With the accommodation segment starting to open its doors, effective operational management is starting to show its muscle in conjunction with revenue management – or at least it should be!
It’s a fact that the accommodation industry makes money differently to just about any other sector in the economy. The traditional trend in other industries to increase productivity coupled with modest price increases, is in sharp contrast with how hotels generate revenue. The hotel industry relies on its ability to increase prices to offset sharp gains in operating expenses. It is fair to say that in the current climate, post covid-19, we will no longer be able to rely on this strategy.
The old saying, “If you want to be successful in business, make sure you have two great friends, an accountant and a lawyer,” could not be more true. In the Hotel industry, I suggest that you add to the mix a Revenue Specialist as your best friend. The fine art and science of effective data management is going to be tested heavily in the months and possibly years ahead.
An exceptional Revenue manager through dynamic pricing can help grow the top line. However, I think it is widely agreed now that the gains we have seen over the last few years is something of the past. Therefore, if revenues are going to grow at a far more modest pace, hotel owners will have to start taking a hard look at the cost side of the equation to start generating real profits.
If hotels are going to survive this period and be profitable, its going to be coming from bottom line savings not from the top-line gross revenue drives.
The test is going to be in controlling expenditure more than dropping rate and starting a price war within your competitor set. The answer is going to be effective operational control and not cutting back on the guest experience or reducing your offering, which guests have grown accustomed to or reducing what is put on your plate in the restaurant. A hard look is going to have to be taken at operational management and their ability to work with lesser staff, introduce stricter control systems, optimizing expenditure all whilst growing guest review scores.
The period ahead is going to test Hotel Operators, GM’s and especially Operational staff. Managers will no longer have the luxury of hiding poor operational management with extraordinary increases in gross revenues. This coupled with real savings on the bottom line is going to be key to surviving and even exceeding profit margins compared year on year.
It has become too easy for hotel owners to look at revenue mangers and ask, “What is your strategy to grow our revenue during this time?” It’s become too easy to move the blame onto the revenue department when the top-line revenues are not in place. In order to assist the revenue team to increase or maintain the status quo, there will have to be a closer relationship between the revenue department and the operations managers. In order to assist the revenue manager a far stronger emphasis will have to be placed on guest review scores and the guest’s perceived idea of value in order to give the revenue department more leverage within its competitive set to increase conversions and at a later stage selling prices.
It is going to be of paramount importance for Revenue and Operational managers to work together to see how changes in rates effects the guest experience from housekeeping through all departments and vice versa. No longer is Revenue Management the only survival tool of the business but proper cost control practices.
Emphasis now needs to be moved now to operational management. How quickly operators move now to realign costs in all departments, create a culture of ownership among its staff and start demanding real sustainable results from Operational Managers, will inevitably result in a competitive edge. This in return will give the Revenue Director a real fighting chance to place your establishment head and shoulders above the rest.
In short, efficiency in the bottom line is going to be the deciding factor who is going to make it through these tough times and be around a year from now or not. The time has come for operational leaders to get out of their offices, hang the suit jacket behind the door, roll up their sleeves and get to work.
Author: Peter Koegelenberg
TrevPAR World – Operational Data Specialist