Content by Marco Benvenuti, Chief Marketing and Strategy Officer and Co-Founder
Marco Benvenuti, Chief Marketing and Strategy Officer and Co-Founder
As co-founder and chief marketing and strategy officer for Duetto, Marco guides product vision, direction and implementation. Prior to Duetto, he was Executive Director at Wynn and Encore resorts in Las Vegas, where he founded and managed the Enterprise Strategy Group. Marco was also recently named the Entrepreneur in Residence at Cornell University’s School of Hospitality Administration, and can be seen speaking or lecturing at industry events and hotel schools worldwide.
Get real about your forecast error
by Marco Benvenuti, Chief Marketing and Strategy Officer and Co-Founder | Too many people in the hotel industry who purport to be revenue management experts don’t understand what forecasting error is or how to accurately calculate it. Or if they do, they’re ignoring it. That’s the only conclusion I can come to when I read about people expecting or getting an unconstrained demand forecast on average 98% right six months out. That’s practically impossible.
Don’t mistake inventory management for revenue management
by Marco Benvenuti, Chief Marketing and Strategy Officer and Co-Founder | For many hotel general managers, knowing their hotel is sold out means they’re finally able to get a good night’s sleep. But if the hotel is sold out a week or even days in advance, they should instead be up at night wondering how it happened and worried about lost revenue.
It may go contrary to the way the hospitality industry has operated for decades, but a hotel completely booked more than a day or two in advance is a costly mistake.
The general manager in that instance has almost certainly filled their hotel with the wrong customers, paying the wrong rates. In general revenue management theory, the absolutely ideal scenario would be selling your last room to a guest walking in at midnight, who’d be willing to pay almost any price for a place to sleep.
That’s extreme, but that’s the idea. The closer a hotel sells out to the day of arrival, the better job the general manager has done. Think about it, especially with the airlines, which are still flying ahead of the hotel industry in revenue management savvy. Leisure travelers book vacations well in advance to get the best deals, but business travelers aren’t as price sensitive. We’ve all been there. An important meeting pops up in New York tomorrow, and I’m online booking a ticket. I expect to pay a higher price, because I’m just happy to find a seat and at the most convenient times for me.
I, the business traveler, should pay a higher rate 48 hours before the trip than the leisure traveler who booked six months in advance. The idea should be the same in the hotel industry, and properties with sophisticated management or revenue management systems are selling rooms in the same fashion. But many aren’t.
I understand it’s against human nature not to take the easy and safe money by selling out as soon as you can, but there are compelling reasons why you shouldn’t. First off, if you’re a GM or owner, think about your last high-demand period. When did you sell out?
If it was the day of or the day before, job well done. If it was three or five days ahead, or a week or two out, you left a lot of money on the table. You not only closed the book on several customers who would have been willing to pay a higher rate those last days, but you also missed yielding up rates 30, 60 and maybe even 90 days out when you were seeing higher than normal pick up.
You should have never gotten to that point. If you have that much demand that early, if the velocity of bookings is that fast, prices should have been increased long before you were down to 10 rooms 14 days out. That’s the beauty of a sophisticated revenue management system like Duetto Edge. A dynamic RMS can spot this trend long before a human would, and then alert you to start yielding up rates so you maximize revenue.
Yes, I know it’s against human nature, but that’s why revenue managers need to be armed with the right tools and data, so they can be confident in their decisions.
And you know what? Following my advice, and revenue management theory, there may be a time or two when you don’t sell out, but I’d rather just miss a sellout by being too bullish and max out revenue all those other times.
If you’re still not convinced, here are a few more reasons why selling out early can cost you money.
• Think about the shoulder dates, too. If you sell out Saturday, June 6 too early, for example, what about those customers who were looking for a three-night stay beginning on June 5? You may have unintentionally frozen them out.
• If you do sell out early, you’re no longer going to show up on the OTA sites and you’d be missing the billboard effect, one of the few positives of those more expensive channels.
• Operationally speaking, a hotel at 80% occupancy and a higher average daily rate may be more profitable than the hotel completely filled at a lower ADR. Especially if you know in advance, because you can adjust staffing to reduce labor costs. (And that’s another benefit of Edge, which offers operational alerts and insight so you can confidently staff your hotel ahead of time.)
And if you still don’t trust me, try using Edge. Our unique web regrets and denial data will show you how many people are shopping for rooms on your site, and also trying to book after you’ve sold out. So if you’ve sold out a week in advance, keep an eye on Edge to see how many people tried booking rooms that last week, and imagine the higher rates they’d have been willing to pay.
There’s no magic formula that says you should have X amount of rooms left with X amount of days before arrival. It all depends on the market, property and demand, which is exactly why dynamic revenue management software is critical today.
If you’re afraid of charging rates higher than you’ve ever charged before, take a deep breath, and ease into it. If Edge recommends $350, because you’re down to just a handful of rooms left, and you’ve never charged more than $250 in your market, try $270. If that works, next time try $280. Work your way up from there.
Today’s consumers understand this concept, and those business travelers who need to be in your city tomorrow are happy to pay almost any price for the convenience of finding a room at your hotel. Do them the favor, and take their money. Don’t tell them you’re already sold out.
Edge Can Bridge Gap Between Revenue Management and Marketing
by Marco Benvenuti, Chief Marketing and Strategy Officer and Co-Founder | Robert Cross called it a “Marketing Renaissance” 16 years ago when he published his groundbreaking book, Revenue Management: Hard-Core Tactics for Market Domination. It was the title to the last chapter in the book, and described how both revenue management and marketing had the same end goal: driving revenue. He envisioned a new position, a chief revenue officer, who would be in charge of all activities that generate revenue, including both RM and marketing.
Seismic Shift: Brands Are Looking for Tech Partners, Not Vendors
Duetto Edge Alerts Can Stop Costly Pricing Mistakes
by Marco Benvenuti, Chief Marketing and Strategy Officer and Co-Founder | As revenue managers, we’ve all been there. Someone inputs the wrong price, forgets to switch a third-party channel back on after a big block of group business cancels or we’re slow to react to a significant change in demand. As much as revenue management systems, channel management systems and other software, including Excel, drive hotel revenue management, humans are still the ones ultimately responsible for pushing the right buttons and pulling the necessary levers.