Democracy is our prerogative and it gives all rights to all individuals to play politics. Unfortunately, this privilege of playing politics is intruding fast into other aspects of our lives. Let’s say in our family or in our office. It will just suck up to an employee who even does not even wish to be a part of it. All big bosses are busy to take all friction out of their businesses processes and diplomacy is pure business friction, not easy to get by.



Story 2

Revenue Optimization

Blurb:The intelligent use of revenue management principles can be used to increase top line revenue and bottom line profitability in any service industry. Management Mix discusses why service sector should adopt yield management towards revenue optimisation.

Revenue Management System (RMS) is relevant to all retail sectors where volume is fixed and allows the sellers like hotels to rate the product in a different way for diverse market segments, procure patterns and distribution channels. It's more than a decade now since revenue management has come into the hotel industry to allow hoteliers to calculate supply and demand and regulate their pricing strategies so as to increase profits.

The focal point of RMS is centrally on revenue optimisation due to the cost structure and finances of consumable assets. For instance, the fixed cost of running a hotel is high, and once the hotel occupancy rate is beyond the break-even occupancy rate, the inputs to profit and overhead per incremental customer is extraordinary.

Grahame Tate of IDeas Revenue Optimization, describes, "The essence of the system lies in identifying the right pricing for services that hotels provide like rooms, conferencing/banquets, etc. Earlier, revenue management depended on controls in order to reach the right pricing. But the revenue optimisation system is moving a step further to promote better pricing by bringing transparency into the decision making process. It talks about the optimal rate to quote based on the probability of bookings by comparing market prices and identifying competitive rates. Hotels need to have a technology backup to know their position and how much they can flex their pricing as revenue optimisation is a tool for right pricing."

The Fundamentals RMS also comprises vibrant methods to estimate demand, assign consumable assets across rate classes, and decide when to overbook and by how much, and what price to charge different rate classes. A consumable asset might be a hotel room or an airline seat.

The service is unpreserved because its revenue-generating capabilities immediately drop to zero at a point in time-right after the sales period ends. For instance, once the night is run out, the lost revenue from an empty hotel room is lost perpetually.

"The basic objective is to increase the revenue and the contribution by charging a higher price from certain market segments, distribution channels, purchase patterns like length of advance booking etc. This is now being practiced very widely by all the hotel chains and upcoming independent hotels for marketing of hotel room inventories. The strategy is designed to dramatically increase revenues, maximise profits, greatly improve the effectiveness of market segmentation, open new market segments and strengthen product portfolio strategies," describes AmitKhurana, head – sales of IDeas Revenue Optimization.

It uses barriers to stimulate consumers eager to pay a higher price from taking a lower price because of advanced buy restrictions. Advance buy restrictions may include items such as least time in advance of arrival that booking must be made, and weekend stay over needs. Refund systems for reserved rooms, children-free stays, more discounts, room upgrading policies, and fines for checking out early or checking out late are other examples of RMS rate class characteristics, which is a effective combination of room rate, advance purchase restrictions, physical hotel amenities, and other hotel policies.

Strategic revenue management makes rooms available for sale at certain points in time, at specific prices, and for various lengths-of-stay to optimise revenues over a typical fixed- period planning scheme. It operates around opening and closing hotel room availability sometimes on an hourly basis. For example, during peak demand periods, the higher priced rate classes are left open and represent a higher percentage of total room capacity, while the lowest priced rate classes are closed, that is unavailable to customers.

Put into practice
The approach and the performance is dependent on having a good data about past purchases of different segments, occupancy levels in different parts of the year/parts of the week, occupancy achieved through different segments etc. There are highly developed computer softwares and models available from various operators that are used by various hotel chains in India.

Karambir Kang, VP of IHCL explains, "We are among the first hotels to start revenue management in the country. Yield management, which is an inventory management system, is an integral part of sales and marketing functions in any hotel premise." He says that other people concerned with yield management include general managers, financial controllers, room division managers, sales & marketing managers, front office managers and reservation managers in hotels

Need to Gear Up
Grahame Tate observes that Indian hospitality is emerging as a fast growing industry in the South Asian region. He describes, "India is embracing technology faster than other competing nations, which is a positive sign towards the industry growth." However, according to him, there is a shortage of revenue managers and the industry needs to impart proper training at the entry level itself.

Talking about the importance of yield management, DhruvaRathore, Area Director, Sales & Marketing, Hyatt International, states, "The Indian hospitality industry needs to follow a pricing discipline. He said that as early as in 1990s, major hotel chains began experimenting with yield management models. Some chains, including Hyatt, invested in sophisticated computerised systems that tracked numerous sources of data. Others responded with predominantly manual systems combining the reporting capabilities of their reservations and front desk systems with a team of trained managers to direct pricing and inventory issues."

Clearing the misconception that RMS is meant only for large properties, Tate explains, "We provide software solutions to hotels that range from 60 to 1,000 rooms. All these properties can score with this system. The services could be used for education, systems, or a combination of various operational components in a hotel. This system enables true centralised control over pricing and increases profits chain-wide. It works regardless of the hotel's size and its complexity."

The Bottom Line
Revenue management allows properties to discount with discretion in order to build market share, uncover hidden demand that promotes aggressive pricing, identify lost revenue opportunities and, most importantly, increase revenue growth without increasing fixed costs.

Considering profit making trends, Bali explains that the bottomline is that it is now more difficult, but by no means impossible, to find a 'good deal' at a hotel. It is, however, more important than ever for the hotel to perceive your convention as being valuable.

It is a proven discipline with a track record of significant revenue improvement in various sectors of the Travel industry. Its potential applicability extends to a number of other service industries with similar economic characteristics.

"The hotel sector in the country has opened up for revenue management not just in terms of systems but also in the form of various software solutions, which assist in understanding financial dealings of hotels. However, there is a dearth of revenue managers in the hotel industry in India and institutes imparting hospitality education need to incorporate revenue management applications in their curriculum," concludes Tate.


Story 3 (To Go As A Supplementary Piece)

New Openings Bring New Challenges

Klaus Kohlmayr

The Asian region is experiencing a hotel construction boom. Based on years of strong economic growth and investor confidence, more hotels are constructed in our region on an annual basis than in any other place in the world. Importantly, the frantic pace in which these hotels are being constructed and opened is leading many in the industry to question whether these hotels are adequately prepared for the challenges they face in optimizing their revenue potential.

According to the Global Authority for Hotel Real Estate, Lodging Econometrics, as of October 2007 there were a total of 1,555 hotels with a combined 366,679 rooms under construction in the 24 countries making up the Asian region.

With 261 projects currently underway and a total of 47,647 rooms being developed in India, the country’s hotel industry is experiencing record levels of hotel and lodging construction. This growth, much like China’s, is aided by the countries recent business and economic boom.

While increased construction is occurring throughout the entire region, development underway in China in preparation for the upcoming Beijing Olympics is helping to underpin the regional boom. In total, China has 7882 different projects underway with a combined 222,591 rooms. China currently accounts for 50% of all planned projects in the region and a staggering 60% of all guestrooms.

Hong Kong, as a financial and transportation hub in the Asia Pacific region is also experiencing record levels of construction. This, in part, can be attributed to the expected freeing-up of the Hong Kong economy which will allow for Chinese investors, both individuals and institutions to openly invest in the market. In preparation for this economic resurgence Hong Kong is anticipated to open 50 new hotels in coming years, split evenly between Hong Kong Island and Kowloon Island.

However, in spite of the number of hotels and resorts opening annually throughout the Asia Pacific region continuing to rise, many hotel’s are struggling to reach their optimal revenue potential due to inadequate pre-opening preparation and a lack of in-depth pricing and channel strategies.

With a Hotel typically requiring 9 – 12 months post opening to achieve its full potential, every effort must be undertaken to ensure a Hotel is “Revenue Optimized” from well before its doors open, therefore ensuring a higher revenue flow and in turn better return of investment for both Hotel Owners and Hotel Managers alike.

There are many areas that need to be covered throughout the pre-opening phase of a Hotel, ranging from establishing market segment strategies, undertaking comprehensive competitor evaluation, pricing research and processing and forward planning. It is also important that all hotels follow a structured, standardized approach to pre-opening to ensure consistent and effective results from day one.

Hotels, such as those new facilities being built in India and throughout the region, should consider addressing their pre-opening processes in three stages, which allow for a mixture of on-site training and strategy preparation.

A strategy setting process, in which pre-opening revenue, marketing processes and actions are developed, should be undertaken six to nine months before a hotel is to open and ideally consist of:

• Hotel strategic analysis including a study of micro market/overall economic factors that could affect the hotel’s performance.
• A thorough analysis of the market and competitive set, including competitor value/benefits positioning across a range of price points.
• Sophisticated pricing structures, based on market conditions, segmentation and hotel positioning.
• Relevant channel strategies according to product positioning and market environment and cement “product positioning” (i.e. Hotel Descriptions, Room type descriptions etc) through all channels.
• Together with the Sales & Marketing Department develop market segmentation strategies and action plans, with a particular focus on business with long lead times (Wholesale/Groups etc.)

A pre-launch process, such as that carried out within the IDeaS pre-opening support program, which ensures that all stakeholders are fully trained and able to implement appropriate revenue management strategies is also vital. This process should be undertaken around three months prior to a hotel’s opening and focus on checking that all systems and channels are revenue optimised, all revenue influencers are appropriately equipped with knowledge and tools are in place to maximize a Hotels’ performance from day one.

Lastly, all staff working alongside or within the hotel revenue management team need to be provided with guidance and support during the hotels crucial initial operating period, between 60-90 days after opening. Continued staff support once a new hotel has opened, together with post opening strategy evaluation, will ensure staff are able to meet their set strategies and handle market expectations as they develop.

The success of a particular hotel or resort can be decided in the initial few months, both in terms of industry reputation and financial success, making the implementation of an appropriate and flexible revenue management program essential.

Through the ongoing support and assistance of IDeaS, hotels and resorts opening throughout the Asia Pacific region are now able to maximize their revenue potential from day one, ensuring positive growth and longevity.

(The writer is director of IDeaS Advantage and Hotel Pre-Opening Specialist)