“Over the past years, Revenue Management has been evolving from the traditional Room Revenue Management to a Total Revenue Management (TRM) approach. As hotels are now starting to re-open after closure due to the pandemic, cost control and effective staffing are one of the main focuses. Directly related to this is “Ancillary Revenue Management” (ARM).
ARM consists of optimizing every revenue-generating stream of a hotel. It is both about controlling the costs and optimizing / maximizing revenue generated in all sectors. It consists of looking into the small loopholes and all those untapped profit-generating potentials. The same principles applied to rooms can also be applied to other revenue-generating areas.
ARM is not only about packaging other elements like F&B or Spa with the rooms; but it means going into real detail about every revenue-generating point of the hotel; like Events space optimization (revenue per available sqm, Revenue per participant, enquiry conversion), F&B (seat efficiency, Revenue and Profit per available seat per hour, inhouse and external guests), Beach club (daybeds bookings and efficiency per hour, Revenue per day bed and per guest), Spa and wellness (Revenue per available treatment hour) and also look into factors like peak hour, time of the day, day of the week vs weekend, inhouse guests and external guests, etc.
The above mentioned elements are still the standard way of doing things in ARM. If we would like to think outside of the box, we would go one step further and look into more creative / innovative solutions. For example:
- Sell rooms for a few hours. Some airport hotels are already doing this and city hotels with large inventories could also do something like this for business travellers who need to rest and recharge between meetings (when they are on a day trip for example).
- Showroom for rent – maybe there is a room that is too noisy for someone to sleep in (too close to a restaurant for example) but it would be perfect for an event. Instead of keeping it on an “out of order” status, it could probably be used by people who need a temporary showroom (for their jewellery business for example) / or travelling jewellers.
- Special rates for rooms can be offered for day guests at the resort’s Beach club for example. For resorts with a casino or a golf course, they can offer additional services to their guests based on consumption. If rainy days affect the beach club revenue, what could be done about it? A special offer for rainy days combining spa maybe?
I think it is also the right time to start analyzing (if you are not already doing it), the COS (Cost of Sale) per segment / channel. How much are you spending on each OTA for example vs the Revenue and profit that you are generating? This leads to the NRevPar – Net Revenue per room and allows you to account for expenses. A lot of hotels are shifting KPIs towards GOPAR – Gross Operating Profit per room and TRevPAR – Total Revenue per Room.
Revenue Management is not all about numbers and analytics:
Especially right now, it is important to understand what the customer wants. For example, Booking.com adapted by launching a travel sustainable badge.
An integrated system across all POS would enable the hotel to collect and analyze data more easily and take correct actions with regards to optimizing total revenue generated.
A holistic approach to revenue management:
Build a Revenue Management Culture across the whole hotel / company. It is important for everyone to understand the principles of Revenue Management in order to work together as a team.
ARM doesn’t stop at a Revenue Manager’s role! Upselling or cross-selling for example can be done at every level and at different stages (pre-arrival, upon check-in and also during the stay). Staff incentives can be put into place for added motivation. There are various ways to increase a guest’s spend during the stay – special offers for slow hours, spa deals, etc.
In summary, every hotel is different and you can be creative in the ways you approach ARM.”