Does a high hotel occupancy mean high profits too?

Business Intelligence
// 1 August 2016
STRATEGIC-APPROACHES

Posted by RezNext Digital Marketing Team

A demand-based sales strategy is the need-of-the-hour

Don’t drive bookings
It’s quite probable that as a hotelier if you are focused on driving bookings you are most likely looking at selling all your rooms at the best possible price. And in most cases the best possible price is either close to what your competitor in the market is selling or lower than that. That way you may have sold most of your available rooms for the day. So with an 85% occupancy you are doing really well, or are you?

Does your 85% occupancy help you grow your bottom line?
If it does not, then you need to take a step back and analyse why driving bookings should not be your focus any more. It is important to drive profitability. This translates into better bottom line growth.

Increase your room rate as your demand increases.
Without access to information on previous booking patterns, booking window and demand peak season, most hotels may look at selling out their inventory earlier if there be an opportunity to do so. However, this may not be a great practice. By selling out faster you are losing the opportunity to price your rooms as demand increases. Even if by a small margin, the increase adds to your revenue and helps boost your ADR. Also factor in your location and your proximity to corporate houses, shopping destinations, city’s main banking house or research corporations. Such advantages give you the edge to hike your last rooms for those customers who choose you for your location. You need to ensure you have rooms available for this customer who will book it at a premium. Hence monitoring your market, demand pace, and your booking window history will help you slowly increase your rates as demand begins to pick up.

Frequent rate updates as dictated by market trends and hotel’s current performance
Everyday there are incidents that alter demand and supply. May be a last minute event that was announced led to all the rooms in your vicinity to be sold out soon including yours. Now if you have not monitored this and have not updated your rate, then your opportunity to increase your revenue is lost. Your static rates did get you bookings but you lost on revenues. Similarly, with a sudden event being cancelled there is more supply available for that day than there was expected. You may have to quickly re-look at your competitor rates, think of what promotions you offer and update your rates to sell as much of your inventory to balance out your online sales for the day.

A hotel must update rates from a low to high pattern to the extent possible on a day-to-day basis closely checking the pace of bookings and the forecasted demand. A differential rate for each day can also be applied by hotels based on their locations, upcoming events and the seasons. Business hotels should look at special rates for weekends to drive occupancy, whereas leisure hotels should give out discounted rates for more room night based bookings on weekdays.

Also rate updates don’t mean that you make them only during a particular day/shift. A lot of leisure bookings for a longer LOS comes typically during the late evening/night time. By not adjusting your rates during that window you may be getting sold at a much lesser rate than you could have actually pegged your property at. Hence rate updates have to be viewed as a task that needs to be done round-the-clock.

With the cost of acquisition increasing, revenue managers must look at all opportunities to drive incremental revenue. Technology can be a key enabler here. All the decision considered above requires a hotel to deploy an enterprise distribution solution that includes a rate shopper and a 360-degree business intelligence solution that displays the market view and also recommends the best rate considering all required parameters. With the right technology infrastructure, you as a revenue manager can adopt a dynamic pricing strategy, evaluate the trade-off between selling soon and a demand based sales strategy and implement various rate plans across different room types for week days, weekends, seasons and for special city events. With such a proactive selling strategy that considers the hotel’s history in bookings for that period and evaluates the current market trends, a hotel will be able to achieve the desired occupancy at a high ADR, contributing to the top and bottom line profits.

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