For as long as most hoteliers can remember, RevPAR has widely been accepted as the most critical hotel performance KPI. Taking both occupancy and average rate into consideration, RevPAR indicates how successful the hotel has been filling its perishable inventory AND the overall caliber of business that it was able to fill it with. Back then, more RevPAR simply meant more profit.
Since then, the distribution ecosystem has become very complex, with every channel having its own distinct pricing and commission structure. Distribution costs have become a crucial variable in the profitability of every pricing decision. The result is that even if the guests are all paying the same price, not all reservations are created equally.
How are hotels tracking results to capture this additional data? It’s one thing to track it, but how can Revenue Managers incorporate this vital component into the strategic process? For those who are successful, does the incremental profit justify the extra work?
As many have been saying for some time, revenue managers should now be called Profit Managers. For too long, the only focus was to generate more revenue, regardless of the cost of acquisition. That lead to many hoteliers and revenue managers relaxing and relaying purely on wholesalers and OTAs to fill the inventory….at a high price.
When they realized the direct channel was to be taken care of too, it was too late for many.
And it’s not about demonizing the third party and going all solo, it’s about being clinical when it comes to the that Cost of Acquisition, and calculating when it’s more profitable to run it by myself, and on which markets or segments I’m better off relaying on a supplier.
Now, and especially since the pandemic, most Hotels try to focus on the direct channel to maximize profit, although we have to be realistic, it’s not free as many used to consider it.
You need to hire and train a team, invest on marketing, campaigns, actions, presence on media, attend workshops and fairs, advertise… all that costs. A lot.
It’s time to be pragmatic and focus on what we can do best, and let suppliers, providers and certain OTAs and agencies do their share too, trying to find that challenging balance where everyone wins.
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