News | DistributionTop five things hotel GMs need to know about revenue managementThis article was originally published onBy Viewpoints | August 27, 2015 In today’s seemingly ever-changing hospitality market, hotel general managers (GMs) have become the key collaborators linking marketing, sales, reservations and e-commerce divisions within a property.NB This is a guest article by Charles Wang, regional head of advisory services for IDeaS – A SAS Company.Their responsibilities now encompass more complex components such as market segment mix engineering, channel strategy, contract evaluation and user-generated comments.With the volume of changes in the revenue management field and in the consumer buying process, it is important that hotel general managers understand the following five principles to focus the entire organisation on driving better revenue.1. Getting the Right InformationBasic revenue management starts with data collection and analysis, and manually collecting this data takes time and energy, in addition to carrying the risk of human error.Amid a flurry of flash sales, mobile marketing and OTAs, it can be tough to quickly identify fluctuations in demand and react with beneficial changes in real time. Automated revenue management software can provide executives with the data they need - when they need it - in an easily consumable format.It is also critical that hoteliers develop standard operating procedures to ensure all employees follow a uniform market segmentation standard, using the same rate and channel codes.2. ForecastingHotels today live and die by their ability to accurately forecast demand and occupancy. A good forecast assists with room rate decisions, staff allocation, property maintenance and a range of critical hotel operations. To do this, hoteliers need to ensure they have deep, detailed data that contains both historical and future information. Accurate forecasts not only influence rate decisions but also impact displacement evaluations – an area that is not always focussed on.Why should a GM care about displacement?In any displacement scenario, hoteliers should ask themselves, “If we take this group booking, are we displacing more transient travellers that may book closer to date of arrival? Are we just taking this booking to have the business on the books?” If the latter is the case, then what is the cost and how will this impact overall hotel revenue?3. Segmentation Mix PositioningUnderstanding a hotel’s most valuable and profitable guests is critical, making this knowledge a key pillar in ongoing revenue optimisation.To build this knowledge base, transaction systems data needs to be integrated to provide a holistic picture of a guest’s overall stay including ancillary spend—food and beverages, guest services, spa visits, even the gift shop.This data will help identify profitable guests and will assist hoteliers in their segmentation mix positioning.Every hotel has a different market segment mix, so what is the best way to assess the optimum balance? SWOT analysis is not new, but it is important for hotels to conduct a SWOT analysis at the market segment level and establish a quantified rating of different market segments.Hoteliers should also produce graphs that help management teams visualise their past, present and future market segment mix, helping identify which market segments should be prioritised.4. Measuring SuccessRevenue management has moved beyond average daily rate (ADR) and revenue per available room (RevPAR), important though they are.New revenue management principles apply beyond just rooms. As an example, function space revenue performance can be measured by function space utilization, profit per available space/time (ProPAST) and profit per occupied space/time (ProPOST).And GMs should ensure that all departments - sales and marketing, finance and operations - use standardised definitions.It is also important that hoteliers look at what is happening in the wider market. Metrics such as the market penetration index (MPI), average rate index (ARI), and revenue generation index (RGI) have become today’s standard revenue management measurements.To do this, it is vital that hoteliers identify the right competitor set and review this set regularly. Hoteliers need to look at location, product and service, in addition to what guests are saying about these hotels.Once the right competitive set has been identified, the MPI is determined by dividing the hotel’s occupancy by the market’s occupancy.Similarly, the hotel’s ADR would be divided by the market’s ADR to identify the ARI, and the RGI would be calculated by dividing the hotel’s RevPAR by the market’s RevPAR.While it may initially sound complicated, this method delivers a more accurate picture and opportunity of measuring success.5. Building a Revenue Management CultureFocusing on people, process and technology is how hotels build strong revenue management cultures.Within this, revenue managers must work closely with the executive suite to build a culture that drives profitability across their entire organisation.To obtain the maximum revenue management benefits - and to optimise profits from all hotel revenue streams - executive buy-in across multiple departments is necessary. Sales, reservations, food and beverage and all hotel department teams need unified understanding and commitment of the hotel’s strategic revenue management program.To achieve this, revenue managers must not only accurately forecast and analyse data themselves, but also effectively communicate revenue management strategies and principles to their senior leaders.Click here for more information on revenue management tips for hotel general managers.NB This is a guest article by Charles Wang, regional head of advisory services for IDeaS – A SAS Company. It appears here as part of Tnooz's sponsored content initiative.