5 Challenges Facing Resort Revenue Managers Today
Written by: Tracy Dong, Lead Advisor, APAC, IDeaS Revenue Solutions
Cultivating asset value for resorts in Indonesia is all about capturing and capitalising on the unique revenue opportunities their distinctive business models create. However, compared with urban-based hotels—where revenue management processes are well-established based on industry-wide practices—resorts are challenged by much more complicated business models and a diverse range of revenue streams.
Resorts in Indonesia require a more tailored approach than the typical hotel. This approach should account for flexible guest rooms to accommodate families of all sizes, while pricing per person or by room, as well as managing an abundance of package offers and contracted wholesale rates. The unique operational environment resorts work within present revenue managers with a range of opportunities, but also some major challenges. Below I have outlined five key challenges resort revenue managers need to be aware of and work around.
Greater pricing options, greater complexity
When it comes to pricing, resort owners, general managers and revenue managers all struggle to answer the same question: what is my optimal pricing strategy to maximise revenue for my hotel? Resort operators face the challenge of having so much data, so much volatility in demand, so many possible outcomes, it makes achieving optimal price points that much more difficult. Because of the complex ways in which resorts generate revenue, more traditional dynamic pricing simply aren’t ideal options for some Indonesian resorts, which means there is greater risk of missing out on significant potential gains.
While automated-pricing technology has enhanced how hotels practice revenue management today, not all of these systems are a good fit for the resort market. For instance, all-inclusive resort revenue managers must weigh the outcomes of per-person pricing versus unit-based pricing and the desire to deploy that pricing strategy across all products and channels.
Resorts also have a higher level of opportunity for guest personalisation. Offers like a spa package, rose petals and champagne, or room-location choices like balcony, poolside, ocean-view or beachfront create opportunities for more tailored and unique guest options.
Making wholesaler contracts work for you
Resorts take a far larger portion of business—sometimes upwards of 70 percent—from wholesale tour-and-travel contracts. This may lead some resort owners to view revenue management as a lesser priority compared to traditional hotels due to having rates set far in advance, rooms occupied and even total guest spend preconfigured, but this should not be the case. The agreed upon terms help ensure the resort stays busy, but with less control over pricing and availability, how does a resort know if these arrangements truly create the best outcome for their bottom line? A savvy revenue manager will conduct a thorough analysis of their contracted revenue performance, outlining areas where rate negotiation or availability can be optimised going forward.
No revenue manager can do it all
Resorts generate revenue in varied ways, often with a lower reliance on guest-room income than traditional hotels. For instance, event spaces can comprise a large portion of profits at a resort. Weddings, professional conferences and conventions with thousands of attendees require hands-on attention from key operational staff including revenue managers who will try to identify and enhance additional revenue streams for the property. While opportunities to enhance revenue from meeting and event bookings should be a focus for revenue managers, it is important that these strategies improve the hotels overall revenue and profitability performance.
How do you price inventory that constantly changes?
One of the assumptions of revenue management is capacity is fairly fixed each day. However, flexible guest-room inventory is becoming more prevalent and critical to a resort’s ability to serve a variety of party sizes and needs. Many make use of adaptable, virtual room types, or component rooms, which are comprised of a combination of two or more physical rooms that enable larger and more tailored accommodations. As an example, a king room combined with a double can be sold as a “family suite.” This is great for guests but a nightmare for revenue managers. The complexity of offering multiple room configurations on top of a property’s set room count often requires manual pricing and constant oversight to manage the profitability of these assets. Technology can now account for these complexities and through machine-learning, arrive at the optimal price and configuration to sell on a given day.
Most revenue management systems were not designed with resorts in mind
The pricing complexities for resorts present revenue managers with unique challenges and opportunities. Modern revenue management technology has made heroes out of hotel revenue managers. They have been able to apply advanced analytics by using automated-forecasting and optimised-pricing technology to drastically enhance their annual revenue performance. However, these same success stories for resort revenue managers are a lot scarcer because not all systems are designed to accommodate for the specific needs of resort revenue management.
Resort owners in Indonesia need to carefully consider their approach to revenue management and what systems to deploy. New systems with per-person pricing and component rooms functionality will allow resort revenue managers to optimise all combinations of room types and rate plans, based on guest demand and price sensitivity. Advanced capabilities from a cloud-based automated revenue management solution can support a resort’s business strategy to maximise total property performance.