The challenge with revenue-managing a hotel often is sticking to a sensible strategy when the competing hotel up the street does just the opposite.
That might be the case when negotiating fees with online travel agencies or adjusting room rates to make up for a cancellation, according to revenue-management experts who spoke on a panel titled “A revenue manager’s best friend: A profitable business mix” at the 2017 Hotel Data Conference.
“You’re only as good as your worst competitor,” said panel moderator Richard Pastorino, CEO and principal at REVPAR International. “Sometimes it’s not you that’s not playing the game correctly. It’s like sitting at a blackjack table. If somebody’s splitting 10s, you don’t want to hang out at that table anymore. But that’s what happens with our industry, and everybody can see it.”
Cancellation problem
For revenue managers, the biggest problem with cancellations is not being able to rebook that room at the original rate. For a lot of hotels, it becomes “a race to the bottom” with rates dropping dramatically just to get the room booked, said Johnathan Capps, VP of revenue at Charlestowne Hotels.
“For us, on an independent (landscape), it’s knowing what the brands are doing via cancellation. (We look at it) by market and by property, especially in higher (average daily rate) price points where it’s important to maintain a certain cancellation window,” he said.
So what’s the best solution for combating that problem with cancellations?
“For me, it sounds kind of simple and probably scares some of our operators, but it’s overbooking,” Capps said.
If you can overbook a room 21 or 30 days out from a hotel stay, “where you know there’s some peak demand in there, maybe at the highest rates,” Capps said, you’ll be better off than if you have to book within a cancellation window when “the wheels are off and everyone’s going to the bottom.”
