IDeaS 27 June 2018
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 InventoryFirst 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.Rocky PricingSo much data, so much volatility, so many possible outcomes, only one true optimal price point. Because of this pricing paradox, dynamic pricing, while standard practice for most hotels, isn't even in the cards for some resorts, which means they're missing out on significant potential gains. That said, those revenue managers who have tried their hand at flexible pricing strategies have likely had mixed results.Automated-pricing technology has changed the game for hotels, but how many systems out there can truly account for the full scope of considerations a resort should make to attain that golden price? For instance, with all-inclusives and their emphasis on the number of occupants in a room, these resorts must weigh the outcomes of per-person pricing versus unit-based pricing and be able to deploy those prices across all channels. There's also a higher level of guest personalization options related to the resort experience. Deals like the honeymooner package with in-room Jacuzzi, rose petals and bubbly or the room-location roulette wheel of balcony, poolside, ocean-view, beachfront, et al. make for more complex customer-choice, value-based pricing possibilities to be considered and disseminated.The Wholesale High TideAnd, regardless, the margin for flexible pricing is pretty slim to start with because a large amount of a resort's business--sometimes north of 70 percent--can come from wholesale tour-and-travel contracts. With rates set far in advance, rooms occupied and even total guest spend preconfigured, it would be easy to assume the work of a revenue manager is mostly wrapped up. The agreed upon terms help ensure the resort stays busy, but with less control over pricing and availability, how does a resort know if these arrangements truly create the best outcome for their bottom line? A savvy revenue manager dedicated to the holy grail of total-revenue management and optimization may wish to question the status quo and conduct a thorough analysis of their contracted revenue performance, if only they had the right tools to take on this sort of undertaking accurately and efficiently.Bigger Fish to Fry?Speaking of total-revenue management, the typical resort has a lot more going on than guest-room revenue alone. Meetings-and-events space, for instance, can comprise a huge piece of the profit pie for resorts. Weddings, professional conferences and conventions with thousands of attendees can become all-consuming for some resort revenue managers trying to enhance additional revenue streams for the property. Every occasion and function-space reservation brings its own unique specifications and opportunities, requiring many dedicated hours of astute, hands-on revenue management.Blue SkiesThe good news is that the future of resort revenue management looks bright. As leading revenue management technology providers wise up to these specific needs of resorts, they'll tailor their products to better serve this industry by building in full-scope, resort-specific solutions. New systems with component rooms functionality will allow resort revenue managers to optimize all combinations of room types and build a strategy specifically for flexible inventory based on guest demand and price sensitivity. An advanced capability like this will give revenue managers the confidence to know which components of a room to sell, and at what price, to achieve the greatest profitability and business mix across different channels.Revenue platforms with more robust pricing options and the latest in machine learning can provide automated pricing strategies that consider more possibilities and scenarios than ever before. Something even as manifold as customer-choice pricing can be enabled by the most sophisticated technology, allowing guests to choose the features they want to purchase and save money on the amenities they don't necessarily value while still increasing the resort's profit margin. Other resort-centric solutions will include group pricing and evaluation tools--maybe a good way to finally see if those wholesale contracts are really worth the displacement of other business--as well as meetings-and-events space optimization analytics.Many of these refined features are already available, and with other tech breakthroughs on the horizon, not to mention buzzing trends like AI and IoT, a resort revenue manager may start to wonder if it's too much of a good thing. Could the technology become so far advanced as to make their job obsolete? It doesn't look likely, at least not any time soon.Creative planning and a human understanding of the resort business and leisure-seeking consumer behavior are imperative for identifying new ways to increase revenue and improve the guest experience. Big data analysis is no match for good old intuition and abstract thinking. What revenue strategy automation and optimization software really amounts to is user empowerment, boosted confidence, improved job performance and a lot more time and energy for revenue managers to spend on constructive, forward-thinking initiatives, and maybe while they're at it, they can sneak in a few hours at the beach.Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com.