Sun-soaked days, vivacious nights, smiling faces at every turn, ninja-like service and all the drinks, eats, entertainment and adventure a heart could desire—we all crave it and will spend big bucks to make this dream a reality, if only for a fleeting moment. While the appeal of resorts and all-inclusives may be the ultimate carefree relaxation and indulgence for vacationers, the behind-the-scenes truth of managing and growing a successful resort business is anything but laid-back fun in the sun.
Cultivating asset value for resorts is all about capturing and capitalizing on the unique revenue opportunities their distinctive business models create. However, compared with standard hotel operation, where revenue management processes are well-established based on industry-wide practices, resorts are challenged by much more complicated business models and a diverse range of revenue streams.
For the resort revenue manager, this is both a blessing and a curse. The potential to enhance resort profits, and her or his own professional standing in the process, is virtually limitless, yet the pitfalls along the path to job success are plentiful. Modern revenue management technology has made heroes out of hotel revenue managers. They have been able to apply advanced analytics by using automated-forecasting and optimized-pricing software to drastically enhance their annual revenue performance, but these same success stories for resort revenue managers have been few and far between.
Resorts require a more tailored approach than the typical hotel that accounts for flexible guest rooms to accommodate families of all sizes, while pricing per person or by room, as well as managing an abundance of package offers and contracted wholesale rates, among other factors. Resort revenue managers often find themselves in a whirlwind of something they may begrudgingly refer to as “organized chaos”—smart, industrious people to be sure, but wasting inordinate amounts of time trying to maintain some semblance of order to all their convoluted reports, unwieldy spreadsheets and clunky legacy technology. And imagine the horror of the resort general manager if their revenue guru were to suddenly win the lottery and say “sayonara, sucker.”
It’s an unsustainable situation, and in today’s technology-enhanced business climate, it’s unreasonable the plight of the resort revenue manager should go on. But, in order to serve up an effective solution, the solution makers must fully understand the problem. So, let’s take a closer look at some of the primary business challenges resorts face when it comes to revenue management.
Wavy Inventory
First up: inventory control. One of the foundations of revenue management is to have a fixed capacity where you can then choose the right business to optimize the available inventory. However, having flexible guest-room inventory is crucial to a resort’s ability to serve a variety of group sizes and needs. Many make use of adaptable, virtual room types, or component rooms, which are comprised of a combination of two or more physical rooms that enable larger and more tailored accommodations. So, a king room combined with a double can be sold as a “family suite.” This is great for guests but a nightmare for revenue managers as this flexible inventory changes the approach needed in revenue management for inventory optimization.
The complexity of offering multiple room configurations on top of a property’s set room count often requires manual pricing and constant oversight to manage the profitability of these assets. This means that rooms are often excluded from certain channels to appropriately protect the inventory, but as a result, they go underutilized and undersold compared to standard rooms. Because of the high degree of variables, little has evolved in terms of an automated solution for component room management.
