Group 9
Through our conversations with the 5 panellists, we were able to attain a better understanding of how hotels have utilised total revenue management within the past 2 years to develop new revenue sources to replace traditional customer-base which have been disrupted. At the same time, we also understood more about the success, failures and considerations hoteliers face when implementing total revenue.
We also learnt that prior to the pandemic, a significant number of hotels have dabbled and attempted their version of total revenue management. However, the panellists also shared that, even up to today, most hotels have failed to fully implement and capitalise on total revenue management.
Impact of Hotel Size and Type on Implementation of Total Revenue
There are more opportunities in terms of total revenue in the large hotel as compared to the smaller hotels since there are various income streams such as restaurants, casinos and even MICE. On the other hand, smaller and budget hotels focus on growing the demand for hotel rooms.
Hotels with total revenue management in place were able to quickly adapt to the declining hotel demand and explore new revenue streams since they have existing resources and facilities that can be utilised. With room revenue impacted by the lower demand, larger hotels implemented strategies to tap on other revenue streams to increase spending per pax. One of the strategies adopted was to introduce room packages with dining credits to encourage customers to dine within the hotel. Another approach taken by larger hotels was to provide customers with personalized experience, such as arranging private tours for customers, and all these new revenue streams ensured that hotels were able to maximise revenue per pax.
In contrast, Mr Vikram, co-founder of ZUZU hospitality whose clients are mainly independent budget hotels, noted that smaller hotels have limited alternative revenue streams. Due to the size of these hotels, diversification of revenue streams is not possible, hence they should focus on growing demand to increase room revenue. In Singapore, although traditional sources of hotel demand dwindled during the pandemic, other sources of demand emerged, resulting in smaller hotels switching to target staycation demands and working with the Singapore government for Stay Home Notice (SHN) business. They also explored new demand channels like Klook and banked on the SingaporeRediscover vouchers issued by the government to increase room demand.
Difficulties and Side effects of Implementing Total Revenue Management
The main challenge in implementing total revenue is the ability to build the total revenue culture in the organization. Building the culture requires all employees to collectively believe that total revenue management does generate positive results for the organization. Without a strong total revenue culture in the organization, employees are less focused on the common goal which reduces the effectiveness of total revenue management. Mr Vikram, the co-founder of ZUZU hospitality mentioned that it is important for employees to embrace the culture and see total revenue management as essential. Additionally, Mr Vikram highlighted that for a start, hotels should utilise tools to provide help for the team and it is crucial for the team to understand the reasons for these tools to be effective.
Another major challenge hotels face when implementing total hotel revenue management is the silo effect. The silo effect occurs when team members do not have common goals and aligned strategies. It is important to eliminate the silo effect, because it does not only affect those in the silo but also all the stakeholders in the organization, thereby affecting the company’s bottom-line. Ms Judith Cartwright, Founder & Managing Director of Black Coral Consulting, highlighted that it has been common for different departments of an organization, such as the sales, marketing, and revenue management teams, to work independently and they tend to have different objectives, leading to unaligned strategies. In this time of big data and increased adoption of technology, the hospitality industry has seen a greater need for cooperation among departments. One simple yet powerful tool is to conduct regular strategy meetings, where there are clear agendas set so that participants can come prepared to contribute meaningfully during the meetings, and different departments can align their objectives, targets, and strategies. This helps to create a collaborative culture where closer working relationships are built among the different departments, which serves each team’s and the organization’s, as well as the customers’ best interests.
Current Hotel Industry Landscape towards Total Revenue
Whilst hotels have achieved some success in exploring new revenue streams during the pandemic and are optimistic of the future of total revenue management, Mr Detlev, a professor at SIT, is skeptical of the true openness and readiness of the hotel industry to accept total revenue as the new normal in revenue management. He attributes his skepticism towards the hotel industry to two main factors.
Firstly, he believes that there remains a lack of data integrity and completeness in the hotel industry. The hotel industry remains technologically disadvantaged in implementing total revenue as they do not possess the technology to ensure data integrity and completeness across departments, which is crucial to enabling effective total revenue management. For example, if a customer comes in with a business group and chooses to pay for his drinks using cash, the hotel will not have any definite way to track who this customer is and how much he spent on his drinks. In most hotels, there is a lack of investment in technology or training to set-up processes to attain customer’s names and personal details to do so. The importance of technology and training has also been echoed by Ms Judith who drew the simple example of how different restaurants in the same hotel had different names for Coca Cola – “Coke, Cola, Coca Cola”. Without clean data and appropriate infrastructure set-up, it is difficult for hotels to truly implement total revenue management and the opening of new revenue streams are merely side effects of focus on new customer bases.
Secondly, he believes that the greatest hindrance to the successful implementation of total revenue is the mindsets of the hotel management. Given that the pivot from a traditional occupancy or room revenue to a total revenue management requires substantial financial and organizational investment, it would require buy-in from the hotel management to make significant changes to existing processes. However, this is often not present as management and staff require a long period to acclimatise and understand the concept of total revenue management. At the same time, whilst total revenue provides greater opportunity for collaboration between departments, it requires a trained team to efficiently manage such collaboration and prevent silo thinking within the organisation. Ms Judith also echoed the concepts brought out by Mr Detlev as she mentioned that one of the greatest difficulties in implementing effective total revenue management is the prevention of siloed thinking and having effective cross-team collaborations. She also mentioned that it is crucial for the strategy team to provide leadership between the departments and the importance of using small wins to motivate greater changes in the organisation.
Given this current situation, Mr Detlev suggests that the first step for the hotel industry to develop other revenue sources is to adopt revenue optimization, which is a combination of pricing, demand, and marketing strategies, to each revenue source to maximize revenue growth. The smaller pivot of revenue optimization acts as small wins for which hotels can see tangible impacts of revenue optimization. With these small-wins, hotel management will then be able to shift their mindset towards total revenue management and eventually be able to commit time and resources into an effective pivot sometime later
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Group 10
We have identified several key takeaways and the first being that companies need to be open-minded and creative in order to expand their revenue streams. Many of the revenue streams are actually very intuitive and integrated very well with the current hotel operations. For instance, Fairmont hotel started a shop service called “Fairmont at Home” where the hotel sells food products and wine that they were already ordering in bulk for their restaurant operations which gives them a price advantage when operating an online store. However, an issue with many hotels was that they were previously very traditional and narrow-minded when looking to boost revenues. For instance, when trying to fill up their function halls, they would target events and conferences which they had always done traditionally even though there were many other ‘non- conventional’ options to fill up their function halls such as hosting church services or even be used as a vaccination centre during the pandemic. Perhaps the pandemic was a blessing in disguise in helping propel hotels to develop new revenue streams as the lack of revenue had led them to be more willing to explore and try out these new revenue streams.
Another key takeaway is that exploring new revenue streams could be very challenging. It goes beyond having to coordinate across the departments within the company but also involves working with third parties as well. For instance, when hotels tried to implement food delivery for their restaurants they had to coordinate with third party app developers or food delivery companies to coordinate such operations. We also learnt that new revenue streams often require buy-ins from the key stakeholders. However, a common mentality amongst employees was that these ideas and strategies only involve the revenue manager and they end up not turning up for all the training sessions which undermined the development of the new revenue streams. Some companies were also unwilling to train their staff to make the new revenue streams possible, especially during the pandemic when they were tightening their belts. There are numerous challenges that one has to overcome in order to implement new revenue streams but most certainty it is something that companies should have the will to push through with it as they will be well rewarded for implementing it where their operations become much more diversified and sustainable.
Next, we also learnt that the local community and domestic market is a key untapped revenue stream. Previously, hotels were obsessed with marketing to the world and trying to reach out to tourists all around the world. However, they missed out on the domestic market segments that were right in front of them. It could be the locals staying near the hotels who could visit or order food from their restaurants or the wider local community who could visit the hotels over the weekends for staycation. These customers’ profiles are significantly different from the tourists and could even be much more resilient and sustainable for their business as proven during the pandemic. In fact, the experts have shared that these customers would serve the hotels well beyond the pandemic, especially through their support of the F&B delivery revenue stream which they had experimented with during the pandemic, and have found it to be profitable and thus likely to be adopted even after the pandemic. As such, hotels would be wise to engage with the local community more actively from now on and try to offer new services and packages to cater to them to make their business much more diversified.
Ultimately, innovation and creativity are one of the many few important factors in play when companies find alternatives to develop revenue sources. Dealing with the unforeseen challenges caused by the coronavirus, many companies have adjusted and adapted their business model to generate more revenue. What worked in the past might not be applicable in todays’ setting and historical data used for forecasting is not that relevant anymore. In times of COVID whereby the revenue streams shrunk, the ability to identify where your company stands and the direction to go is crucial. While there are chances of failing, one of the takeaways was also to fail fast, learn fast and rebuild the model. Hotels and businesses must be quick in identifying who and what would bring in the most revenue for them. Also, staying flexible and adaptable at times like this is a must. In order to stay ahead of competitions, businesses must be willing to try out new stuff, constantly finding alternatives to generate revenue rather than staying status quo.
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Group 11
The RoundTable offered us insights into various sectors and concerns of revenue management. In this summary, we will be expounding on those insights specific to our discussion topics of developing alternative revenue sources and total revenue management. Throughout our discussion, a trend was formed around four topics, which we will present in the following paragraphs.
The first discussion point was the need to be creative in the search for other revenue sources. Globally, businesses were in the predicament to either significantly alter their way of sustaining business or shut down completely. The hotel sector was drastically, if not the most, affected by COVID-19, as simply the political environment did not allow the continuation of the day to day practices within the sector. As such, businesses aimed to implement creative and sustainable solutions. Tasneem Mukadam (Director of Customer Success, Duetto) described a situation where some of her clients, the hotels, partnered with hospitals as well as hairdressers to earn additional revenue. These partnerships allowed the hotels or hairdressers to use the hotels’ rooms for their services. This was in line with Ian Chinn’s (Regional Director of Sales, APAC, IDeaS Revenue Solutions) experience, as he explained agility as well as flexibility to be the dominant strategies during COVID-19.
The second discussion point is the size factor of respective businesses. Smaller hotels tend to be more flexible and open-minded towards change than bigger hotels. According to Ian, employees of smaller hotels tend to have closer relations with their bosses, allowing them to be more daring and explore bolder options when it comes to finding alternative revenue sources. An example would be smaller hotels being more willing to try out remote delivery as opposed to big-name hotels. Bigger hotels tend to have a longer history of engagement and as such stricter and more conventional workflows compared to smaller amenities, resulting in them being rather inflexible. Furthermore, given that smaller hotels have lower transaction volumes in any respect, it is naturally easier for them to adapt fast to imminent situations.
The third point is on how different revenue management strategies were adopted based on the different cultures or countries that the hotel is in. Ian cited that some may choose to take an aggressive approach while others will take on a more cautious approach. Some hotels in the U.S. adopted the aggressive approach by allowing visitors to stay in their rooms regardless of whether the visitors were vaccinated, while hotels in Asian countries have a more cautious approach by only accepting vaccinated guests. Another trend he mentioned was that hotels in Asia prefer to have their own branding in their food delivery services, which makes them less willing to outsource their delivery services. On the other hand, many countries outside of Asia did not have such a strong preference. However, it is important to note that many of these trends and examples are recent and related to the pandemic. One interesting point he briefly mentioned was that some desperate companies also ended up using “dark-road” (possibly illegal) strategies in the ways they pay taxes and collect money in order to maximise their revenue under such tough times.
Our last point is on the need for hotels to be actively daring in searching out alternative revenue streams. Ian and Tasneem shared with us their experience in evaluating different hotel strategies in generating alternative revenue, and to their knowledge, there does not seem to be any hotels which suffered backlash or consequences in their pursuit of alternative revenue. This should act as a source of confidence for hotel management to be daring in trying different approaches and be as creative as possible. However, as a cautionary note, Ian pointed out that there are strategies that have worked better than others, and proper consideration is needed to maximise the benefits of each strategy. Ian shared the experience of quarantine hotels in Singapore, how one hotel under-forecasted the expected number of rooms that the government requested. This led to the hotel earning less from the quarantine rooms than they could have if they were to offer more rooms. Hotels who wish to take lesser risk also have the option of using digital (algorithmic simulations) or physical (A/B testing) means in order to back their speculations, giving them greater insight into the probability of success for each strategy. As cruel as it sounds, luck also has a large part to play in short-term revenue generation strategies and as such, hotels need to be fairly certain about the strategy’s probability of success before implementing them. As a learning point, hotels need to be daring enough to find a feasible, yet innovative solution that is backed by data and evidence, in order to find a good strategy in generating alternative revenue streams.