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  • Writer's pictureRyan Haynes

How hoteliers are rethinking the revenue metric dilemma

In this episode the second of a mini-series on revenue management and pricing strategies, we speak with Radisson, Preferred Hotels and IDeaS RMS about the hotel performance metrics and how they are changing.

In a recent survey between IDeaS RMS and The Caterer, responses show that independent and regional hoteliers look at hotel revenue and commercial metrics differently. Key insights include:

  • Despite over 7 in 10 (70.9%) claiming they have an integrated revenue strategy - also known as Total Revenue which incorporates all hotel departments - RevPAR (30.6%), Occupancy (22.2%) and ADR (17.6%) remain the dominant metrics for measuring business success.

  • Profit, a better reflection of a hotel’s overall business performance, is used by 16.7% of respondents, with TRevPAR used by just 4.6%.

  • For branded hotels, RevPAR is preferred by 42.4% of hoteliers while occupancy (28.3% in rural, coastal and beach hotels) is the prominent metric for independent regional hotels.

We are joined by Michael McCartan, IDeaS, Area VP EMEA, Raimund Notz, Director, Hotel Revenue Optimization - Central & Eastern Europe, Preferred Hotels and Dario Artiola, Senior Director Revenue Performance, Radisson Hotels Group to discuss:

  • What is an integrated revenue management strategy

  • Role of F&B and ancillaries in profit optimisation

  • How to have the right strategy

  • Focusing the team on the right approach

  • Using technology


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Programme Notes


This episode has been automatically transcribed by AI, please excuse any typos or grammatical errors


Ryan Haynes:

Hello and welcome back to Travel Market Life. In today's episode, we're going to be looking at rethinking hotel performance revenue metrics. As a result of a survey in conjunction with Ideas RMS and the Caterer, we discovered that Despite over seven in 10 71%, claiming they have an integrated revenue strategy, also known as Total Revenue, which incorporates all hotel departments. Still, RevPAR stands at the number one metric at 30.6%, occupancy at 22%, and ADR R at just over 17% being the dominant metrics for measuring business success. Profit is a better reflection of a hotel's overall business Performance is used by 16.7% with RevPAR, with just under 5% while for branded properties, RevPAR is Preferred at 42%.


Ryan Haynes:

For independent regional hotels, occupancy is a predominant metric. We are going to be discussing metrics and performance with three leading hoteliers. Michael McCartan, VP EMEA from IDeaS. Raimund Notz, Director for Hotel, Revenue Optimization for Central and Eastern Europe at Preferred Hotels and Dario Artiola, the senior director of Revenue performance at Radon Hotels Groups. We're going to be looking at what is an integrated revenue management strategy, how to have the right pricing strategy, the role of food and beverage and ancillaries in Profit, Optimization, and utilizing technology.


Ryan Haynes:

Firstly, thank you, Michael, for providing us with these details and insights into how hoteliers are thinking in the UK around performance metrics. What are the key changes that we're seeing across the UK and what can we put behind this trend?


Michael McCartan:

Hi Ryan, thank you very much for having me. Yeah, so as you said in your introduction, RevPAR and closely followed by occupancy and ADR still seem to be the key metrics that hotels are using to evaluate their performance. I think over 70% of hotels used one of those three metrics as the key indicator, but interestingly enough, the fourth most common indicator was, was Profit or GOPPAR. And I suspect that over time we're going to see that metric starting to overtake or catch up and then overtake the other three metrics. And I think the reason it hasn't happened yet is that in order to do so, you need better access to data.


Michael McCartan:

You need more of an integrated data approach to report those metrics accurately and consistently and on a timely basis. But that's definitely a trend that we, at ideas see coming through. A lot of our customers are looking to report on Profit more than they do, more than they have done in the past. But even, even we as a company are challenged in trying to get hold of the data to allow hotels to not only report their Profit accurately but also to manage their pricing as a result of Profit Optimization.


Ryan Haynes:

Do you think it was a surprise that there is such a difference between how group-branded properties and independent hotel properties manage their metrics?


Michael McCartan:

Not really. I think again, it goes back to access to data. And you probably find that the change in the groups have better access to data and therefore can measure the indicators that they want to measure as opposed to the independent hotels that probably don't have access to the same level of technology or an integrated ecosystem of technology and therefore have to Resort to managing at the lowest common denominator, which is probably occupancy as we saw in the survey results.


Ryan Haynes:

Well, let's speak just a couple of Hotelier now because we've got Dario and Raimund on the line one looking at it from the group perspective to grads and hotels group and Raimund looking at it from an independent perspective, Preferred Hotel. So, it's great to have you both here. I mean, one of the really interesting things, if we start really from the performance over the last couple of years, ADR, in particular, has performed incredibly well, you know, rates have shot through the roof. In particular, though there's been challenges for some hotels about the guest perception of value and how that relates to pricing. What challenges have you had to deal with there in particular, if we take it from Dario first, please?


Dario Artiola:

Yeah, thank you Ryan for inviting me. First of all, let me also say that I fully agree with what Michael was saying, just maybe a little comment on that from a Radisson perspective. You know, the core business in the revenue man, revenue management department, of course, he's the revenue managers, you know, so really the guys that are managing the, and you see that there is a change, you know, that actually Michael was mentioning because before it was more like Profit was one of the metrics on a corporate level. Now Profit is actually coming more and more actually into a revenue management level. So for me already, like calling them only revenue management, revenue manager, actually it's a bit too reductive because they should be already called like the commercial manager, you know because they are now they have an overview on 360 degrees, but eventually, in the future, they might become a Profit manager, you know, and that's exactly in line with what Michael was saying in terms of, in terms of pricing.


Dario Artiola:

To reply to your question, yes. I mean the, the ADR increase compared also to 19, which is now actually not even any more of the, the, the real comparison because, you know, last year already was 20% above, you know, let's say in average compared to 19. And now we are doing the industry, not Radisson, right? The industry is doing even, even better. I believe personally that what we are seeing in the market is something related to the fact that the customers are valuing, valuing more, let's say timing, you know, they're valuing more, you know, the experience, this blazer new segment that we see more and more often, you know, people working, you know, just trying for work and maybe also enjoying, you know, the destination for the weekend.


Dario Artiola:

It's something that we see really often. We also dedicated, let's say, offer for that. So, for me it's really a perception of how the customers are valuing, let's say, their own time. You know, they tend to be maybe less price sensitive and maybe, you know, just for something that is before they would've asked like two times before, you know, going, you know, in a certain direction.


Ryan Haynes:

Thank you very much. And, and Raimund, I mean, looking and working with quite a large number of independent hoteliers, you know, Dario, you know, referred to that point around sort of like commercial management versus revenue management. Where are independent hoteliers when you are speaking to them about sort of, the resources and the team skills that they have on-site?


Raimund Notz:

Well, yeah, first thanks for having me here. On the podcast, it's a pleasure to be together here with all of you. And yes, in regard to the numbers, it's really interesting and it's different to the brand side like Dario's telling us about red and how, how things going. The point with independent hotels is a question of technical structure and how, how they built their distribution set up in our days. So, we are looking at things from a different perspective. Only maybe half was, was, was properties only limited number of, of data throughout the channels, but overall, we try to support properties in regard to profitability.


Raimund Notz:

That's, that's the point. So, it's a question which goes back then to the knowledge of the team on site and technology in place, access to technology, and also the willingness of the hotel owner to invest in The technology, which can, can also support profitability because maybe they, they have savings on, on, on, on salary side versus, versus the one time or very low monthly fee for technology. So, this is something which definitely contributes then to profitability, even though we don't focus on the numbers in the first instance when really looking at occupancy and, and ADR at this point, however, talking then about the business mix, thinking of online trouble agencies and commissions on the site, there are opportunities to really optimize profitability and reduce costs on the other side.


Raimund Notz:

And as Dario said, the question really is the expectation of the customer was increased ADRs and increased ADRs in the first instance come as a surplus. So they are to a certain degree, purely Profit. We have to deduct nowadays the increase in salaries, et cetera, and energy costs. So, this is something which goes the other way, but it's definitely a question then with increased ADR of how to maintain the customer expectation. It's not only the point of increasing rates because of certain reasons can be energy, can be salary, increases, level cost, whatever, but it's also a question of maintaining the customer expectations and ensuring the product is, is getting an improvement.


Ryan Haynes:

Thank you. Now Dario, there just are lot more importance being put on food and beverage and ancillaries in Profit optimisation. How. Far is Radisson on that journey to being able to incorporate that fully within sort of the metrics of the performance of the hotel within the specific guests and what they contribute?


Dario Artiola:

Yeah, actually that's, that's a great point, you know, which is linking perfectly with what we were just saying to just take one of the Raimund points. It's all about the capabilities, of course, like big chains, you know, they have of course more cap capabilities also to test, you know, and to do something which is maybe, you know, new in the market, you know, maybe to also use some technologies which are disruptive, you know, and maybe can bring additional revenue. Sometimes it can burn revenue, you know, course you can afford to test something which maybe an independent hotel cannot. So, starting from that in Radisson, we are working with the external companies which are helping us to implement, let's say an FMB man revenue management. So, we are applying, let's say revenue management strategy, on the FMB, applying management, on the menu in the restaurants of the seeds allocation.


Dario Artiola:

We have already actually quite successfully tested in the pilot like five 10 hotels. So this is already now become like actually something pretty common, let's say Radisson, not all hotels at the moment, you know, all the restaurant of hotels are using these technologies, but they will, and the Profit, let's say in terms of increase in revenue, it's up to 30%, which for the FMB, which we know, by default, it's not the most profitable, let's say segment ever. It is already quite something, you know, and again, it's just that big chains eventually, you know, can bring something to the market, you know, as of course leaders and then, you know, maybe, of course, the others will follow.


Ryan Haynes:

Now, Michael, I mean both Dario and Raimund have mentioned this need for data and technology. Backing up your point at the very beginning, could you tell us what the role is of a revenue management system for hotels that are looking towards revenue, a total revenue, and how the technology can really help with that Profit more than just room rates?


Michael McCartan:

Yeah, so I sound like a broken record some of the time because I always refer to data as the oxygen technology can, can achieve wonderful things, and it's particularly in an integrated ecosystem, but in order for that ecosystem to fully function, you need to exchange data freely. And our industry has a long torrid past of not having systems talk to each other. So, it's much better, of course, with the OPI open API movement, where systems do talk to each other, and that free exchange of information happens. But the reality is we still got a long way to go.


Michael McCartan:

So we still have a situation where little bits of data sit in pockets here and there in an organization in food and beverage is not fully, fully merged with the PMs, et cetera, et cetera. And, and, you know, Dario and Raimund can talk a lot about that, but if our, our su the, the successful deployment and utilization of full profit optimization across the board at, at a general level is dependent on systems such as ideas, getting access to data. We can achieve amazing things. We can rarely make Profit Optimization the gold standard for hotel operations, but it is dependent on us getting access to all of the data that matters.


Michael McCartan:

And once we, once we, once we do have that data, then, then we rarely can make a lot of what we've been speaking about reality.


Ryan Haynes:

Now Raimund, in the data we see that you know, many more independent hotels don't have a revenue management system or don't even have a dedicated revenue department or revenue manager within their property. Are you seeing this change and how are they starting to sort of set up really robust, robust revenue strategies and incorporating a more integrated approach?


Raimund Notz:

Well, Ryan, this is, this is exactly the point how to, how to set up a strategy. This is difficult for most of the independent properties because they don't have, as you said, they don't have a proper revenue manager or department on site. So here, here it starts. And then talking about the missing, I would say the missing technology. So, they lose out on revenue or selling opportunities, right? And here it really starts and was a global representation like Preferred totals and resource or Preferred Travel Group. Better to say we support the properties to achieve global awareness and to help them to set up a proper, proper distribution strategy and help them with alliance partnerships to get access to technology partners, which would be hard to evaluate on their own in the global structure nowadays.


Raimund Notz:

I mean there is a lot of technology available. Dario mentioned this as well, and you could also fail on technology. So, we are in between and also take a step to prove certain, certain things and partners and technology to ensure one wants an independent property is pointing, is choosing the, the partner, it's not going to fail then, right? So, this is something which, which helps. But yes, it's quite often it's, it really belongs then to full distribution connectivity to also include the sales department sales guys talking about contracting, how to do contracts nowadays, technology, it depends on the market, on segmentation, on the business mix, there are a lot of those things in there for independent properties don't have a proper revenue department on site.


Michael McCartan:

One of the things that we are seeing from an independent hotel perspective is greater trust in technology and particularly in artificial intelligence and machine learning. And the consequence of that is that they are now able to deploy revenue management systems to automate the tactical pricing decisions for them, which means that they no longer have to spend hours and hours analysing which price point to apply to the market. They can let that happen in the background and allow them to focus more on the strategy of their business. And Raimund will know, obviously in independent hotels, they don't have the luxury of big, big teams. So often in independent hotels, one person is wearing many, many hats so to free them up of the responsibility of having to do tactical pricing changes saves a huge amount of time for them and allows them to reinvest that time into more strategic activities.


Michael McCartan:

And as the technology improves and the automation improves and the decision-making improves, I think the trust levels not only with, with independent hotels, but all hotels will, will rarely mean that, that those decisions, those automated decisions are going to be taken for granted. And in general, hoteliers will have more time to do more strategic things.


Dario Artiola:

When you have also maybe franchise hotels and you have maybe other manager hotels like any other chain is not mandatory. Let's say that, you know, let's say they are immediately affiliating with you in an RMS. So, in a way sometimes, you know, also you have like hotels within RMS or hotels with, they don't have an RMS, but you know, on the basis that, you know, of course, there are owners behind, right? Every single hotel and everyone wants to make more money. So sometimes from our perspective, and we do that, you know, together with actually the, the ideas team. So, we basically show the uplift of what, you know, what we are doing. And actually, to Michael's point, not only in terms of revenue but also in terms of the time they might save to do other stuff, you know, to focus on things that might be even more like profitable.


Dario Artiola:

So, from a chain perspective, you know, sometimes we also feel this, let's say, you know, the situation where you know, you have hotels consolidated with the system and you know, others that you basically need to show, which are like all the uplift you might have and try to, you know, to convince to go in the direction.


Ryan Haynes:

I mean, I was going to say Dario, that was going to be my next question and was really sort of like, you've got the technology, you've got the data, what ne more needs to be done? But it sounds like, you know, by having those data, that proof point, you're able to get that backing, that buy-in and, and, and bring that cultural change that's, that's needed. I mean, one of the other key questions is around sort of the role of RMS technology, does it replace or compliment the role of a revenue manager? Because it's often a fear amongst many people, it's replacing them, but it sounds like the strategy is absolutely essential for, for revenue management, for a revenue manager when you have a technology that's able to deliver you that insight.


Michael McCartan:

Just to jump in there I, think Ryan, one of them, I like to quote George Patton. He famously said that poor tactics can destroy the best strategy and I think from a revenue management standpoint that is absolutely correct. So, you can have the best strategy, but if you can't execute it on the tactics of that strategy effectively, then your strategy's worth nothing. And the automation and the, and the role of technology that, that in delivering that automation is really supporting hotels in delivering their strategy more effectively.


Raimund Notz:

And Michael, I want to jump in here what you said earlier for independent properties, it's really a question of getting trust into technology, getting the confidence this is working properly. However, on the other side Ryan as I said, maybe the revenue manager role is maybe disappearing or changing, I think in the future, yes, with the technology in place, the role, and the function itself will change. And nowadays, I mean don't want to focus too much on this future technology, but it's all around us.


Raimund Notz:

So, talking about ai, we heard quite a lot about ChatGPT and all these things. People obviously are very keen on those things, even in the independent hospitality area. However, we still facing, or we still have, the challenge that properties don't have a proper two-way interface in place. So, while talking about this future technology while not having, having our basics done, so this is, this is the challenge and there was a huge gap in between which should or have to be overcome in a very short time, obviously.


Raimund Notz:

So, this is something, and then yes, the role of a revenue manager will change in future.


Ryan Haynes:

Now, I mean one of the other areas, once you've got, you know, the revenue manager and what is a revenue manager or commercial manager, you've got the systems in place. What we also found within the survey was the importance of training and actually potentially the lack of training in this industry. Particularly when there are very few official and certified courses in and around commercial and revenue management for hotels. Now over half of hoteliers cite that they only take ad hoc courses in relation to revenue management as their main learning channel. 44% rely on self-learning and only 25% are able to access perhaps supplier-delivered training.


Ryan Haynes:

Dario, what sort of programs do you have in place at Radisson to help educate and upskill your team and, you know, what do you think the industry most needs to be able to support the industry succeed here?


Dario Artiola:

Yeah, sure. That's a great point. In Radisson, I mean especially for revenue management, we have created what is called the Club of Revenue Management, which now actually has five editions. You know, Madrid, Dubai, Shanghai and Delhi. So, which are just centres dedicated to revenue management? So, as you might understand, we also starting really also from interns. So, we give like clear path, you know, starting as a trainee, you know, when you can go become a class revenue manager, associate director. So of course, we're focusing a lot on young, new generations and therefore a lot of collaboration with universities. So, in Madrid for example, we are collaborating with the five universities, and you know, we also like to do training, this university, we do courses that we might, you might see also online sometimes with the pictures.


Dario Artiola:

And most of the time, you know, basically they get to see what we are doing, you know, in terms of which are the main activities, and we do in revenue management. And then, you know, they become our interns and there, you know, they're growing, they're growing the in, in the company. So, in terms of how let's say we are getting, let's say these new resources, that's one of the ways, but training, as you say, is essential. So, I think we, I can even quote ideas now because lately, we have just released as a company like a G3 IMS essential certification, which actually has been done by all the revenue managers. And it was not like for granted it was really a tofu exam with a lot of questions, how to maximize the inventory, how to maximize the restrictions, how to guide the system, you know, to apply the right strategy.


Dario Artiola:

So, it was pretty tough. And this is one of the ways, you know, that you are always constantly, let's say, you know, basically monitoring what your team is doing by giving them, you know, say the right access to the, to the materials.


Ryan Haynes:

And Raimund, the independent hotels have so fewer resources and potential budgets for learning and development programs. But you know, if a group like Radisson is using supplier-delivered training from ideas as a certification, then obviously vendors are out there to be leaned on and to be, get that support in order to be able to optimize the use of these technologies. I guess you'll also see the lack of sort of support in learning development within independent hotels.


Raimund Notz:

Well, I mean knowledge, knowledge was always key, and it will always be key in future. So, this is one thing. What will stay, yes. We work also with partners to provide training opportunities, and insights to our, to our member hotels in the independent area on additional resources, yes, we as a company provide training as well. We use CRS technology of course, where we offer training opportunities for member hotels. We also offer revenue manager revenue optimization training as well.


Raimund Notz:

on the other side, we have a close co-collaboration with the HSMAI. So, offering partnerships, and training, why wire this resource and strongly recommend that revenue managers take advantage of the CRM e-certification process, which helps, helps also quite a lot.


Ryan Haynes:

Michael, with the IDeaS certification program there also comes a level of account support and also consultancy to be able to actually help hoteliers get on top of their revenue management strategies and optimize their systems. Why is it so important to get that done from the outset?


Michael McCartan:

To get the ROI from a revenue management system, you need to ensure that there's the right level of engagement from the user's perspective. So, it's, it's beholden on us to ensure that our users are equipped with the right skills and understanding to get what they need from the system. And it varies from an independent hotel to a chain. As Dario said, you know, they're very sophisticated at reason. They've got these, these clubs around different parts, parts of the, the world really creating these in-house centres of excellence. And we would support that versus an independent hotel that is going to be, you know, relying much more heavily on ad hoc collateral that we support, and we develop for our customers.


Michael McCartan:

But then we, we, we supplement that with ongoing client success and, and usage behaviour and, and understanding how different customers are, are using the application to ensure that they are deriving the ROI that they expect from it. It's a selfish interest at the end of the day because the more the customers get out of our applications, the more they will continue to invest in us as a company.


Ryan Haynes:

Thank you. Now Dario, Raimund love to hear a couple of pieces of advice that you would both give group or, and or independent hotels.


Dario Artiola:

Trainings, you know, and starting with the, with the right approach, you know, is of course the key. We have actually the beauty of being, let's say, working with the young generations, with the guys that are super motivated, you need to show basically how, how this job is, you know, and what are the tasks that they're doing, the way of involvement, you know, in certain things. And again, we are not, we, it's not selling anymore as the revenue management role, even if it's the title might be there, but again, it's commercial because you have also a lot of interaction, you know, with other stakeholders, salespeople with GMs. So, it's also about, you know, you need to negotiate many of your ideas even, you know, you want to have in a certain hotel. So, I think this also, it's the only, the only suggestion we can, I can give personally is just to maybe new revenue managers are to really get to understand, you know, what is the, the real tasks that the revenue manager does, you know, in this industry.


Dario Artiola:

And, and then if you, you know, if you like this kind of work, you know, then just take some risks and go for it.


Raimund Notz:

Well, yeah, it's definitely a question of knowledge. How to gain knowledge, how to improve, and rethink the business and distribution mix, which is in place. Don't say no to any opportunity. The worst thing that could happen? You, you fail. The worst thing, what could happen is you, you get a reservation as we say here in Germany quite often was a twinkle, was a smile. So yeah, revenue management and technology and the independent sector are rising. It's, it's, it's improving. Take the chance to take advantage of the new technology, especially in the situation of staff shortages in most of the properties.


Raimund Notz:

And really ensure you have a proper strategy, a proper plan for the coming years.


Ryan Haynes:

And Michael, finally, you know, any sort of thoughts there on what Dario and Raimund have said, and the support that ideas can provide?


Michael McCartan:

Yeah. At, at ideas we like to promote the fact that it's, we've got solutions that are fit for purpose. So, if we sort of roll back the clock, maybe five years or so, there was probably one solution for that. That had to be applied to every single type of hotel. We're in a situation now where we've developed solutions for budget hotels, independent hotels, resorts, extended stays, part apart-hotels, et cetera. So there just aren't, it's not one size fits all. It, it's it, there are specific solutions to meet specific market needs. So just because you tested or tried a revenue management system five years ago doesn't mean that you should close the door on the opportunity.


Michael McCartan:

Wonderful.


Ryan Haynes:

Thank you, Michael, Dario, and Raimund, it's been a pleasure. Thank you for contributing to this episode today. Thank you.


Michael McCartan:

Thanks for that. Thank you for having me.

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