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How much is your revenue manager costing your business?


Written by - Rachel Grier, Area Vice President, Asia Pacific for IDeaS


Indonesia’s premier hotel and resort market of Bali has suffered from a period of oversupply in recent years. In spite of larger numbers of inbound tourists visiting the island, hotel occupancy numbers have been flat, or even decreasing, leading to the Indonesian Hotel and Restaurant Association (PHRI) to call for a halt in new development construction and limit the impact of oversupply.




“I think we need a moratorium. Several regions like Bali, Yogyakarta and Bandung, already have too many hotels,” said PHRI chairman Hariyadi Sukamdani.*


All Indonesian hoteliers, whether facing issues around oversupply themselves or not, should pay particular attention to the Balinese sector because it gives them an opportunity to watch what happens when supply dampens demand in a market.


In a market facing oversupply issues, it has never been more important for local hoteliers to have the right people and systems in place. However, many hotel owners and their reservation managers in Indonesia are still slow to invest in advanced operational systems like revenue management, viewing these solutions more as a cost than a business driver.


The case against applying 'more people' to fix the problem


Indonesian hoteliers should be aware that when operating in a market facing oversupply issues, hiring more people to try to improve a property's revenue performance will not help. Put simply, one smart revenue manager operating with the assistance of an advanced revenue management system (RMS) can outperform three revenue managers using older, more manual-based approaches. And investment in RMS technology does not have to break the bank either; for the equivalent of 2,000 rupiah per day, local properties can receive significant benefits and drive rate growth.


Revenue managers, even those working in teams of people, operating without automated systems are unable to perform many of the functions needed to drive hotel revenues today. Take the example of a hotel coming into peak season, where there is more demand than capacity at the hotel. In a market with oversupply, peak operating periods are key revenue generating opportunities not to be wasted and present a situation where the revenue manager has to decide which business to take and which not to take.


In a manual environment, the best strategy a hotel revenue manager could apply would be to implement longer lengths of stay. However, using an advanced RMS, the system analytics choose the optimal reservations automatically using a combination of both long, medium and short lengths of stays depending on arrival dates and overall forecasted demand. The differences between manual and analytically-based decision-making in this situation is significant. Given the sheer amount of data needing to processed (reservations for two years into the future across multiple room classes and segments, all with different lengths of stay on different arrival dates), there is no way a revenue manager operating with manual systems can effectively drive revenues in this situation, not even if a hotel considers hiring additional staff to strengthen their revenue team.


Why revenue management is also a cost saver, not a cost centre

In a market facing oversupply conditions, hoteliers should focus on operating as efficiently as possible, reducing any unnecessary expenditure. This is an area an automated RMS can help. Having the ability to account and plan for periods of higher or lower demand, through a detailed forecast generated by an RMS, enables better operational and staffing decisions as well as managing external suppliers to ensure wastage is minimised and profitability can be maximised.


Once forecast data is made available, staffing managers can determine which areas are most affected by guest density and thus optimise their labour management and reduce unnecessary expenditure. For example, hoteliers should review the impact of the number of occupants per room on housekeeping needs, the number of staff needed on the front desk to check guests in and out and the number of servers required in restaurants, the spa and even the transport department.


Services and perishable supply management is another area in which a detailed forecast can be deployed to drive business optimisation and efficiencies. During peak periods, the number of sheets that need washing per day will increase. If the hotel’s own laundry doesn’t have enough capacity for these peak periods, having accurate forecasts in place will mean hoteliers know in advance when they might need to contract out sheet washing externally to manage the overspill.


Food and beverage is also another large source of potential wastage for hotels, especially when it comes to those items that come with an expiration date—from fresh bread to expensive imported produce. Knowing when there will be periods of high and low demand, as well as from which segments will be the key consumers of these perishable items, will help hoteliers ensure they order the right products at the right time and avoid costly spoilage.


Revenue managers working without an RMS could be costing your business


The average hotel revenue manager touches a diverse range of systems within their role, including reputation management, channel management, rate shopping, revenue management, property management and central reservations systems. Advancements in RMS technologies have the ability to free revenue managers from some less meaningful, manual tasks to focus more on meaningful, strategic pricing opportunities. However, it is still surprising today there are some hoteliers, particularly in smaller properties and regional brands, operating without automated revenue software in place.


Revenue managers working without an automated system that unifies key data and delivers meaningful insights and timely pricing changes and inventory control are operating at a significant disadvantage today. They are having to take on substantial amounts of manual data entry, sit in on meetings focused more on basic logistics and less on strategy, and also have a heavy reliance on limited data sets from which to make reactive pricing and strategy decisions. To get the most out of their revenue managers’ skills and to maximise all revenue opportunities for their property, hoteliers needs to invest in technology and automation to enable proactive strategic decisions that drive business optimisation, efficiency and profitability.



References:

*https://www.thejakartapost.com/news/2017/11/14/government-asked-to-stop-issuing-licenses-for-hotel-construction.html



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