From Revpar to Trevpar: Integrating Ancillaries Into a Revenue Strategy

Considering ancillary revenue streams can make up to 60% of hotel revenues of why would not any operator embark on the journey of total hotel revenue management?

Apart from challenges related to the creation of a functioning revenue management (RM) culture the inclusion of F&B, spa and event revenues into that culture brings its own set of challenges. This article will explore these challenges and offer a guideline to successfully integrate additional revenue streams into a comprehensive revenue optimization strategy.

Revenue per available room or RevPAR is a measurement of the success of a balanced occupancy versus average daily rate strategy. While there are still owners – and surprisingly sometimes even operators – who favor either an occupancy (“Less than 100% is considered a failure”) or ADR (“has to be the most expensive hotel in town”) focused strategy, any operator, who started to build a revenue management culture will agree that profits can only be optimized if the focus is on RevPAR.

Depending on positioning, location and other factors profitability for the rooms department should be somewhere above 75%. So optimizing the revenues from a department with high profitability by having a working RM culture in place is vital for the financial success of the property.

But what is considered a working revenue management culture?

A key element is a revenue management professional and I am purposely using the generic term professional, because that could be a director or manager, could be on property or centralized, could be reporting to the GM or to the commercial leader.

What is the most important skill of a revenue management professional?

Surprise, surprise it is not the ability build and analyze spreadsheets in record speed nor the ability to create dynamic 3D models of the latest booking pace by segment. In today’s fast paced dynamically ever changing constantly disrupted world the number one skill in any RM professional should be the ability to clearly and confidently communicate.

Some readers might indeed be surprised by this statement, but the most amazing math genius will not be able to get any recommended fact based strategy adopted if s/he is unable to communicate the rationale behind the recommendation especially if it involves change.

And we all know how much the hospitality industry and the people working in it love change (article for another time).

Read rest of the article at Hotel Executive