Hotel Profit Discovery

Three Short Case Studies in Total Revenue Management Analytics

One of the arguments I continually make in this blog is that many Total Revenue Management efforts are being thwarted by the fact that managers are using the wrong measures to construct TRM strategy.  In brief, you can not use traditional hotel measures of performance and analysis to run a TRM transformation.  Here are three cases studies, based on real consulting engagements, where measures based on more advanced analytics where used to highlight hidden guest behavioral patterns that were destroying profit.

GM: Dinner Impossible

The Challenge:

The GM needs to promote restaurant visits. Restaurant sales have been stagnating. As a first line of attack, the GM changed the menu a few times but there has been no improvement in Sales. As a second line of attack, the GM tried to incentivize the front desk and concierge to increase in-restaurant visits – again, to no avail. Upon requesting Smart Reports, the GM peruses them to find out if there is any guest behavior that can be exploited to increase restaurant visits. He is particularly interested in understanding the behavior of the guests throughout their stay.

Analytics Solution:

The Key Influencers report allows the GM to see which guest activity most influences a given target (in this case – In Restaurant service) using an advanced data mining technique. The algorithm finds the strongest associations in guest behavior across all touchpoints. The report then tells you exactly where your efforts ought be focused in order to have the best chance of achieving your best results. The report is ideal for studying issues that are beyond any individual department or outlet.

Managerial Revelation:

The GM requested a Key Influencer report where the target was In-Restaurant Visits. He immediately realized that one of the biggest negative influencers on in-restaurant visits was whether or not the guest had Checked In early. The report clearly revealed that Early check-in guests were much more likely to visit the restaurant for dinner on their first night stay at the hotel than guests who checked in at/after 3p. Guests checking in at/after 3p would most likely opt for room service. The Average Room service ticket per guest was half that of the Average in-restaurant ticket. Therefore there is a revenue opportunity in converting room service dinner sales to in restaurant dinner sales.

New Reality:

After costing out alternatives, the GM hired new housekeepers to allow for more early check-ins. This resulted in a double digit gain in dinner visits for first night guests and a triple digit ROI for this newly discovered opportunity.

Long Term Impact:

The GM realized that he had to see through the clutter of knowledge and ‘experience’ that was making up his existing tactical thinking and instead to rely on the analytics in Smart Reports for strategic insights.

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F&B: PAC to the Rescue

The Challenge:

The F&B Director realizes that over the last 2 years, the main restaurant has increased its number of covers but the average spend per cover has decreased – a reflection of the fact that revenue has stagnated. The F&B Director is considering raising menu prices to compensate for the decrease in average spend per cover.

Analytics Solution:

The Per Available Customer (PAC) Report reveals how much each guest generates for each outlet during their entire stay.  While the traditional Capture Rates can only show total outlet activity, PAC Reports reveal significant changes in guest behavior.  These reports are a critical component of Total Revenue Management.

Managerial Revelation:

Due to the fact that the F&B Director can see the Restaurant’s perfomance per Available Customer – a granular level, he realizes that he had previously misdiagnosed the situation.  He now sees that the number of guests visiting the restaurant has decreased while their spend and average covers have increased.  This is a clear indication that the restaurant is not positioned correctly to the type of guests staying at the hotel.  At first glance it seems that the restaurant is now relatively inexpensive for the best guest and so they are visiting more often and creating more covers. However the restaurant is overpriced for the majority of the hotel’s guests.

New Reality:

The F&B Director sits with the head of RM & Marketing to better understand the type of guest that is being driven to the property so that he can design Menu and Pricing that is more reflective of the guest profile.  He also put in place a Promotion Strategy that included certain price points that were being ignored previously and which would be appealing to the less affluent guests.

Long Term Impact:

The Heads of Marketing, RM and F&B monitor the trends via Smart Reports and PAC Reports to understand Per Available Customer performance and to predict the guest behavior that drives overall revenue and growth.

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Marketing: Promotional Paralysis

The Challenge:

The Marketing Department’s library of promotions are not performing well.  Most are copies of the competitor’s promotions and packages therefore the marketplace is diluted with similar offerings.  The PR value of these promotions are also diluted given that all the area hotels had the same or similar offerings. The Head of Marketing had to create new packages that would drive growth and which were more creative.

Smart Report:

The Spend Combination Report clearly identifies the Value of the most common “footsteps” taken by guests during their stay.  Using any combination of outlets, channels, day of stay or any other dimension, the Head of Marketing is able to identify the guest behavior that drives the most revenue or profit.  The advanced data mining algorithms of Association, present in the Spend Combination Report, are used to reconfigure your PMS data into an invaluable map of likely guest behavior.  This report is ideal for identifying the touchpoints that are commonly experienced during one stay.

Mangaerial Revelation:

The Head of Marketing determined that instead of a blanket promotion encompassing all guests, the Promotion Strategy ought to vary depending on the room type.  Also, he realized that Spend Value had a direct correlation with the value of the room type and therefore the Promotions, Packages and Discounts for each room type should be different.  He was able to find the combination of services which were most appealing to each guest segment, the guests that increased their spend once they were offered certain promotions and the likelihood of guests repeating a service during their stay.  He was able to trace the footsteps of each guest by room type to discern opportunities for Promotions.  These changes had a powerful impact on Profit.

New Reality:

Promotions would now be designed to be more personalized to each stay and more unique to the hotel.  There was also a reduction in Promotional Mailings as they were now more targeted.  Specific discounts and packages were published by room type which resulted in a triple digit growth in the booking of these promotions.

Long Term Impact:

The Head of Marketing now understands that blanket promotions are not valuable and that instead he had to tailor each promotion to the guest behavior that would prove more profitable to the hotel. The mindset of Marketing shifted from “finding guests for my products” to “finding the right products for my guests”.

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Robert Hernandez, Statistical Analysis and Data Mining for Revenue Growth Robert is an expert in the field of mathematical Hotel Optimization and Analytics. He has spent the last 17 years building data-driven forecasting and optimization models for companies in over 20 different industries, from tech to tourism. Robert possesses a very unique skill set including cross-disciplinary experience, advanced mathematical and analytics skills, data transformation, industry-specific knowledge and business-process improvement expertise. Robert began his career at the Walt Disney Company in Revenue Planning. Read More+


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