How to Make Effective Commercial Decisions for Your Hotel

Written by Rachel Grier, Area Vice President, Asia Pacific

The Indonesian hotel industry continues to face its huge challenges as a result of COVID-related lockdowns and travel restrictions. The new reality of lower occupancy and negligible corporate and international demand for the foreseeable future will force hotel owners and managers to do more with less. To survive in these challenging operating conditions, the break down of departmental silos and thinking in radical new ways about guest value is required to achieve commercial success.

For many years the concept of collaboration has been discussed in the hotel industry. The benefits of a closer working relationship between sales, marketing, distribution and revenue management seemed clear for all, but was challenging to execute. Today, collaboration is no longer an aspiration, but a necessity given the scale of consolidation of roles and restructuring within many hotels. So how can your hotel align departments to drive commercial success?

Shifting from interdependence to collaboration

Shifting from interdependence to collaboration

Often, hotel departments operate relatively independently from one another, with different priorities, technology platforms, profit margins, demand patterns and performance metrics. And yet decisions in one department can directly impact other departments. Such interdependence provides a key argument for cross-departmental collaboration, or given current forced consolidation of departments, new opportunities to work more effectively. When departments align under the shared goals of identifying, attracting and capturing the most profitable business, there are more synergies and fewer conflicts. When data and market intelligence are shared across departments, the staff has a clearer idea of which strategic business opportunities to pursue and when to negotiate or decline.

he emergence of commercial leaders

The emergence of commercial leaders

Traditional stand-alone management roles like marketing, sales and revenue management are today being combined by many hoteliers into commercial management roles. Even for those hotel groups that decide to keep singular marketing and revenue management specialists, more is expected of those roles. For instance, no longer are hotel revenue managers responsible for a single property or a handful of properties within a hotel group. They are now responsible for a cluster of properties determined by location or brand and are expected to make strategic revenue decisions for up to a dozen, or more, hotels every day.

As hotel management roles are consolidated and responsibilities expanded, commercial leaders require a key automated and integrated technologies in order to drive greater operational efficiencies. For instance, a machine-learning revenue solution that implements tactical decisions and automatically distributes rates and inventory controls will free up commercial leaders from having to review and then execute pricing decisions for multiple properties each day. This will allow the new generation of leaders to focus on long-term commercial strategies, working seamlessly across yesterday’s siloed hotel departments.

Align data and thinking to drive profit optimisation

Align data and thinking to drive profit optimisation

Effective hotel management relies on accurate, consistent data to identify promotional needs, plan campaigns and guide pricing and inventory decisions. Operations uses forecast data to anticipate business flows, manage resources and control costs. And management companies and owners use similar data to anticipate profits and guide planning, financial and investment decisions. To optimise revenue and profits in a disrupted market, the forecast and guest-spend insights compiled by by revenue managers should be accessible across all commercial areas of a hotel organisation.

From a marketing perspective, revenue management data can help identify those who have the greatest value to the hotel. Analysis should look beyond room spend to understand their total value through purchases of food andbeverage, plus ancillary items like spa, golf and retail. These insights can then be used to create targeted, personalised campaigns to entice them back, or attract more travellers like them and increase total spend and hotel performance.

Sales prospecting, proposals and contract negotiations from any segment should be oriented towards maximising total hotel revenue rather than simply filling guest rooms. Whether it’s group bookings, corporate agreements or wholesale contracts, the goal should be to better optimise all spaces throughout the hotel, including meeting rooms, and ancillary revenues. It is essential for sales teams to work with revenue managers to consider the costs of displacement and identify opportunities to boost revenues from non-room areas by understanding total guest value and growth potential in the future.

As with other departments, food & beverage can also benefit from access to revenue management data and strategies normally applied to rooms. This includes demand pricing, menu engineering and precise forecasting to identify promotional needs and find opportunities to reduce labor expenses, cost of goods sold, and spoilage. Hotels may additionally leverage room demand by bundling breakfast, drinks and other food & beverage items into creative and dynamic packages.

While the meetings & events sector has been significantly restricted by the pandemic, now is the time for revenue managers to work closely with meetings & events staff to implement forecasting methodology, demand-based pricing as well as release off-dates, minimum spend and length-of-stay requirements in preparation for when demand returns. With better forecasting and reporting, managers will know when to turn away business and hold out for more lucrative opportunities and when to be flexible.

New ways of working

Given the challenging market conditions hoteliers across Indonesia face today, forward-looking hotel leaders are moving towards the consolidation of traditional stand-alone departments and roles. As part of this realignment and the shift towards holistic commercial teams, key staff members across sales, marketing, distribution and revenue management will have to find new, effective ways of working together, collaborating for the future strategic success of their hotel.

For more information on how your hotel can benefit from commercial collaboration, please visit: www.ideas.com