For hotel groups looking for new ways to generate additional revenue in 2016 and beyond, the extended length accommodation sector continues to grow and provides solid value for owners and guests alike.
NB: This is a viewpoint by Joerg Happel, senior product manager for IDeaS.
Today nearly every major global hotel franchise has at least one extended length accommodation product under their portfolio of brands.
Extended length hotels and serviced apartments differ from many traditional hotel rooms in terms of the physical layout of the space, with the majority of rooms being equipped with full kitchenettes and other home-style amenities.
Guest pricing for extended length hotels and serviced apartments has traditionally been a challenging concept for revenue managers, since rates may vary greatly depending on the length of stay a guest is seeking.
But it is vital that hotel groups enhance their approach to pricing for this sector given the revenue opportunities that it presents.
Forecasting for the different length of stay profiles within the same property, such as transient (typically shorter stay demand) and longer stay demand, is critical in the acquisition of the guests in these segments. This requires an understanding of the dynamics of existing length of stay demand profiles for each property, unit, or revenue center, and how this impacts a guest’s willingness to pay.
Market segmentation, therefore, is a critical opportunity for extended stay hotels.
Identifying the type of guests staying at a particular property requires a reliable separation of data and grouping for accurate forecasting. How valuable are different guest segments? When do they arrive? How far in advance do they book?
Understanding and accounting for key demand factors for each key business segment serves as the most reliable basis for key business controls to drive profitability. This includes setting the right price, achieving the right mix of guests, achieving the right length of stay mix, setting appropriate over-sales limits in order to avoid lost revenues, and applying the right mix of these pricing and inventory controls to achieve profitable growth.
An advanced revenue management system, despite the complexities of the environment, can facilitate exactly this kind of forecasting. It takes into account demand by arrival date and length-of-stay, cancellations and no-shows, extensions, early departures and more.
This capability to analyze data and generate robust forecasts to maximize RevPAR or ProPAR is where many current revenue management systems and pricing systems fall short. An incorrect forecast essentially invalidates any attempt to set controls designed to grow profitability as a result of that forecast.
Looking more closely at in-house extensions, there is an opportunity to take advantage of this frequent occurrence at extended stay properties. For example, the construction crew that reserved four weeks may end up facing supply delays, equipment problems or bad weather. Accommodating their needs is obviously in the property’s best interest, not just for repeat business, but for maximizing the overall mix of business.
Let’s consider a related scenario where specialized controls can help drive revenue:
Guest #1 wants to book three nights at $100 per night. Guest #2 wants to book 30 nights at the same rate. If one night has zero rooms to sell in the room type the guest wants, there is far less impact (revenue loss) on the short length of stay reservation, but a significant one if the hotel is unable to accommodate the longer reservation.
In this situation, overbooking while demand exists is an acceptable option - particularly if the customer profile for Guest #1 suggests a likelihood of cancelling. And even if Guest #1 walks, the hotel or apartment secured the 30-night booking which, again, typically means a lower cost of service.
Optimizing the remaining capacity by considering all available demand across all arrival dates and by length of stay, in addition to overbooking and sell-through controls (straight-line availability where there is still demand), is critical to maximizing revenues.
Buying into data
Understanding the wash - cancellations, no-shows, early departures, and straight line availability (the constant availability of rooms across guests’ stay-pattern enquiry) - is significant, too, and this level of understanding is imperative in an advanced revenue management system for driving better revenue.
The short answer to all of these challenges and opportunities comes down to one word: data. Collecting it. Organizing it. Analyzing it. Continually refining the data acquisition and analysis loop lets revenue managers and executive leadership generate the accurate forecasts vitally important for fine-tuning business operations and increasing the overall value of an asset.
This is why an advanced revenue management system should be a necessity for the extended stay market - its ability to utilize sophisticated analytics to employ a rational and disciplined approach to revenue management overall. Accurately forecasting all key elements allows you to set demand and market-relevant prices, optimize the business and length of stay mix, assess all guest opportunities appropriately, and ultimately, increase a hotel’s revenues.
In conclusion, as the extended stay industry continues to grow and evolve, so too must revenue management strategies and solutions in order to truly sustain growth and drive performance.
The hotels leading the extended stay sector will be the ones taking advantage of the most advanced revenue management technology to reach maximum profitability.
NB: This is a viewpoint by Joerg Happel, senior product manager for IDeaS. It appears here as part of Tnooz's sponsored content initiative.