Revenue Management Strategy: Forecasting and pricing during market recovery
Preparedness is key to surviving any period of instability. Putting in the work to ready your hotel against various outcomes will pay off in the long run.
As a revenue manager, you may have asked yourself the following questions recently:
- Is it worth the effort forecasting with such an unpredictable future ahead of us?
- Should I drop rates to drive business or increase prices to make up for lost revenue?
- How can I manage and reduce costs in this low-demand time?
We spoke to revenue managers Thibault Catala of Catala Consulting, Adrienne Hanna of Right Revenue and Annemarie Gubanski of Taktikon to determine optimal approaches to revenue management and whether there is any use in forecasting during this uncertain period.
The importance of forecasting in uncertain times
While forecasting may seem futile due to the many unpredictable changes in rules, regulations and demand, it’s more important now than ever.
Here are four ways to use forecasting in a volatile market:
Outline several scenarios. Creating a forecast might make you feel secure as it gives you something to go by. Unfortunately, if you have but one version of events sketched out, you may be less able to adapt if things don’t go as planned.
Instead, create a best, worst, and medium-case scenario to get an idea of possible outcomes, how these would impact your property and how you can react to them. This way you’ll be better prepared for whatever does happen and will be able to make decisions quickly and confidently.
Leverage revenue management technology and your experience. Revenue management systems (RMS) help you save time and provide deep insights into how demand in your area has been developing. Leverage your experience and knowledge of the industry to interpret this data and refine your forecasts.
Look at the short term. Government regulations around travel can change daily and lead to a quick rise or drop in demand. Monitor the situation in your home country and key source markets to anticipate changes as much as possible. Focus your forecasting on the short term (4-6 weeks) and be flexible with updates to accommodate sudden changes.
Predict and manage your operational costs. Apart from showing you how much revenue you will be generating in the coming weeks, your multi-scenario forecast is also an important planning tool for operations. Departments such as housekeeping, front office, F&B and engineering will use your forecast to schedule staff and purchase supplies. Work closely with them and keep them updated on any changes to help them manage their workloads efficiently and cost-effectively.
The importance of forecasting in uncertain times
While forecasting may seem futile due to the many unpredictable changes in rules, regulations and demand, it’s more important now than ever. Thibault Catala of Catala Consulting, Adrienne Hanna of Right Revenue, and Annemarie Gubanski of Taktikon explain four ways to use forecasting even in a volatile market.
Rates vs. experiences: what do your guests want right now?
When fighting for the little business there is, it can be tempting to slash your rates to attract guests. But is that the only solution?
Our experts explain five things you need to be aware of when updating your room rates during the Covid-affected period.
Don’t blindly drop your rates. This approach may bring limited results in the very short term but recovering from aggressive price drops could take years, harming your profitability in the long run. Avoid joining (or starting) the race to the bottom. Demand is limited now and lowering rates will not increase it.
Stay true to your brand and price positioning. Be strategic and keep your branding and price positioning in mind if you decide to lower your rates.
- What does your property stand for?
- Who are your ideal guests?
- How would they perceive steep discounts or radical price reductions?
Answer these questions carefully before going ahead since drastic moves can change how customers perceive you – and may even damage your reputation.
Focus on value for money and experiences. Find other ways to offer your guests a bargain, instead of just cutting your rates. This can include creating packages that include several ancillary services like room service breakfast, parking and bicycle rental. Apart from providing extra value, this package can promise great experiences like a leisurely breakfast in the comfort of the room and a fun excursion your guests will remember and probably cherish more than a discount in the long run.
Use clear messaging. Let guests know exactly what they’re getting for their money. Competition for business will be fierce, so you will need to justify your rates, especially if your competitors are discounting.
Describe the benefits guests will get from booking with you and highlight the fun, memorable experiences you will give them. Focus on things many people missed in the past few months including quality time spent with loved ones, outdoor activities, exploring a new place or simply switching off in a relaxing environment.
Analyse your market and find your approach. In this unprecedented situation, nobody can accurately provide a roadmap for how to navigate a new business landscape. Use the suggestions above to get ideas for different approaches and find what works best for you in your specific market.
Rates vs. Experiences: Don't blindly drop your rates!
When fighting for the little business there is, it can be tempting to slash your rates to attract guests. But is that the only solution? Thibault Catala of Catala Consulting, Adrienne Hanna of Right Revenue and Annemarie Gubanski of Taktikon explain five things you need to be aware of when updating your room rates during the Covid-affected period.