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The New Frontier of Hotel Revenue Management: Newsletter #24

In Newsletter #24: The new frontier of hotel revenue management | New TripAdvisor research | Happier staff, happier guests, more profit. 


A couple things outside of the ordinary happened these last two weeks:

1. A TV ad came on that  I actually wanted to watch - I was watching my beloved Arsenal play this weekend and an advert came on. As I watched it, I did not turn down the volume nor did I fast forward, I actually paid attention. This was Airbnb’s “live like a local” campaign and it is scarily captivating. Let’s hope we don’t all continue doing what we are told not to… watch it.

2. We have written longer than usual summaries this week. Too long to put in this newsletter, so I do encourage you to click in and read, especially the Revenue and Staff Culture stories. I say this because I feel we are on the cusp of trends that will greatly improve hotel operations:

On the revenue side, so much of the focus is spent on getting that room booked with too little thought about the opportunity that lies in the relationship with the guest thereafter. In any business, it is far more expensive to attract a new customer than retain an existing one, so this has to change.

On the staff side, you would not believe what the back of a hotel looks like unless you see it every working day (it’s not pretty). For an industry with such high employee turnover (31%) and an extremely challenging work-life balance, there is so much tangible benefit to prioritizing (and retaining) your staff. Danny Meyer preaches this, startups embody this and big tech companies are this.

In Miami next week if any hotels want to meet,

- Alex Shashou




Is it time to change your revenue manager's focus to profit?      

eHotelier | Are Revenue Managers and General Managers Aiming for the Same Targets?

Hotel Business Review | A Day in the Life of Two Revenue Managers

eHotelier | The New Frontiers of Hotel Revenue Management 

Why it matters: Every month we have the good fortune of bringing in speakers to educate our team. From UX design, to life coaches to hotel revenue managers, everyone has a powerful story and insights to share. Last month we welcomed Jeremie Catez, a former revenue manager for Accor and founder of a great new revenue generation tool for hotels, BeeWake.

As he educated us on the traditions of the revenue manager role, we could not help but wonder whether the existing model limits hotel’s profitability. Jeremie’s observation was that most revenue managers’ goals are set to top line revenue (RevPAR). Yet, top line revenue is, just as it describes, just the first line item. There are so many other factors that can drive profit. We question whether hotels are missing opportunities by having their gate(rate)-keeper be so narrowly focused. For example, if a family of four books two rooms and two traveling businessmen book two rooms, it is clear who is going to spend more on the hotel’s services and be more profitable for the hotel, yet where in the revenue management model is this taken into account?

We summarized our discussion with Jeremie here, and have since seen two more great pieces (above) that focus on the limitations (or “handcuffs”) of the traditional revenue management model. We feel that questioning the revenue management role is an important movement that is just beginning to hit the mainstream (even though some of our more boutique properties have been experimenting with for a while). The guest opportunity is not in the booking itself but in the relationship that starts at that point.  


This study should save you some time.   

Skift | Hotels That Respond to TripAdvisor Reviews will see Revenues Rise, Up to a Point

Why it matters: New research out of Cornell University’s School of Hotel Administration puts an interesting twist on what we’ve known for quite some time now -- that hotels that take the time to respond to reviews on TripAdvisor fare better (in ratings and revenue) than those who don’t, but only to a point.

Indeed, this recent study shows that hotel revenue levels rise as the number of management responses to online reviews increase, but after an approximate 40% response rate there’s a point of diminishing returns. Most surprisingly, researchers found hotel revenues and ratings are lower when managers respond to more than 85% of reviews than if they were not to respond to any reviews at all.  

Also important are the findings that consumers are more appreciative of responses to negative reviews than to positive ones, and that just getting guests to post any reviews on TripAdvisor pays dividends -- researchers found a positive correlation between ratings and the number of reviews.

So, what does this mean for hoteliers?

This is good news. For those who previously felt pressured to respond to every review, this research should save valuable time. Interestingly, this recommendation squares with a report TripAdvisor issued in August of last year, which advised hotels to engage with at least 25% of reviews. What could then be discounted as self-serving advice, now seems prudent.

So too, hoteliers should focus their time on negative reviews, finding opportunities to make constructive responses, rather than simply acknowledging positive comments.  


Happy employees = happy guests = happy profits.  

Hotel Business Review | Happy Employees, Happy Guests from Boutique Properties to Major Resorts

Why it matters: Last week we wrote about how prioritizing better technology for your hotel staff can help mitigate high staff turnover, high staff training costs and improve service delivery. Showing your staff you value them by providing them with well designed technology, argued Snapshot CEO Stefan Tweraser, in “Design Thinking in Hotel Technology,” will result in them more highly valuing your guests. This week’s case study on hotel employees in Carlsbad, California reinforces this theme, with the message that happier staff will lead to happier guests, which will lead to a happier bottom line.

The author of the piece details a wide range of tactics properties in Carlsbad employ to inspire happier staff, including the hotels’ investment in hiring, training and mentorship and the emphasis on “growing [their] own” - the preference to promote from within. The study also looks at ways different hotels in the area try to empower their staff, recognize high performance, create work-life balance and try to make the hotels a “second home.”

Of course these insights and practices aren’t just Carlsbad’s alone. In every business, a company’s staff can make or break a consumer experience. Hotels are no exception. Everyone remembers a staff member who went above and beyond to make the extra effort.

Last week in our ALICE book club we discussed Setting the Table, written by hospitality industry icon Danny Meyer, who espouses the idea that treating your staff well isn’t just the right thing to do, but good business: “A happier staff leads to happier guests and more profit.” According to Meyer’s formula (and if you have eaten at one of his restaurants, you’ve felt it) “the first and most important application of hospitality is to the people who work for you…. [and then] to the guests.”

In every industry, there are companies that put employee culture first and are rewarded for it. Zappos. Google. Airbnb. Your hotel?