Building a Revenue and Channel Culture together

Key Objectives Broaden awareness of Revenue Mgt and Business strategies Focus on the development of critical analysis and strategic thinking skills with a

focus on enhancing competitive positioning and driving total revenue growth Develop influencing behaviours and strategies for planning and preparing for

trade reviews and board reports. Optimise channel contributions through clear understanding of the hotels market

segmentation Increase the awareness of all channel distribution points by linking into the sales

and marketing function. Develop competencies and skills of revenue champions at hotel level Communicate, share and enhance best practice between revenue/channel and

hotel Drive revenue generation through strategic promotions across all 4 channels

Key drivers to achieve our goals

Research Understanding the business

Analyse Problem solving & decision making Innovation

Convince Leading & developing people Impact & Influence Adaptability

Execute Planning & organising Drive for results

Measure Take responsibility Asses strategy

Course agenda

Market segmentation Data Collection & Analysis Forecasting Yield management Channel management Pricing

Market segmentation

What is a market segment – Dividing a market into distinct groups of buyers who might require separate products, have different needs or show different

behaviourEach property may have different market segments depending on their focus or location.

City hotel CorporateBTALeisureIndividuals

Resort HotelLeisureIndividualsTravel AgentsCorporate

Conference hotelCorporateConference organisers

Long stay hotelsCorporate BTA

Transient hotelsCorporateleisureIndividuals

African Sun’s Mkt Segementation African Sun/Staff Business Travel Agents Conference organisers Corporate Government Leisure Individual Non-Government Organizations Sporting group Tour Operators Associations

Benefits of accurate market segmentation

Accurate forecasting

Optimising market mix

Developing targeted strategies to attract specific customers

Effective and targeted pricing strategies

Data collection

Where does one look to extract the information needed to make an informed decision on generating increased revenues

PMS Market share reports Market trends Events calendar Sales reports Local news papers

Why do we need to analyse data out side of what the PMS can give us ?

Key metrics associated to room revenue

Occupancy Average daily rate RevPar

Quick calculation

Revpar / ADR = Occ%

Revpar / Occ = ADR

ADR X Occ = Revpar

Which of the above is the most significant measurement for RM to consider ?

RevPar

Revenue per available room

Gives a measure of performance against all available rooms as opposed to just sold rooms

A key measure in ensuring that pricing and occupancy decisions give the best possible return

Rate reduction decisions to drive occupancy must be considered very carefully – increased occupancy carries increased costs

Increased price can result in a drop in occupancy but also give a better RevPar result

Key performance indicators

MPI – Market penetration indexHow our occupancy compares to our competitive set

ARI – Average rate index

How our ADR compares to our competitive set

RGI – Revenue generated Index

How our RevPar compares to our competitive set

Market Penetration Index

Our occFormula =

Market occ

Hotel MarketExample Occ 84.1% 77.1%

MPI 1.09

Average Rate Index - ARI

Our ADRFormula = -------------

Market ADR

Hotel MarketExample ADR $71.96 $81.90

ARI 0.879

Revenue Generated Index - RGI

Our RevParFormula = -----------------

Market RevPar

Hotel MarketExample RevPar $60.55 $63.17

RGI 0.959

Monthly Performance Data

Job Number: 957984 Staff: Dave Bunyard Created: July 30, 2009 Currency: ZAR - South African Rands

Date Index RankMy Prop Comp Set My Prop Comp Set

Jan 2009 27.1 48.7 47.1 60.8 55.7 5 of 5Feb 2009 44.8 65.8 64.7 85.6 68.0 5 of 5Mar 2009 36.8 64.3 60.6 76.4 57.3 5 of 5Apr 2009 35.5 56.4 61.8 71.0 63.0 5 of 5

May 2009 40.0 66.2 53.7 70.6 60.4 5 of 5Jun 2009 62.7 73.4 72.3 70.5 85.4 4 of 5

Date Index Rank

My Prop Comp Set My Prop Comp Set

Jan 2009 1,477.43 1,597.50 1,353.60 1,413.37 92.5 5 of 5Feb 2009 1,654.56 1,714.76 1,621.49 1,623.36 96.5 4 of 5Mar 2009 1,531.95 1,685.61 1,547.68 1,533.24 90.9 5 of 5Apr 2009 1,417.14 1,644.37 1,562.50 1,554.71 86.2 5 of 5

May 2009 1,411.16 1,762.26 1,549.00 1,578.67 80.1 5 of 5Jun 2009 1,431.85 1,910.03 1,561.15 1,602.23 75.0 5 of 5

Date Index RankMy Prop Comp Set My Prop Comp Set

Jan 2009 400.21 777.43 637.02 858.83 51.5 5 of 5Feb 2009 740.67 1,128.09 1,048.57 1,389.80 65.7 5 of 5Mar 2009 564.36 1,083.65 937.64 1,171.51 52.1 5 of 5Apr 2009 503.48 927.09 966.04 1,104.13 54.3 5 of 5

May 2009 564.46 1,167.38 831.66 1,115.04 48.4 5 of 5Jun 2009 897.20 1,401.98 1,129.16 1,128.85 64.0 5 of 5

ADR

This Year Last Year

My Property: The Grace In Rosebank #133104

RevPAR

Comp Set: Hyatt Regency Johannesburg #111222, InterContinental Johannesburg Sandton Towers #111489, The Michelangelo Sandton Square #127993, African Pride Melrose Arch

Hotel #137159, Excludes Subject Property

This Year Last YearOccupancy

This Year Last Year

Other revenues

SpendPAR RevPOS RevPas RevPASH

SpendPAR

Total in-house guest / Total Rooms = SpendPARRevenue Available

$12,375 / 100 = $123.75

This excludes events, banqueting & conferencing revenues

RevPos & RevPas

RevPos – Revenue per occupied space (sq m)RevPas – Revenue per available space (sq m)

Total revenueRevPos = -------------------

Occupied square meter

Total RevenueRevPas = -------------------

Available square meter

Teak 0 42.84 0 85.68 27-Jul Acacia 30 8550 8550 2 28.56 57.12 57.12 100% R 149.68 R 149.68

Baobab 35 9975 9975 2 198 396 396 100% R 25.19 R 25.19Boardroom 0 36.69 0 73.38 Mahogany 9 315 315 2 28.22 56.44 56.44 100% R 5.58 R 5.58Seringa 0 138.84 0 277.68 Teak 0 42.84 0 85.68

Jul Acacia 113 39170 1500 1230 41900 26 28.56 742.56 1771 42% R 56.43 R 23.66Baobab 346 73280 4500 14300 92080 20 198 3960 12276 32% R 23.25 R 7.50Boardroom 4 0 0 180 180 2 36.69 73.38 2275 3% R 2.45 R 0.08Mahogany 115 35350 1500 1605 38455 32 28.22 903.04 1750 52% R 42.58 R 21.98Seringa 259 60140 15000 16425 91565 22 138.84 3054.48 8608 35% R 29.98 R 10.64Teak 161 62225 0 8000 70225 26 42.84 1113.84 2656 42% R 63.05 R 26.44

Date Room No of Pax Total DCP Venue hire Extras Total Rev No of Periods Square meters Occupied Available % Occ RevPOS RevPASTotal 998 270165 22500 41740 334405 128 473.15 9847.3 29335.3 34% R 33.96 R 11.40

Cost per square meter

Date Room Total Cost Square meters Occupied Available % Occ RevPOS RevPASJuly Total 257000 0 9847.3 29335 34% R 26.10 R 8.76

Profit per square meter

Date Room quare meter Occupied Available RevPOS RevPASJuly Total 0 9847 29335 R 7.86 R 2.64

Example of Hotel C&B RevPos & RevPas

RevPash

RevPash – Revenue per available seat hour

Benchmark to establish revenue generation for food and beverage outlets

Takes into account perishable products of a seat and outlet opening times

Total outlet / Nr of available / hrs open = RevPASHRevenue seats

$13,000 / 100 / 10 = 13

Variable V’s Fixed costs

Variable costs – a cost that is proportional to the volume of the input produced Examples:-

Guest supplies Utilities Food & Beverages

Fixed costs – A periodic charge that does not vary with business volumes Examples

Admin & General Sales and Marketing Salary burden

Gross operating profit

GOP – Calculation Increase increaseADR Occ

Total Hotel Rev $15,000 $18,000 $18,000_

Variable costs $4,500 $4,500 $5,800_

Fixed Costs $5,000 $5,000 $5,000

=

GOP $5,500 or $8,500 or $7,20037% margin 47% margin 40% margin

Forecasting

Forecasting should drive at least 50% of your actions

Forecasting Revenue MathMarket segmentation

Channel ManPricing

Yield Man

What is forecasting

Estimate the company’s share of market demand based on defined market segments and an assumed marketing environment

Predicting market demand In each market segment Based on predicted market conditions

Building blocks to achieve accurate rooms forecast

Opportunity/gaps/peaks Short Term In system No shows

Yield Restrictions Long term Booking Pace Cancellations

Financial performance Historical Data Day of week Budgets

Demand to come Room nights Market seg Patterns/trend

Pricing Average Rate Length of stay Tentative/definite

Overbooking Revenue Uncertainty Groups Wash down

Market conditions Unconstrained Special Events Capacity

Forecasting

Organizing the data

Questions & Short term – Long term – Uncertainty – Budget – Market condition

Hypothesis

Data Collection In system – cancellations – No shows – Historical data – Market segRoom nights – Average Rate – Length of stay – Revenue – Capacity

Data Day of week – Patterns/Trends – Booking Pace – lead time

Organization

Data Analysis Special Events – unconstrained – Group Wash – Tentative/Definite – Demand

Recommendations & Opportunity/Gaps/Peaks – Financial performance

Decisions

Take Action Yield Restrictions – Pricing - Overbooked

Forecasting

Organizing Data – continued

How best can we display the data so that it shows, patterns, trends, seasons and events.

Graphs and simple tables tend to work better than detailed figures. Summaries are essential and gives the reader a brief overview if they do not have the time to go further.

Always take into consideration that the reader is extremely busy and has very little time.

Forecasting

Organising Data – continued

Forecasting

Pace report

0

10

20

30

40

50

60

70

80

90

100

Pick-up report

Data Analysis

Short Range Forecasting Pick up Pace Demand

Pick Up – What bookings are in the system now for a future date/period

Pace – What is the current trend or lead-in time

Demand – What is the future demand for accommodation

Forecasting

Forecasting

Group forecasting Transient forecasting

Groups Historical utilisation Booking pace Sales estimates Type of group Wash down

Transient Historical Booking pace Sales events Public holidays

Forecasting

Action Plan

Low Demand

Pursue market share Keep discount categories open Sell value and benefits Increase allotment allocations Target email blasts Remove stay restrictions Involve all staff

High Demand

Manage demand to optimise rev. Raise prices to be consistent with

competitors Control room rates and availability

through rate restrictions Focus on other revenues Up-sell Tighten guarantees and cancellation

policies Apply full price to suites and executive

rooms Involve all staff

Yield Management

Definition of yield management

Yield management techniques

Impact of yield management

Displacement of costs and effective negotiations.

Definition of yield management

The process of managing customer demand through the control of differential pricing and inventory allocation in each price category in

order to maximise gross revenue

Managing customer demand Differential pricing Inventory allocation Maximise gross revenue

Yield Management

Revenue cycle

Create demand

Reservations request

GuestRepeat customers

Retain demand

Manage demandForecast demand

Strategic Planning & Action

Yield Management

Yield Management

How can we measure yield management

Occupancy % X ADR = RevPar

Volume X Unit price

= Profits

Yield Management

How to drive yield

Automated Revenue Management systems

Length of stay (LOS)

Displacement costs analysis

Overbooking

Yield Management

Automated revenue systems

The most popular system is probably IDeas – but there are many others

Length of stay Minimum number of nights Maximum number of nights Close days to arrival

Examples:-

If each of your guests stayed one extra night how would this effect your occupancies. If you had to restrict length of stay for peak periods or high yield days What happens if your demand days in a week are to high how will you sell shoulder days

The aim is to establish the maximum revenue from a high demand period not the maximum average rate or occupancy.

Yield Management

How do you control Length Of Stay

You need a good unconstrained forecast

Understand your length of stay profile

Do not wait until you have 90% occupancy on the books

Use minimum length of stay rather than closing out lower rates

Do not over use minimum length of stay – we still need to fill the peak nights

Yield Management

40100

120100

30

Mon Tue Wed Thu Fri

100 rooms

Yield Management

40 70100

6030

Mon Tue Wed Thu Fri

100 rooms

Yield Management

LRA ?

What is Last Room Available

If the Best Available Rate (BAR) is available for a standard room type, for a given length of stay, the client’s negotiated rate for that room type will also be available for the

same length of stay.

If the BAR for a standard room is not available for the given length of stay, but is available for the next negotiated room type, then the client’s available rate for that

room type will also be offered

The clients negotiated rate is subject to black out dates as defined by the RFP

Yield Management

Displacement Cost Analysis

This refers to contracted business

Groups

Corporate

Airlines

Tour Series

One must be aware of how much business is contracted at a lower than average rate and then manage how much of that business is booked over

peak times/days

Yield Management

Overbooking

Internal factors No Shows Cancellations Unexpected departures Stay overs Human error

External factors Season or day of week Supply and demand City wide conferencing or events

Yield Management

Remember the Revenue cycle

Create demand

Reservations request

GuestRepeat customers

Retain demand

Manage demandCreate optimaldemand

Strategic Planning & Action

Revenue Management

Influence Strategic Actions -Make recommendations on business mix to create optimal demand at the

right time based on forecasts.

Yield Management

Channel Distribution

Channel Management

Channel Distribution brings together our reservation channels, distribution strategy and channel operations so we can simplify the way customers get to our brands and our

brands get to market.

How do customers book

Direct with the Hotel

Central Reservations Office

Global Distribution Systems

Third Party Intermediaries

Online Distribution

Channel

Direct Bookings

Hotel Reservations department –Brilliant

Customer

Phone

Fax

E-mail

Walk-in

Who uses direct channelTransient corporate

Leisure

Groups

Contracted clients

Conference organisers

All market segments

All Local bookings

Channel

Central Reservations Offices - Voice

Customer

Phone

Fax

E-mail

PACRO or

HACROREZVIEWBrilliant

Who uses VoiceTransient corporate

LeisureGroups

Contracted clientsConference organisersAll market segments

All Local and regional bookings

Channel

Global Distribution Systems - GDS

Customer

Amadeus

Galileo

Worldspan

Saber

Pegasus switch

Rezview or

Utell

Brilliant

Who uses GDS

Contracted & non contracted companiesLeisure

ConsortiaTravel Management companies

Business Travel Agencies

Channel

Third Party Intermediaries - TPI

CustomerBrilliant WWWPegasus switch

OR

PACRO or

HACRO

Expedia

Orbitz

Priceline

Venere

Lastminute

Who uses TPI

Non contracted companies – once offLeisure

Transient

Channel

Online Distribution

CustomerWWWBrilliant

Who uses direct channel

All non contracted customers

Channel

Cost per channel

CHANNEL RVNG RCVL RCVL UTELL

Monthly retainer 120.00 150.00

GDS – Rack 13.84 6% 6.66

GDS – Neg 11.84 3% 6.66

Online 5.50

TPI 3.50 +10% 3.55

PACRO 4.00

UTELL – CRO 10%

Channel

Key learning from Channel

Manage rates

Maintain parity where possible

Different channels attract different market segments

Instant results

Content management

Keep inventory open

Global internet access

Channel

Adding New Properties

Register with Utell and Pegasus or both

Load property information

On-boarding information

Wait for Utell or Pegasus to open inventory and rates in Rezview or Netrez

Start booking

Channel

Pricing

A Mckinsey & Ass Survey conducted amongst 2,400 companies across a range of industries showed the impact on the bottom line of various business initiatives A 1% reduction in fixed costs improves profitability by 2.3 % A 1 % increase in volumes increase profit by 3.3 % A 1 % reduction in variable costs increases profit by 7.8% A 1 % increase in pricing can boost profitability by 11%

Price right and you will achieve the ultimate goal

Increase ADR and bank your RevPar

Pricing

How easy is it to raise your prices

Realising price increases is not as easy as we’d like it to be

A 2 litre of Coke often has the same price tag as it did in 2005

Laptop prices are at low low prices

Airline tickets can cost up to 25% less than they did 5 years ago

Pricing

Pricing is an industry wide problem

Consumers are confused with irrational and overwhelming amounts of choice

72% of hotel guests agree that they like to shop around Hotels need to sell on benefits and confidence that the guest is getting

the best deal – there should be no elements of risk Consumers know and will accept fences, Fences should become part

of the overall value proposition

Pricing

5 pricing principles

Pricing is approached holistically with supportive segment structures Offer constrained set of differentials & clearly target products using the BAR

as the benchmark Customers will have to do something or give away something to get a

discount Product messages must be clear, descriptive, consistent and inline with

brand positioning Price points are based on marketplace demands and compressed to

encourage buy up

Pricing

Questions to ask when considering a price change

Product Is this product different in the customers eyes If discounting, what specific behaviours does this customer exhibit that

will allow me to target this specific customer and prevent cannibalization

Place How does this impact each distribution channel and the customers that

use them Price

How will the price relate to the benchmark and other price points Is it compressed and rational in relation to other price points How price sensitive is your target market

Promotion How do you intend on promoting the value of this product to customers How will your message clearly, rationally and consistently identify the

differences between products, both physically and in terms of sale

Pricing

African Sun’s Pricing policy 2010

100% 100%

> 10%>15%

> 20%

> 30% > 30%

> 40% > 35 - 40%

> 35 - 45%

Rate strategy for African Sun

Tactical

Cost per room

Negotiated - corp

Weekend

leisure STO

Series/Groups

Corporate Hotel Leisure/Resort Hotel

RACKRACK

Corporate

BTA

BA

R

Pricing

Rate strategy guidelines.

Rate Rate description Rate guidelines Market segments Definition Fences Channel Risks

Rack Highest published rate. Acts as a benchmark for other rates

100 % - Full published rate All markets - Should always be last room available -

No fences and LRA All

Always ensure that this is rate managed when occupancies start to fall

Best available rate

The lowest unrestricted rate. Public rate available which can vary based on demand

High BAR – 100% Mid BAR – 80% Low BAR – 70%

All bookers

Should never be closed out unless the hotel is full. Rate can fluctuate based on demand.

No fences and LRA All

BAR is a flexible rate so needs to be managed based on occupancies and should never be lower than contracted or negotiated rates

Corporate

Standard corporate rate with no restrictions. Available to all non-negotiated corporate clients.

90 % - commissionable Individual Corporate clients – no contracts

Provides hotel with a rate to offer all corporate clients with low volumes and non-contracted business

No fences DIRECT PACRO GDS

No real risks – just needs to be managed

BTA rates Contracted rates with the major BTA,s and consortia.

Min 80 % - 75%

All major consortia, BTA,s and TMC.

Contracted on an annual bases through RFP,s or contracted separately based on demand. Always liaise with head office before entering into an agreement

No Fences and LRA

GDS PACRO DIRECT

These rates are fixed for the year and cannot be re-negotiated once contracted and the rates must be respected

Corp Negotiated Rates

Contracted rates between hotel/African Sun head office and a multi-national corporation, eg IBM.

Rate can vary based on volume. Generally 10-20% off BTA rate

Multi-national corporation or global company with managed accounts

Enables the hotels and head office to negotiate rates and load these on the GDS

No fences and LRA

GDS DIRECT PACRO

These rates are fixed for the year and cannot be re-negotiated once contracted. Sometimes they are commissionable check contracts.

Weekend rates

Hotel specific with a high corporate market segment

Demand dependant and can vary dependent of property but should be between 75 & 85%

Leisure and discretional corporate business.

To drive volumes over weekends

Fences – restricted to Friday and Saturday nights only

All

Leisure rates Preferred Group / Series

Tour operator rates 80 – 70% depending on volume business and type of operator

Tour operators with leisure business

To incentives the tour operator to package the hotel for a wider distribution through their supply chain

No Fences if resort hotel, if not then bookings restricted to non-peak days

PACRO DIRECT

Always be aware of leisure business taking over your peak midweek period, Tue – Thurs.

Tactical A promotional rate that Drive volumes over distressed Discretional Dependent on low season Must have fences Online Maintain fences and add

Pricing

Managing Channel & Revenue

Research Understanding the business

Analyse Problem solving & decision making Innovation

Convince Leading & developing people Impact & Influence Adaptability

Execute Planning & organising Drive for results

Measure Take responsibility Asses strategy

The End

Well done you have now completed your first phase Revenue and Channel training

module.