Asian Hospitality Assistant Editor Jill Von Wedel reports from the Choice Hotels seminars…

THERE IS no doubt that these are trying times for hoteliers. RevPAR across the industry fell 17.7 per cent in the first quarter of this year, while Choice’s RevPAR declined 10.3 per cent, not slumping as low as other brands in the industry. Owners are seeking to cut costs and increase occupancy – all while preserving the guest experience.

According to PKF Hospitality Research, most US cities will see a decline in RevPAR in 2010, though there will be emerging signs of recovery. Key metrics will turn positive in 2011.

One way for hoteliers to cope with the economic downturn is through a program of revenue management to maximize RevPAR and minimize costs.

‘Revenue management is proven to increase revenues by two to five per cent by helping hotels identify and accept the most profitable mix of business,’ said Brenda Barnes of Strategic Pricing and Revenue Management LLC at a seminar at the Choice Hotels International convention. ‘You can sell the right room to the right customer at the right price at the right time through the right channel.’

Some things to consider in revenue management include:

• Best available rate structure:  The flexibility to adjust rates to reflect demand
• Rate management tool: Simplify rate administration
• Special rate plan rationalization: Use to simplify the rate structure

While giving discounts for certain groups (such as seniors) or with short-term promotions can be a good way to attract new business, they should be used sparingly. According to a study by Cornell University and Smith Travel Research that tracked prices between 2001 and 2007, while discounting increased occupancy rates, hotels that consistently priced below comp underperformed on RevPAR.

Discounting can also lead to revenue dilution, in which a discount is given to a guest who would have otherwise purchased the room at the higher rate. ‘In those cases, we don’t know who would have bought the room at the regular rate,’ Barnes said.

Revenue dilution can also spark unintended price wars between hotels, causing the entire market to suffer. The rates must reflect the market condition and the customers. ‘If you don’t think about dilution, you could lose more than you gain,’ Barnes said.

Other points of hotel revenue management include:

• Understand value proposition versus your competitors’ and position yourself accordingly. ‘You’re only as smart as your dumbest competitor,’ Barnes said.
• Create value-added packages. Adding extras can entice customers to stay at your properties.
• Reward loyal customers. Programs such as Choice Privileges reward guests with free nights and other extras.
• Ensure rate availability and restrictions on offers are appropriate. Don’t extend offers for too long or too short a time, or place unreasonable requirements.

Barnes also recommends looking at the current trends and forecasts. ‘Forecasting is more important that ever in this economy,’ she said. ‘Use all the data that’s available to you. Make the most of peaks, identify valleys. Allow quick reactions to shifts in booking patterns.’