Keeping Profit on Top of Your Hotel Wish List - Ehotelier’s Weekly Review

Dec 07, 12 | 12:08 am

By Anne Edwards, Editor in Chief, ehotelier

I have been reading the sage advice of the RevPar Guru, Jean Francois Mourier for years now and have followed his forays into algorithms and airline-style revenue management with a mixture of wonder and confusion. To be sure, with ever-increasing technology at our disposal, one of the greatest changes in the hotel industry has been to revenue management. This week we published two articles on this subject and their combined effect joined a few dots for me. The two articles I am referring to are When Did Your Comp Set Die? by Jean Francois Mourier and Hotel Rates and Occupancy: Why Less Is More by a new contributor, Matt Shiells-Jones.

Why 5 Hotels in a Comp Set Is Not Enough

The RevPar Guru discussed competitive sets as we have historically viewed them (pre- internet) as “other competing hotels against which a property measures its own performance” and explained how STR reports were valuable in giving hoteliers insight into the competition’s rates. Today, however, he says that “revenue managers need to use a new parameter to determine a property’s competition in the online channel: the online comp set.” The online comp set is comprised of all the hotels with the same OTA star rating within your destination (not just the 5 hotels you’ve chosen for your traditional comp set model). Unlike the fixed comp set, the online comp set fluctuates constantly based on time, booking pace and general demand. Mourier says that when planning your pricing strategy, use the online comp set and factor in all of the hotels within your destination.

Now, I’d love your feedback on this one feedback@ehotelier.net because I’m sure that many hotels do this in many different ways but it seems to me that the idea of keeping an eye on the fluctuating rates of all of your competitors and pricing accordingly is a wise move. In the past, I have believed that the reason for doing this is to keep occupancy high (and I’m sure that’s the primary reason for many), but in his article Hotel Rates and Occupancy: Why Less Is More, Matt Shiells-Jones pointed me in a different direction: profit.

What’s More Important to You – High Occupancy or Profit?

I won’t pretend to have kept up with his maths, but Matt takes us through a couple of pricing examples in which it is clear that sacrificing your occupancy for the sake of higher room rate can lead to greater profit. His proviso, harking back to the RevPar Guru’s advice, is to know what your competitors are charging, and fluctuate according to demand. All you need to do then is match your competitor’s rate or undercut them slightly in order to succeed. In his words, “Taking a lower occupancy in exchange for more profit just seems logical.” Indeed.

Are Your Cats Staring Into Space?

On an unrelated note, of the articles that received the most attention from readers this week, two were about leadership – How To Train Cats and Salespeople and Seven Unusual Things Great Bosses Do and one about saying sorry – Stop Saying Sorry, by Alan Fairweather. The quote I will take with me this week from these articles comes from celebrity animal trainer Joel Silverman who says “When I’m really pushing and the going gets tough, sometimes the cat just sits down and says, ‘I give up’. Even the brightest cats, if they feel you’re pushing them too hard, will, in effect, say ‘Screw you, buddy, I’m going to go over there, sit down, and stare into space.” Sound familiar? If you would like to get your hotel guests to stop staring into space, read Stop Saying Sorry for lots of alternative language for phrases to avoid such as ‘Have to’, ‘I can’t’, ‘I’ll try’, ‘But’ and my favourite ‘Calm down’. That’s all for another week and remember that when this year ends, the next one begins so rather than waiting till it’s all over (that won’t happen) to take a break, do some nice things for yourself and take little breaks now. When you look back in a year’s time you’ll be glad you did.

About Anne Edwards

Anne Edwards combines her love of language, travel, and different cultures as Editor in Chief of ehotelier.com. Prior to this position, Anne lectured in Cross Cultural Studies at the Blue Mountains International Hotel Management School in Australia and currently consults to the Australian Federal Government on subjects such as Leadership and Building Productive Partnerships. Anne has travelled and worked internationally for twelve years, holding various positions in the field of education, most notably as linguistic advisor to the Crown Princess of Thailand for two years where she sampled some of the best hotels in the world. Her love for travel spans the freedom of wandering on a shoe-string budget to the finest standards of service in world-class properties. As Editor in Chief of one of the largest hotel news sites in the world, Anne has a birds-eye view of what is happening in the industry internationally.