How to Adapt to a Post-Covid Hotel Revenue Management?
COVID-19 has taken all historical data sets of the hospitality industry and flung them right out of the window. Never before, barring wartime conditions, has tourism been affected to this extent. So, how do you manage the revenue from here on forth?
This detailed guide to post covid revenue management will give you the exact answer to that question.
We are living in volatile times. The tourism industry has lost $460 billion in 2020 alone. Mass lay-offs have become the law of the land. 1 in 3 employees is not planning to return to the hospitality industry. New Zealand, Australia, Sri Lanka, Japan, and many more countries have extended their lockdown schedules. No one has any idea whether the slow return of the mass tourism trend will last.
It’s extremely difficult to manage revenue in times such as these. You cannot curb your spendings just because you think things are going to worsen in the future. There is no hard proof of that. You cannot suddenly start making extravagant investments either. There is no hard proof that the situation will look better in the future. So, what do you do to appropriately manage revenue in the post covid era?
The answer is: Embrace change. You cannot just return to the way things used to be hoping that everything will return to normal. We are now living in a “New Normal” world. You have to embrace the novelty of the situation.
This article contains 5 important tricks that will help you in efficient post covid revenue management. Keep reading.
5 Tricks to Ace Post Covid Revenue Management:
Look at New Data
As I have said in the very beginning, all prior data is useless now. Demand has plummeted to such an extent that you are pretty much starting out from the scratch.
This, however, is a justifiably frightening concept. You have to run a decades-old establishment in a new market that is almost impossible to predict. So, how do you know if you are doing revenue management right? Do you just start guessing because you are blindfolded and have no data?
Wrong. You still need hard data to base your decisions on. But you cannot just rely on historical data anymore. You need to depend on three sets of data: historical data, current data, and future-facing data. Using a combination of these three is the only way to make an informed decision in today’s time.
You also need to broaden your understanding of who qualifies as a competitor. Vacation rentals and AirBNB apartments also need to be taken into consideration. People have been preferring these over regular hotels to avoid communal areas like the lobby. You also need to check the trend of flight searches. This will give you a good idea of how tourism can look in the near future.
As for room prices, you need to be as dynamic with them as possible. Forget seasonal changes. You need to vary them on an hourly basis as per live demand. Live data is what you have to constantly keep an eye on. No, I am not going to try and convince you that it is easy. But I can tell you a way you can automate this process in the 4th point. Stay tuned.
Revenue Management must necessarily be based on data. Now that historical data has been rendered useless, you need to combine it with something that works. You need to pair it with new data that looks forward instead of backward.
Accept the Unpredictability
I cannot tell you how the tourism trend is going to change in the next five years. No one can. There are tons of contradictory predictions floating around.
Due to the ease with which we have adapted to Zoom meetings, in-person business meets might just become extinct. According to Bill Gates, 50% of ‘business travel’ is going to vanish because of the virtual meeting apps. Carsten Spohr, chief executive of Lufthansa, on the other hand, has a completely different opinion. He thinks business travel will return to its original volume soon enough. Forbes’ experts think a mixture of the two might happen. According to the American Express Global Travel Trends Report, 76% of the respondents were keen to travel in 2021. However, wishes and reality might not align. The demand no longer corresponds with actual travel because people cannot control their country’s lockdowns and travel bans.
So, how can you pair this post covid uncertainty with sensible revenue management schemes? By accepting the inevitable- that the world is going to be unpredictable for a while.
No, one quite knows how the recovery process will go. Looking at live trends and varying your room pricing according to that is the only way to thrive. The market is fluctuating more than ever before. Don’t make the mistake of making any hard guesses and basing your revenue management decisions on that. You need to embrace flexibility.
Unpredictability is the one thing you can safely predict in the post covid times.
Total Revenue Management is a concept that has been around for a while. But now it is more important than it was ever before. Total revenue management refers to the management of revenue across all departments. That is- the management of all current and potential sources of revenue.
Why is this important now, in the post covid times? Because you might not be able to make money on hotel stays. But you might make money from the restaurant on your premises. You might not make money from your rooms, but you might make money from your travel desk and rental services.
That’s the thing. You have to focus on the other sources that are generating revenue. And for this, you have to focus on some new metrics as well.
These are Revenue Per Available Guest (RevPAG) and Gross Operating Profit Per Available Room (GOPPAR). If your guests are using your spa, bar, or gym, you can still make additional money. These metrics help you measure how much you can boost the profitability per guest and per room.
Not only do you need to profit differently, but you also need to measure this profit differently as well. This is the key to efficient post covid revenue management.
Invest in New Tech
I cannot stress this enough. To efficiently manage your revenue in post covid times, you HAVE to get a PMS.
PMS stands for Property Management System. This is a single software that will take care of every single aspect of running your property. No need to invest in a separate mobile app for your website. This one cloud-based platform will do everything for you: managing, organizing, scheduling, auditing.
“But why should I invest in an expensive software for things I can already do?” you might ask.
It’s a justified question. To counter it, answer this. How much do you have to pay your front desk receptionist to do a midnight shift? After all, guests can arrive at any point in time, right? So, you need at least two receptionists who can cover the whole 24 hours, 7 days a week.
With a PMS, this cost goes down to zero. The guests are provided with a virtual key the moment they book a room. PMSs offer them the option to check themselves in through their mobile phones way before they reach the property. You can pretty much function without any staff if you have a PMS. The housekeeping staff who need to be on the ground receive a notification every time a guest makes a request. No need to involve a front desk middleman. Your guests can also make any further table reservations or rent cars through their mobiles themselves. No need to employ a person to man the travel desk all day either.
You also do away with on-ground tech and audit teams. It’s super easy to manage aspects like dynamic pricing from the PMS itself. This brings us to what I said about live data collection in the first point. You can find out the room rates of all competing hotels at the current moment through a PMS. The PMS automatically adjusts your room pricing according to that. And as I said before, these prices change on an hourly basis because the whole process is automated. As soon as the demand and the occupancy fluctuates, so will your room rates.
Automations are what make PMSs like StayFlexi so ideal for revenue management. Not only do you save money on labor costs, but there is also no room for human error either. Auto Inventory Management might be the best feature of StayFlexi. This ensures that you don’t have to lose money on overbooking because the inventory is updated in real-time. You don’t have to worry about rooms going empty because PMSs also handle stay extensions and room exchanges perfectly.
Cross-Sell and Upsell
This is a continuation of what I was talking about in the 3rd point. Money doesn’t just come in from renting out rooms. It comes from the spa, the restaurant, the bar, the travel desk, car rental, and other recreational facilities.
You not only need to convince a guest to stay. You need to convince a guest to partake in the other facilities that bring in revenue as well. Seems difficult, right? Well, think of it in a roundabout way.
What if you can draw the guests in because of your exotic food selections and your hanging swimming pool? What if the recreations convince the guests to stay? This is exactly how the most successful hotels are cross-selling and upselling their facilities now. This is officially the work of a hotel curator. Consider hiring one if you haven’t got one already.
You might think all this is a pointless waste of money. It’s not. It’s Revenue Management 101. You have to spend money to make money. More importantly, you have to spend money wisely to make significantly more money than you are spending.
Revenue Management in post covid times is not easy. You have almost nothing to base your decisions on. You feel like you are starting out from scratch. And most importantly, the whole industry is drowning in unpredictability.
But by following the tricks mentioned in this guide, you will be able to survive. These are highly volatile times so you need to embrace the uncertainty, newness, and inevitability of change.
Want to figure out how a PMS like Stayflexi can help in revenue management in the post covid era? Let us know your query in the comments below.