As hotel account pricing decisions become increasingly more automated, it frees up Revenue Managers’ time to dig deeper into the data to uncover more revenue opportunities. One of the most important opportunities which is often overlooked is analyzing and renewing rates for current negotiated accounts, whether global RFPs or backyard LNRs. Revenue Managers typically overlook these opportunities because they assume the sales team is performing this analysis and negotiating the highest rates possible. What we all need to understand is that it’s the sales team’s job to find accounts, build relationships, and inform the Revenue Manager with insights such as potential room night production and price sensitivity. It’s the Revenue Manager’s responsibility to analyze historical trends and forecasts to recommend optimal rates to begin the negotiating process with each account. Here are my top 5 factors a Revenue Manager needs to review before recommending the optimal rate for the account:
Stay Pattern Analysis: It’s common knowledge that Tuesdays and Wednesdays are peak nights for a corporate-heavy hotel. The higher the stay distribution is over these two nights, the less valuable the account is since it can easily be replaced by higher rated accounts and/or bar based business. Vice versa, the higher the stay distribution is over shoulder nights, the more valuable the account and potential for a more competitive rate to get the lion’s share of the account production in the market.
Displacement Analysis: It’s important to review the % of sellout nights (95% or higher occupancy) the account stays at your hotel. Often, a poor stay pattern (staying over Tue-Wed) will correlate to a higher high occupancy revenue %. This analysis also provides a good insight into how far off the negotiated rate is from the actual hotel’s ADR. The account shown in the image below produced 37% of its room nights on sold out nights with an ADR almost $20 below the hotel’s total ADR. Ideally, if the high occupancy revenue % is high (a benchmark that needs to be determined by the Revenue Manager by reviewing all accounts together), the negotiated rate should be as close to the total hotel ADR as possible. For example, I would be much happier if this account was ~$99 to split the ~$20 gap between account ADR and total hotel ADR.
Compare like accounts: I love performing this analysis because when I view the accounts graphed via a scatterplot with room night production on one axis and ADR on the other, I typically see very little correlation. Why is it that an account that produces 20 room nights has a lower rate than one that produces 500? Most of the time, there’s not a reason; hotels are currently throwing rates at a dart board and seeing where they stick. We need to change this behavior. If your hotel does have a slight correlation between production and rate, this analysis is a great place to start to come up with an optimal rate because at the very least, it will price the account relative to all of your others. For example, the account below produced 213 room nights at an $88 ADR; however, in relation to all of the other accounts, the rate that would place it on the rate trend line is $96. This rate falls pretty close to the displacement analysis of cutting the gap in half to price the account closer to $99. Finally, we’re starting to make some sense out of these rates!
Sales Intel: The number crunching takes the team only so far. The last ingredient is the input from the sales team. The Revenue Manager needs to understand the account on a more humane level. How strong is the sales relationship? What’s important to the account? Are they more rate sensitive or are they more concerned with service, location, amenities etc.
If you have access to the Kriya Portal and need help pricing your accounts, please contact us for advice.
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