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Revenue management in the aftermath of Covid-19

Monday, November 29, 2021, 14:11 Hrs  [IST]
Asmita Mukherjee | Hyderabad

Before Covid-19, revenue management for hotels was all about maximizing bookings and revenue growth. But, in the aftermath of Covid-19, amid declining demand, revenue management has transformed into a key strategic lever to keep the lights on for hotels in the survival process. Several businesses which couldn’t effectively wield the power of revenue management had to shut shop in the last eighteen months or so. While the challenges of the pandemic have been tumultuous, the learning has also been humongous from a revenue management perspective. Asmita Mukherjee spoke with industry experts to shed light on the intricacies of revenue management in a post-pandemic world. 
 
Segments contributing to revenue 
 
Hotels are not only about rooms but they also have several sources of ancillary revenues such as spa, food, and catering. Out of these, one of the important segments which contribute a major pie to revenue growth is hosting MICE. For a hotel, business meetings and corporate events are a great way to boost revenue.
 
Speaking about segments such as MICE, Leisure, etc. which gained strategic importance from a revenue management perspective during the recovery phase, Nikhil Sharma, Regional Director, Eurasia, Wyndham Hotels & Resorts, EMEA said, “While leisure travel has remained strong and essential, business travel commenced once the restrictions were eased, and we see discretionary business demand recover. While we have seen a shift in the segments, we are confident that all segments (based on seasonality) will have a strong recovery in the months and years ahead.”
  
Mentioning that from the start of the pandemic MICE had initially taken a hit with government restrictions on the number of guests allowed for an event, travel restrictions, and some safety mandates, Kushal Ranjan, Director Revenue, Pride Group of Hotels, said that for all the hospitality groups, leisure travel has been the biggest support throughout the pandemic and even now. “Many people are coming for staycations and weekend getaways. Now that the festive season has arrived MICE is showing decent recovery and some cities are experiencing great demand,” he added.
 
On the other hand, for Parth Khamesra, Vice President - Ramya Resort & Spa, Udaipur, leisure is prominent than others. He said, “As a Luxury Resort, Leisure has picked up very well, as the travellers were stuck at one location for a very long time. Travellers/guests have become diligent with choosing the right resort or hotel, which is following all possible protocols like the Ramya Resort & Spa, Udaipur, adhering to all the Covid safety procedures and instructions as given by the government. Small weddings have also picked up as the events have become intimate, unlike big Indian weddings. Corporates are still keeping it low in terms of events and meetings. There is a shift for us. Earlier, it was a mix of both, presently, leisure travellers are more prominent than others.”
 
Revenue Forecasting Conundrum
 
From a revenue management perspective, it was extremely difficult for the hoteliers to forecast revenue during the pandemic, as there no similar past data was available. Khamesra said, “It is definitely a challenge to forecast any data prevailing to the hospitality industry, as the guidelines are ever-evolving to keep Covid-19 in check. In order to overcome the challenge of forecasting revenues amidst the pandemic uncertainty, we keep a track of the ever-changing and evolving guidelines. We deal every day as a new day since the pandemic, and we keep track with other hotels and resorts for any possible data, to have real-time data of the destination. Forecasting is difficult, but India is getting closer to normalcy, so we shall be able to forecast better in the coming days.”
 
As no one could ever imagine the future brought by Covid, the industry is now learning its lessons. Sharma elaborated on the need for real-time data for revenue forecasting by hotels, by informing, “Business schools fail to teach us the next steps when revenue goes to zero in a pandemic. The hotel industry around the globe experienced unprecedented challenges, questioning the historical data in revenue management systems. Traditionally, revenue management has been based on past data trends such as lead time and seasonality. As it has been observed that hotels taking part in revenue management services have outperformed in REVPAR (revenue per available room), hoteliers need to subscribe to revenue management intelligence with real-time action for better decisions on a global average.”
 
Sharing his thoughts on workarounds adopted for forecasting by revenue managers in the absence of historical data, Ranjan said that forecasting revenue during the pandemic is challenging but with the right amount of deep dive into the available market information and data, one can easily figure out trends. “For us revenue managers, the new reference point for revenue forecasting is STLM (Same Time Last Month) data rather than STLY (Same Time Last Year). Many segments’ or sectors' revenue depends on the kind of relief given by governments, states, and countries. Many sectors are either witnessing a V or a U-shaped recovery, some segments are even flat or witnessing a downward trend,” he added.
 
Ancillary revenue adoption
 
During the pandemic, we had seen hotels adapting themselves to the market demands by transforming into hospitals, and workstations, while also offering various services such as washing, delivering food and many more to stay relevant in the market. Sharing such survival plans, Ranjan pointed out that Pride Group had been really aggressive with its ancillary sales strategy. “We went out to our guests to deliver food to their homes; we repaired their Air Conditioners, sold masks, and PPE kits. We also sanitized offices and homes. The list can go on and on. Keeping a hotel shut was not a good choice as the hotel had a lot of fixed costs associated and hence ancillary at one point was our mainstay,” he said.
 
On the other hand, Ramya Resort and Spa offered not only the room but a bit more to the customer, at the same price, as a bundle offer. “We at Ramya Resort and Spa, Udaipur, offered the Dine-In + Pool option when the guidelines permitted usage of the swimming pool, which worked well for us. We took slot bookings to ensure proper social distancing. Another bundle that we offered was the access to Gymnasium + Activity Area + Pool + Dine Option where everything was private. These two offers worked really well in the market,” Khamesra mentioned.
 
Balancing cost and competition
 
Cost controls have been gaining importance since the pandemic to improve the bottom line, in the absence of sales. Competent revenue managers have been concentrating on areas to reduce costs majorly in operations and marketing. Keeping all this aligned to market competition is also important for maintaining relevancy. Competitive intelligence pertaining to customer preferences and pricing was always a key parameter of revenue management, but it gained significant importance with Covid. Due to the uncertainty and fear created by COVID, preferences of the customers have changed. Lately, it has become clear that travellers are giving preference to hotels, which have flexible cancellation policies.
 
Speaking on the impact of changing customer preferences on competition, Sharma opined, “Today, the market is looking for flexibility in the cancellation policy, and people tend to book hotels that offer booking and cancellation flexibility. The comparative rate continues to be an important aspect in comparing rates of your competition set, which aid in maintaining the rate position compared to the market and analysing the booking period (i.e., how far are guests booking to ensure rate plans are set and distributed to the right channels). In addition, value-added pricing (in the form of food and beverage offering or room upgrades) is much more practical than the best available rate, as it offers tangible benefits to the guests while they are at the hotel.”  
 
While sharing the importance of cost controls, Khamesra said, “Revenue management is similarly significant today, as it was before the pandemic. Today, there ought to be a much more prominent spotlight on working on cost control and benefit, just as a critical spotlight on-demand age. One of the spaces we ought to concentrate on is internet marketing; explicitly, any investment in web-based marketing should have strong information to help that investment. Another vital region where we are concentrating is demand age, as worldwide travel had reached a practically complete halt during the COVID pandemic. To create demand, our property comprehends impending patterns and has the option to change in a like manner. Perhaps the best marker of the purpose to travel is flight search information, so understanding flight search demand is essential.”
 
Need of the hour

To ensure smooth operations and sustainability, cost control must be kept in place. According to Sharma, one needs to focus on a healthy Average Daily Rate (ADR) index. Hotels should use demand centric revenue management systems analysing the real-time market.
 
“As the revenues are fluctuating in the present scenario, hence we would recommend to close every possible query at the best rates possible. Incorporation of Covid appropriate behaviour and protocols is must to ensure guests feel safe and secure at all times,” added Khamesra.
 
Ranjan stressed upon the fact that hotels need to appropriately regulate their selling strategy. 
He concluded by saying, “In the recovery environment, hotels should focus on maintaining a healthy ADR index. Value-adding pricing needs to be encouraged by offering guests some tangible add-ons. Continued focus on ancillary sales will also help in the longer term to add to the top-line revenues.”
 
asmita.mukherjee@saffronsynergies.in

 
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