While the ability to offer the right room, at the right price, at the right time will always be at the core of revenue management, it is vital that hoteliers in India also look beyond and far ahead.
Revenue management is commonly applied to the practice of setting room rates across the hospitality industry in India, however, it has become necessary for Indian hoteliers to now look for other potential revenue generating hubs. Function space (banquets) are a major revenue stream, says Sivaprasad Gangadharan, regional director of sales for South Asia, IDeaS.
Gangadharan highlights the fact that meetings and events often account for 40-60% of revenue for many hotels, yet profits are left behind when function spaces go unsold or undersold. “A 2011 survey by Sherri Kimes, professor of operations management at Cornell University and a leading revenue management academic, recognised functional space as an area with the highest likelihood of success, outside of traditional room revenue management,” he says.
Some revenue managers agree that there is a need to make amendments. Aakanksha Gupta, revenue manager at Trident BKC, Mumbai, shares that the demand for banquets in a place like Mumbai is seasonal, where demand rises in the winter. “There is a requirement for newer revenue management systems to take an overall decision, keeping in mind residential and non-residential requirements for banquets,” she says. Other than that, newer software solutions for spas need to be incorporated, according to Gupta.
Calling for a new focus and approach that keeps revenue management at the core of the business is Mike Kistner, CEO, RezNext Global Solutions. In his opinion, the room distribution system in India is highly fragmented, most processes being manually managed and therefore resource-dependent. “Resources manage these processes based on their experience and not based on real-time data,” Kistner says. Keeping revenue management at the core makes hotels utilise several reservations processes intelligently and drive more revenue. Clearly, the intended impact is that which affects rooms, F&B, function space and more. New solutions in the market like the function space revenue management solution from IDeaS forecast and validate expected demand using advanced analytics to increase profit by optimising the total profit contribution from various revenue streams. Putting this into practice, Gupta shares how, on a daily basis, an increased focus is given to detailed data analysis at a micro level.
Yet solution providers like Kistner, feel that the Indian market has been slow in adopting the concept of revenue management. He says some hoteliers think of it as a tool for only four- and five-star categories. Other independent hotels that are based in high-traffic destinations, anyway, achieve the expected occupancy and therefore, don’t see value in the revenue management concept. There is a lack of understanding between occupancy and profitability. “Revenue management is a concept that must be demystified. Hotels, irrespective of their star category, should realise the merit in scientific data analysis and recommendations that can help grow their revenue all through the year,” Kistner states.
It is true that in major markets like New Delhi and Mumbai, where hotel landscapes are heavily competitive, international groups employ hi-tech solutions and strategies to maximise revenue. So do some groups in major tourist areas. Meanwhile, independent and small-scale operators employ less advanced management systems. What is used by other major players is viewed as cost-prohibitive and inapplicable by the smaller business setups. Gangadharan concurs. He offers a solution for this situation: IdeaS’ pricing system, which offers mid-scale hotels core revenue management functions that can be managed with limited resources and achieves immediate revenue uplift. He believes, proven revenue generating systems and strategies used by larger hotel groups should not be overlooked by limited service properties in smaller markets.
So what are the concrete solutions today that have actually helped clients? IDeaS provides a sophisticated mobile app for revenue management. The recently-launched, first integrated mobile app for the industry offers the ability to view, update and deploy hotel pricing information on the move. It allows hoteliers on-the-go access to critical information and the power to make pricing decisions directly through the app. Pacific Hospitality Group, one of the first to adopt this cloud-based mobile app, successfully integrated the new system through this charter programme. The revenue managers can now carry out common revenue management tasks anywhere and at any time. “Revenue managers from Pacific Hospitality Group have reported working from the soccer field, at home or at the airport, and are really pleased with the innovative new capabilities of the app, staying connected to properties even when away from their desks,” shares Gangadharan. Booking windows have become shorter so one can’t wait to be back at their desks to make critical pricing decisions. A solution such as this gives clients the foresight that revenue management practices need.
Kistner talks of a client, a four-star hotel group in India, that has greatly benefitted from its solution ReV, powered by Maxim. It has achieved revenue optimisation during peak and non-peak seasons relying on the analysis and recommendations made by the system. Managers use the system to automate their distribution and maximise revenues from a pre-selected target segment during peak seasons. For non-peak phases, the system recommends which segments to go after from a marketing and distribution perspective. This way, the hotel is able to manage their bottom lines without revenue erosion.
From a hotelier’s perspective, some key Indian conditions should also be kept in mind while developing systems. Incorporating Indian calendar holidays, long weekends, auspicious (wedding) dates and elections being some. Gupta says, “By default, Indian markets are more price sensitive and so, the system should throw outputs which offer different options and can suit the price band.” She also highlights how an expert in revenue management is required to understand the outputs and to manage the inventory today. Software should become more user-friendly with a simpler interface to make it possible for a front-office manager to understand and implement the outputs provided.
Looking ahead, Gupta believes there will be a renewed focus on revenue management across all sectors, globally. Those properties which may not need a dedicated revenue management team for each unit will be served by newer solutions for smaller brands and operators.
According to Gangadharan, despite the fact that almost every hotel manages multiple revenue streams, team members within each stream tend to make pricing decisions based on the impact of their line of business only. They need to make a shift towards more holistic strategies. Technology is now aggregating and transforming large, disparate data sets into actionable intelligence for making accurate demand forecasts and strategic pricing decisions. Gangadharan affirms, “In the coming years, we will see Indian hoteliers gradually moving towards adopting an approach in revenue management that we call total revenue performance. That is, the ability to instantly and systematically decide what business to accept across multiple revenue streams, based on which decisions deliver the greatest overall value to the hotel.”