Mind the Gap…

We have all worked with or simply met pricing professionals across the entire talent spectrum. What do they all have in common?  Unanimously, every single last one (even the greatest) leave money on the table.  It’s a simple fact. Some hotels leave little, others quite a bit – even the greatest hotels with advanced systems leave money on the table everyday.

Hospitality pricing professionals subscribe to at least a few different pricing techniques, with different strategies around property forecasts and pricing against what the market is demanding.  Unfortunately, today many pricing professionals are routinely in a reactive pricing position which always leaves money on the table.

The very intent and purpose of revenue management is to be proactive.

If you have great demand for a specific day, you might raise the price (usually up to the next higher price set in your system). You probably even spot check your rates against the comp set published pricing, to validate that you feel good about your new rate.  Set it and forget it (well, forget it for a few days anyway, then I’ll check it again… right?).

What if the market pricing is trending up?  What if people shopping you are comparing you against hotels not programmed into your STR report comp set (higher or lower ‘tier’ properties)? What if you are now priced at $159 yet the market will very soon be priced at $199? What if you knew that ahead of time – would you price at $179 instead of only $159? Maybe $189?  This is a Price Gap.

This is the definition of Price Gap: It’s not simply that you are priced lower than your comp set… it’s when your price point is lower than it should be… and you are leaving money on the table.

Mind the Gap. Identify your Price Gaps with the Market Fare Forecast and start capturing that Gap revenue today.

Now that’s being proactive!

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com. Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.

 

Announcing Daily Hotel Rates!

Fare-1-1 is excited to announce the completion of the Dashboard – the industry’s first, complete, one-stop hotel rates shop. The powerful addition of Daily Hotel Rates empowers you with the right tools to do the job right, powered with hotel rate data (updated nightly) like no one has ever done before… a comprehensive list of rates from every single hotel in your market organized for your analysis by star rating. The application is designed for search ease and rapid query support… simply start typing the name of the hotel you are curious about and it will appear. Or, type your rate and you will immediately see who else is charging the same rate. Instantly. Just like a jet fighter pilot, you deserve the right tools to navigate and push your business forward. This includes the right software, hotel software is important in order to manage and control your business to meet the needs of the customers.

The Fare-1-1 Dashboard equips you with the powerful Market Fare Forecast, Lowest Daily Rates, custom user Daily Email Alerts and now the Daily Hotel Rates… everything you need to make more informed hotel pricing decisions. Quickly study your market with Daily Hotel Rates and Lowest Daily Rates, set your rates against the Market Fare Forecast ensuring you are properly positioned amongst your competitive set, and set your Daily Email Alerts so you know the moment anything changes.

Your revenue management system doesn’t do any of that.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

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Situational Awareness

Situational awareness is critical to success.

A long time ago, someone very wise offered me great advice…

Situational awareness. Always be aware what is happening around you.

When setting your rates, this awareness is critical. Your price should always be set first and foremost based on your property’s own supply and demand situation, then adjusted to maintain your competitive edge and protect market share. This is where situational awareness plays a big role.

So you set your one night length of stay rate at $149. You then need to compare your new rate against the market, and upon checking the Lowest Daily Fares you see the lowest comparable rate in your market is $159. You also see that the Market Fare Forecast predicts your market will be priced at $189, as the rates in the market are trending up over the past week.

How does that new rate look now? Your new rate at $149 is leaving $10 on the table, and very likely actually $40. The opposite of this scenario also presents opportunity… if you are $40 higher than where the market is headed, you will want to adjust so you don’t lose occupancy for the sake of protecting rate.

Situational awareness is great, immediately helping you identify small opportunity… but when you gain insight and take action to properly position your hotel in the market based on what the competitive rate will actually be, you really unlock hidden revenue and profitability.

Don’t just rely upon a spreadsheet that regurgitates what rates are found online… don’t simply react to the competition! Gain insight with valuable data found in the Market Fare Forecast, take action and drive your business.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

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Worst Decisions Ever

Worst Decisions Ever

A client recently asked us what were the worst decisions ever we observed over the years. Revenue managers make a lot of decisions daily… everyone makes mistakes. The important thing is to learn from your mistakes, and not repeat. The next few posts present some lessons our clients have learned.

Blindly following the leader and dropping rates.

Don’t blindly match the new lowest rate in the market. This race to the bottom is a dangerous game, and not a sound hotel pricing strategy. First and foremost, you should always price your property based on its needs, its own supply and demand. If you are high on supply and short on demand and a competitor drops rate below your own, we recommend a couple things. First, run the numbers to see how many lower priced bookings you could take and still make forecast and budget… know the numbers. Second is there a way to drive demand without a ‘public’ rate drop? Can you run a package sale, drive opaque bookings, etc.? Do you really need to match that new low rate, or maybe just fine tuning your price by dropping it a small $10 will win?

If you run a package sale, or a room upgrade promotion, it will give you something to talk about (marketing!).

Where is your inventory need? If not in your lowest room category, and you drop your lead rate, you just diluted that demand and failed to target the actual need.

Tomorrow we will present another lesson learned and observed!

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

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Perfect Hotel Rate: Did You Nail It?

Perfect rate… revenue management’s holy grail (ok, go ahead with Monty Python quotes here).  So, how do you know when you actually nailed that perfect rate?

You could perform a complicated price sensitivity analysis, evaluate whether or not you actually left demand on the table (do you have data behind constrained and unconstrained demand?), and numerous additional analyses.  You could invest a lot of time chasing the answer.

We recommend asking another question, to find your answer: Did you lower your rate?

It’s pretty simple, so let’s avoid analysis paralysis and save a lot of time.  The goal is to sell your rooms for the highest price on the day of arrival. If you were selling for $199 three months ago, $249 one month ago, now less than three days to arrival you are priced at $199 again (or lower) then you simply didn’t nail the perfect rate.  Or, you didn’t leave the perfect rate out there long enough to do its job.  Either way, you didn’t nail it.

Honestly, we know the perfect rate really only exists in theory… but the common hotel/resort doesn’t need to try and solve complicated analytical battles.  If you’re wondering how effective your rates are, evaluate how often you lower rates… adjusting/correcting rates once you realize you’re set too high, or too low is great.  Constantly changing rates and dropping rates as you get closer to arrival is habit to avoid.  After all, if you drop rates closer to arrival you are educating your customers to wait until you drop rate… not good!

Knowledge of market trend and where your comp set will be priced is key… stay one step ahead and protect your market share.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

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Three Easy Steps To Success

Memorize three easy steps to success in revenue management:

Identify your target.

Sound like a military operation? They do it for a reason, you should too. We all know the best way to accomplish something is to write it down, put it in on your fridge, stick it on your laptop monitor. The point is identifying exactly what you are targeting, and when/where you want to hit it. Need another five occupancy points next month? Want another three dollars in Best Available Rate this month? Target identified… now you know what you want and when you want it.

Track your progress.

Are you behind, or ahead of required pace to hit target? If behind pace, how much time do you have to correct? You need to understand your position every single day. Track it, record it, live it, breathe it.

Do something about it.

If you are behind pace go talk to marketing, call your third party (OTA) market manager, fix your price… do something! Don’t just accept missing your target… go knock on doors until you get some help if you have to, until you get what you need to hit the target.

Mission accomplished.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

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It’s Time To Sweat The Small Stuff!

We have all heard someone offer the cliché advice “Don’t sweat the small stuff!”  If you’re anything like me, that drives you crazy.  As a revenue manager, we live for the small stuff.  After all, it’s the small stuff, the 1-percent gains that translate into the BIG stuff… so, we sweat the small stuff, and justifiably so.

While we’re being honest with each other, there’s actually quite a bit of ‘stuff’ in our world.  Conference calls, reports, rate parity, inventory management, sales and marketing meetings, training, revenue meetings, group requests, contracts, competitive reviews, and so on.  This stuff is important, and deserves your attention… but it’s not the small stuff. 

Situational awareness of your competitive rate position is powerful small stuff.

Ok, I admit… it’s a bit of a love-hate relationship.  We love being the story tellers, after hours of digging through data and completing analysis that makes us smile as we find those tidbits of supporting evidence that add up to strategic insight.  There’s nothing that compares to persuading a board room audience to shift strategy based on your analysis and being proven correct… and we love it.  We hate when stuff pulls us in 17 different directions and we lose valuable time we’d rather spend on that analysis we were just about to finish… especially when it’s the fourth meeting in a row and the agenda includes reviewing the upcoming revisions to the cubicle floor plan.  Not something we love.

Managing your time is perhaps the most important job skill you can develop.  What this really means is not allowing other people to manage your time.  Ensuring analysis is based on the most recent data, improving accuracy and updating forecasts, refining analysis with improved segmentation, working with the sales team to make sure they understand the forecast changes; these are just a few examples of the small stuff that simply must be deeply integrated into your daily schedule.  Seriously… the small stuff should literally be scheduled on your daily calendar.  Assemble a daily and weekly checklist, and block time on your daily schedule.

Make sure you actually have access to and reference the right small stuff.  This speaks directly to your competitive rate analysis! Fare-1-1 provides daily updated views of the data you need… Market Fare Forecast pricing by length of stay and trend behavior, lowest daily fares, and more!  All conveniently located on our Dashboard.  Set alerts and you don’t even have to monitor reports… you’ll get an email alert!

It’s our professional duty to sweat the small stuff, and the first step is being the master of your own time – save time and increase revenue!

Time to sweat the small stuff.  Good luck!

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

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Do You Need To Fix Your Rates?

At times as a child, I was overly-dramatic and often made exaggerated facial expressions to the point that my mother would often sternly tell me “Fix your face!” I can only imagine some of the ‘before and after’ expressions I made.

Today, revenue management (RM) has grown well beyond setting rates… we applaud the RM evolution. There’s one problem, however – as we spend more time on other things, we must not allow ourselves to forget the basics. If you find yourself in lots of meetings discussing how your property can drive demand, be more creative with marketing, how the sales team can be more aggressive and effective, re-tuning offers and incentives, maybe there is a more important question: Do you need to fix your rates?

Clarification: As a practice, revenue professionals will often defend rates suggesting rates should only be dropped as a last resort, after all marketing and sales efforts have been exhausted. In theory, this is true… however, it is also based on the assumption that your current rate is the right rate… I’m suggesting you stop and ask yourself if it is, in fact.

You can spend hours designing gorgeous, captivating campaigns, adjusting offer reinvestment, setting higher sales goals, but if the rate is wrong it will bleed into every part of your strategy. How do you know if your rate is wrong? If your rate is set solely based on the competitive set (are you chasing the lowest market rate?), based on the budget or forecast (setting your rates to support the last forecast?) or some other equally arbitrary guidance, you need to fix your rates.

As a revenue professional, whenever I found myself starting to look at ways to drive bookings, I always paused and asked myself this critical question: Do I need to fix my rates?

If the honest answer is yes, you’ll want to act fast. The first thing you need to do is assess what your goals are… how does your demand forecast compare to your available inventory? Are you trying to sell the hotel out (closer arrival dates) or are you trying to get your pace back on track (longer lead times)? Once you establish your goals, you need to understand what rate your inventory is actually selling for. If your rate is currently set at $100, and the rate you are achieving after promotions and discounts is $80 then your rate is probably 20% too high. Promotions, discounts, and the like require planning (and time and money!)… you will always be better off selling the inventory outright by setting the right price.

Understanding the trends in your market that impact your property are crucial, as well. Once you have your goals set and understand what rates will actually sell your inventory, you can take a look at what the competition is doing and fine tune your pricing decisions accordingly. Simply matching the lowest rate in town is never a good idea… you need to take a more analytical approach and make decisions based on the needs of your property. Perhaps you don’t have to beat the market by offering the lowest rate in town… especially if the market is moving rates up.

Fixing your rates is not always easy… but always necessary. Make sure you have the tools you need to make the best business decisions.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.