A revolution is happening in hotel revenue management.
Hotel companies with the highest profit expectations and the most data-driven cultures are beginning to follow the customer instead of the product.
They are using advanced analytics to dump their dependence on the crude “Per Available Rooms” (PAR) averages and have begun the move to measure their world by predictive indicators based on “Per Available Customers” (PAC). This is the future of Hotel RM.
It is a seismic shift that is reframing the Hotel Revenue Manager’s world view from PAR to PAC.
Here are the steps required to profit from this transformation.
Step 1. From Property to Purchases
The conventional PAR measurements were inherited from a time when data collection and data access was limited.
Since a property’s number of rooms rarely changed, they became the simplest gauge by which to measure changes in the world. Thus, “after-the-fact” averages like room capture rates, RevPAR, and TRevPAR became the benchmarks for evaluating the success of “what” happened.
Ironically, while PAR is great for investors looking at how one property compares to another, it is almost irrelevant for hotel managers trying to make the great decisions that create value for those same investors. In fact, for most managerial functions, PAR does more to obscure problems and opportunities than to reveal them, often allowing unprofitable trends to go undetected.
As an example, while an outlet’s capture rate may have remained unchanged over several years, the mix of guests actually making purchases may have completely shifted from a higher value to a lower value guest — a clear indicator that the product or service of that outlet needs attention.
To truly understand your hotel’s unique demand rhythm, you have to listen to data at the most granular levels. Diving down to individual purchases is the first step in exposing the important patterns in the guests’ actions that truly drive or destroy profit.
This is the spark that ignites all successful Total Revenue Management initiatives.