The art of hotel revenue management is seeing the first waves of a sea change away from top-line revenue toward profitable revenue.
At this year’s HSMAI Chief Revenue Officer Executive Roundtable, held last week in Los Angeles in conjunction with the HSMAI Revenue Optimization Conference and HITEC, HOTELS moderated two roundtable discussions featuring more than 30 revenue optimization executives from some of the largest hotel management and ownership companies. The discussions showcased the need for new tools to help measure profitable revenue.
Revenue managers said the profession has entered an “awareness phase” of knowing that metrics need to switch, but not how to accomplish this.
“We’re starting to see really large owner organizations start to cry out and as that voice gets louder, it will start to create real change,” said Sloan Dean, vice president of revenue optimization at Ashford Hospitality Trust.
Challenges include a lack of consensus on the best metrics to measure profitability — two metrics discussed as contenders were EBITDA and ProPAR (profit per available room. Revenue managers said that their STAR reports from STR as well as other financial reports do not fully show how a hotel is performing, as for example a sales team can give contractual concessions and not report out net revenue after concessions. This means revenue managers can create revenue that is not profitable, and are in fact encouraged to do so under the current setup.
“The STAR report is basically outdated as our report card,” said Bonnie Buckheister, principal, Buckheister Management Ltd.
Getting the data to create such metrics will be difficult, too, as owners may balk at disclosing more of their financial information. Furthermore, even if such data is procured the hotel industry may be reticent to change its rate and distribution strategies given its fragmentation, inability to reduce inventory and conservative approach.
“It goes down to personalities in certain leaders in certain organizations. The stay brands in particular are very conservative organizations. There’s not this risk-taking type of mentality. There is not a single major brand that will move toward a prepaid model and we’ll still be giving inventory to people that we complain about,” Dean said.
In the meantime, vendors may begin developing products to help revenue managers focus on profitable revenue. “There are things we can effectively measure, like the third party groups with a rebate in commission. You can measure to an extent the loyalty costs such as bonus points and GDS costs, which are pretty consistent. A lot of it we can measure, but it is difficult just getting it all organized into one place that, for lack of a better word, you can trust,” said Jon Eliot, vice president of revenue management, Premier Hospitality Management.
Roundtable participants included:
Brian Berry, vice president of revenue management, Host Hotels & Resorts
Denise Broussard, senior vice president revenue management & ecommerce, Interstate Hotels & Resorts
Tom Buoy, executive vice president, pricing and revenue optimization, Extended Stay Hotels
Elizabeth Cambra, vice president, pricing and revenue optimization, Outrigger Enterprises Group
Maricarmen Cardenas, senior vice president, revenue management & ecommerce, Crescent Hotels & Resorts
Kathleen Cullen, vice president, revenue & distribution, Commune Hotels & Resorts
Scott Dahl, vice president of revenue management, Hersha Hospitality Management
Sloan Dean, vice president of revenue optimization, Ashford Hospitality Trust
Alise Deeb, senior vice president, revenue operations, La Quinta Inns & Suites
Jack Easdale, vice president of yield management, Venetian|Palazzo Sands Expo
Craig Eister, senior vice president, global revenue management & systems, IHG
Jon Eliot, vice president of revenue management, Premier Hospitality Management
Neal Fegan, executive director of revenue management, Fairmont Raffles Hotels International
Kimberly Furlong, vice president, revenue management, TPG Hospitality
Edward Goff, corporate director of revenue management, Hyatt Hotels
Linda Gulrajani, vice president of revenue management, Spire Hospitality
Ash Kapur, vice president, revenue management & distribution, Starwood Capital Group
Betsy Kinnear, vice president of sales & revenue, Alliance Hospitality
Dev Koushik, vice president, global revenue optimization, IHG
Kathy Maher, senior vice president revenue management, Wyndham Hotel Group
Kathleen Mallery, senior director, revenue optimization, Americas, Carlson Rezidor Hotel Group
Mark Matz, senior vice president of revenue optimization, Remington Hotels
Gary McLin, vice president of revenue strategies & ecommerce, Rim Hospitality
Michael Morton, vice president, member services, Best Western International
Sharon Paine, senior director, pricing & revenue optimization, Choice Hotels International
John Savage, regional director, revenue management, West U.S./Canada, Starwood Hotels & Resorts Worldwide
P.J. Snowden, vice president of revenue management and ecommerce, Pyramid Hotel Group
Tim Wiersma, vice president, revenue management, Red Roof Inns
Chris Wilroy, vice president of revenue management support services, Hilton Worldwide
Monica Xuereb, vice president of revenue management, Loews Hotels
Nicole Young, director of sales & revenue management, SBE