The need for revenue management SOPs in your hotel
By Tracy Dong, lead advisor of Asia Pacific, advisory services, IDeaS Revenue Solutions
A friendly smile as you step out of a taxi. Your bags collected by the helpful porter. The line for check-in moving with ease. You are upgraded to a suite since to your original room type is unavailable. You are offered a dining recommendation and assistance navigating the city before making your way to a room where your bags already sit at the foot of the bed.
A well-run hotel is noticeable by how it makes guest logistics (such as peak-hour check-in) completely unnoticeable. However, hotels don’t become experts in mastering these procedures by sheer luck. It takes dedicated hours of staff training based on proven Standard Operating Procedures (SOPs) to perfect these tasks, and ensure that the front of house runs smoothly and effectively.
Hotels have long practiced check-in SOPs to support positive guest experiences. However, while SOPs are often used in front of house environments, they are still not commonly deployed in an area critical to a property’s financial performance: the revenue management department. Revenue management SOPs can help key personnel maximise revenue opportunities for a hotel, and assist new staff – enabling them to better understand the hotel’s positioning, market segmentation, pricing structure, inventory and forecasts.
There is a clear, distinct need for hoteliers across the Asia-Pacific region to establish and enact SOPs for their revenue management departments to enhance overall staff and property performance. But what SOPs are critical to a revenue manager today?
Market analysis SOPs are vital in helping hotels assess their own performance within their local operating environment. Collecting market intelligence to understand the market positioning of a property is one of the first steps in the practice of revenue management. The data gathered from market analysis SOPs help define a hotel’s benchmark rate within its wider pricing environment and inform its marketing strategies.
To create effective market analysis SOPs, hoteliers need to research or update their competitor information – including a review of their competitor set. A market analysis should also include a report on the local market conditions (supply and demand, GDP growth, inflations, key industry news) to assist with ongoing budgeting processes. Hoteliers should also develop a SWOT analysis for their property and local competitors to help define their market positioning.
Market segmentation is fundamental to revenue management. With market segmentation SOPs and accurate data tracking in place, a hotel’s revenue management team is able to develop market strategies for target segments, forecast demand based on the booking behaviour of each market segment or market segment groups, and develop optimal pricing strategies.
Hotels need to have a clear market segmentation structure in place for all relevant team members that divides target business for the property into distinct groups. Different types of hotels may have very different market segmentations. For example, city-based hotels may have more corporate business segments, while resort hotels have more leisure business segments. To be practiced effectively, SOPs should clearly define each market segment, and ensure each department in the hotel (especially reservations and front of house) understand how to track reservations under the correct market segment code. For those hotels with an advanced revenue management system in place, automated and robust analytics provide strong forecasting data for different segments, as well as recommendations for optimal business mix.
Accurate forecasts can be instrumental for planning inventory and staffing levels. If a hotel can anticipate demand, it can have the right levels of staff working at the right times, even down to forecasting peak check-in and check-out times.
For hoteliers without sophisticated revenue management systems in place, forecasting SOPs are critical to ongoing operations. To establish forecasting SOPs, a hotel should collect and compare the current and previous years’ market segment data, room type preference data and booking pace. Other logistical considerations include the level of forecast detail (is it by day, by market segments, or room types?), how far into the future to forecast and how often to review the forecast. For hotels that have deployed an advanced revenue management system, forecasting is a straightforward matter and SOPs mainly need to focus on how to validate the forecast generated by the system to ensure that optimal Best Available Rate (BAR) is selected.
Pricing SOPs are critical to any hotel’s ability to operate successfully. These commonly include guidelines and rationales around how to develop pricing structures by market segments, which ensures all revenue opportunities are maximised. Pricing SOPs can influence BAR, packages, corporate rates, wholesale rates, group rates and daily BAR rate review and changes. For hoteliers using a revenue management system, BAR recommendations will be provided daily for the next 365 days, and the rates are automatically uploaded to various distribution channels. This means that the revenue manager’s role and corresponding SOPs are focused on reviewing and validating BAR recommendations made by the system.
Revenue Management Meetings:
Revenue management is the combination of people, process and technology, and today’s revenue managers are key collaborators that link marketing, sales, reservations and e-commerce divisions within a property. Although many hoteliers understand the importance of having a formalised revenue management process and culture in place within their organisations, many others in different departments do not. To drive profitability across the entire organisation, revenue managers must work closely with all executives to build and instil a strong culture of revenue management.
Regularly staged revenue meetings are a good platform to align the objectives and strategies among key department heads in the hotel. Revenue meeting SOPs should outline the extended revenue management team, attendees of revenue meetings, decision makers and team leader (normally a revenue manager or sales leader), along with topics to be reviewed and reports to be used to benchmark results.
People and Structure:
Company organisational SOPs are especially important for on boarding new revenue management staff within a hotel, as these are easy and necessary references on personnel responsibility or collaboration inquiries. Company organisational SOPs should include all key operational personnel and demonstrate where the revenue management team sits within the overall hotel (or hotel group), as well as the revenue manager’s reporting line. These SOPs should also include revenue manager job descriptions, KPIs and common daily, weekly and monthly tasks to ensure that no workflows are overlooked.
Given today’s highly competitive operating environment for hoteliers in the Asia Pacific region, it is vital that hotels not only have properly trained revenue management staff and automated operating systems in place, but also that effective SOPs are established and practiced. SOPs support the ongoing function of revenue managers, enabling them to concentrate on targeting the right guest at the right time for the right price – and maximising revenue opportunities for their hotel.