they will. It is only a question of how long they are willing to go. iExplore Chief Marketing Officer Amanda Sundt said that upscale resorts will provide two-for-one deals and dining credits to clients even if they don’t discount aggressively.

Another development that will force the prices down is the opening of new hotel establishments. The increased capacity, as hotel chains like Four Seasons and Hyatt open more branches, won’t help the industry in terms of their prices. Appropriate and effective hotel revenue management is important for the players to survive.

Airline Prices will stagnate or Decline – while there are indications that the economy is recovering, it is not healing enough to affect airfares significantly. Airline carriers will continue with their aggressive pricing due to lackluster demand from leisure travelers. And until business travelers pick up some of the slack, it won’t likely increase in the near future. Overall, this might be a good thing for hotels as people are encouraged to travel more.

Blackout Dates are a Thing of the Past – off-peak times is traditionally known as the “value” season as hotel revenue managers lower their prices to lure guests. But blackout dates may be a thing of the past because low prices are becoming the norm. Steve Heydt from Elite Island Resorts said that “We’ve responded to this trend by ensuring that we allow our current value pricing to roll over and be available next spring, summer, and fall.”

Social Networks Announces Travel Deals – the increased use of social media among travelers is making travel deals more common. Travelers usually know about travel deals from sites like Facebook, Twitter, and MySpace because their friends and contacts make the announcements. For certain airlines, social communities have even become loyalty channels.