By Romy Bhojwani
Article published by Hotel News Now.
Savvy revenue managers should look for opportunities beyond just room revenue, such as in group meeting and banquet spaces. Here are some things to consider when refining the M&E strategy.
In their quest for revenue per available room Index, most revenue managers miss other high profit revenue streams, ranging from meetings and event space to banquet revenue contribution to total RevPAR.
It’s time to shift the paradigm from a guestroom-only revenue focus. Savvy revenue managers will factor in the size of groups, arrival and departure patterns, and banquet revenue per occupied group room night (ROGR) contribution into their yield management decisions. The devil’s in the data for creating more accurate, demand-based forecasts. Here are some areas to consider when helping revenue managers maximize revenue (and profit) opportunities beyond just rooms revenue.
Review the basics
How is meeting and event (M&E) space revenue and banquet revenue being used to make guestroom pricing decisions at your hotel?
Factoring in these additional revenue data points could lead to a very different revenue strategy at your hotel, and if executed well, could result in significantly higher levels of profitability. Yet for some reason, revenue managers overlook this meaningful opportunity to boost their impact. Guestrooms are, of course, the lifeblood of any hotel, but the time has come to expand the scope of your hotel’s revenue strategy, and the next target should be your M&E space and banquet revenue per occupied group room night.
Shift the paradigm
Despite its significant money making potential, function space historically has been viewed by operators and revenue managers as a second-rate profit producer, only there to help fill guest rooms. A cultural shift is in order, with resources properly allocated and aligned with this high profit margin revenue stream.
Develop a data-driven M&E revenue strategy to gain alignment across your hotel’s executive team and key stakeholders on the M&E revenue strategy.
With stakeholder buy-in, the next step is to apply some fundamental revenue management practices to the M&E area. If you’re a seasoned revenue manager, you’re in luck because many of the tried-and-true guestroom revenue principles apply to M&E as well. No need to reinvent the wheel. You’re leveraging the same set of tools against a different area of revenue opportunity, and in a slightly different manner.
Forecast true demand
Like your guestroom strategy, the secret sauce is the data you collect and your ability to use that data to accurately predict the future. The better the data, the better the demand forecast and the more confidence you can instill in your sales methods. M&E salespeople often have the bad habit of booking their available space on a first-come, first-served basis without assessing the likelihood of more profitable business interest that’s just around the corner. This is where demand-based pricing can really make a difference, but it takes a demand-based forecast for this strategy to work properly.
Get to know the true value of each of your property’s M&E rooms at varying levels of demand, and study your group booking patterns for all event sizes and functions. Incorporate turned-down and lost business data for a fuller picture. Ultimately, with your new and improved demand forecast in place, you can encourage sales to be more aggressive when pricing and booking high-demand days and less aggressive on the low-demand days.
Factor in the impact of banquet revenue when pricing the group business and the meeting rooms. A smaller group with higher F&B spend could be more valuable than a larger group with little to no F&B spend. Analyze the F&B and ancillary revenue opportunities when pricing guestrooms.
Fill the void
Another tip to bear in mind as you refine your M&E strategy: the closer you fill space to optimal capacity, the more revenue you’ll make. This may sound overly simplistic, but math is math, and this is where your space utilization tactics really matter. Understand the booking window by group segment and the balance between placing longer lead time group “on the books” and yielding rate and banquets spending on groups with a shorter booking window. Avoid putting a small group in a large room. Attendee numbers count, even when you protect space with minimums. Know your room sizes, configurations and capacities. Space management, meeting space-based decisions and food-and-beverage spend-based decisions are key to maximizing function-space revenue.
Know and understand your sales system’s capabilities and leverage it to track inquiry trends, size of groups, banquet spend and contribution to total revenue. Understand and measure banquet revenue per square foot and per meeting, forecast demand, set optimized rates and measure performance of your function space at a detailed and scientific level.
But whether you’re just venturing into the untapped realm of function space revenue management, or if you are already doing it, there are significant opportunities to enhance revenue and profitability.
It’s both a small step and a giant leap through those big double doors leading to your ballroom and into your hotel’s under-utilized and under-yielded space. The next frontier of hospitality revenue management is here; go where most hotels have not gone before. You will be rewarded with higher total RevPAR (Rooms + F&B) and greater overall profitability, via an additional high margin revenue stream.
Original article available here.
Romy Bhojwani has more than 20 years of experience in the global hospitality and real estate industries. In his role as EVP of asset management at hotelAVE, he oversees a portfolio of luxury, and upper upscale hotel assets located in North America and Europe. He works with his team and leverages his expertise to develop and execute asset management plans that result in value creation opportunities throughout the investment lifecycle. Prior to hotelAVE, Bhojwani served as managing director of 360 Capital Advisors. He founded and led the advisory and asset management company to create value-enhancing solutions for global hospitality assets. Bhojwani previously served as SVP of real estate and asset management at Delta Hotels and Resorts. He led the asset management and acquisitions function for a portfolio valued at $750 million located throughout various primary markets in Canada. Bhojwani also has also held positions in real estate, asset management and operations at Jones Lang LaSalle Hotels, Hilton, Horwath Asia Pacific and Oberoi Hotels.
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