Pushing Rates: Getting More Out of Every Room Night

In a windowless room near the front desk of the Red Lion Anaheim rests a navy blue, family-sized suitcase and 12 feet away from it sits Stephenie Torres, the hotel’s sharply dressed revenue strategist. In a couple of hours, the front desk staff will wheel the suitcase out to an exhausted mom and dad returning from a day of chasing their two young boys around Disneyland. About two hours after that, Torres will step out of her walled-off office area, when she’s done adjusting, cajoling, and finessing room rates to maximize each night’s take on the property’s 300 rooms. Though, truth be told, her work is never quite done.

Splashed across the two computer monitor screens on her desk are several weeks of booking data—some confirmed and some projected—broken out by channel type and rate. Each morning, Torres logs into Duetto Edge, a cloud-based revenue management application, to see how the performance of the hotel is trending, and then she compares the new numbers to last year’s and to her forecast to see what kind of opportunities are available to push rate or occupancy or both. From there, she references a Revcaster report on her local comp set to make sure her inventory is priced competitively.

What she sees in front of her are some pretty uninspiring numbers for the week ahead. They show up in her onscreen chart as shallow dip in an otherwise peak-filled month. “All the spring breakers have left,” Torres says. “And we have this lull before all the people start arriving who want to vacation when the kids are gone.” She brings up another view that shows the air traffic coming into the Orange County Airport and then lines up the air travel volume peaks and valleys with the hotel’s. “My low is down here right now, but when I get up here, things will start to rise back up.”

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This isn’t a surprise, since the post-spring-break lull was something the software saw coming almost a year ago. “We knew this was going to be a need time, so we made sure we were priced accordingly,” Torres says. “We worked with the regional marketing team to push out some email promotions ahead of time and coupled them with banner ads.” And, as it grew closer to the booking window, she worked with the team again to do some global promotions through select OTA channels. “We also ran a Groupon promotion for this month because we knew the rooms would be hard to fill.” All these advanced sales efforts have softened what would have been a steep drop in RevPAR into a week of anemic occupancy that didn’t drag room rates down with it. Still, that didn’t stop her from spending the previous weekend obsessively checking Duetto with her iPhone to see how things were moving.

In an industry that’s increasingly data-obsessed, Stephenie Torres isn’t the only revenue strategist turning to advanced analytical software and targeted pricing techniques to grow a hotel’s top line. Revenue management moved beyond spreadsheets and gut feelings a long time ago. And big hotel chains like Best Western International, Wyndham Hotel Group, and Red Lion Hotels (RLHC) with its RevPAK
platform (see “Unpacking RevPAK”), are now assembling integrated software systems for their hotels that are stocked with advanced revenue management tools that automate the pricing process as much as possible, allowing operators to be much more strategic in their distribution and room rate decisions. Instead of crunching numbers, revenue strategists can now focus on creating pricing strategies and campaigns for every channel guests use to book their rooms—from brand.com to Hipmunk.

The Inn Crowd
The Red Lion Anaheim is a block away from Disneyland, and there are an additional 22 hotels within a half mile of the theme park that live and die on the families and groups traveling to the happiest place on earth. The supply of hotels in the area is on the rise, with two new properties currently being built on either side of the Red Lion—a Hyatt House next-door and a Residence Inn across the street. “The Hyatt House is a higher priced product and the Residence, though closer in price, will still be higher than us,” says Cindy Hooper, general manager of the Red Lion Anaheim. Earlier this year, a Hyatt Place and a Homewood Suites opened nearby. All told, the local hotel market sustains 80 percent annualized occupancy mainly by feeding off Disneyland and the nearby convention center.

“Occupancy is forecast to grow at about 2.7 percent for this market, so we shouldn’t see many challenges from new supply coming online,” says Hooper. “I know a lot of people are unsure about new supply, but I think it’s good for us in this case. They’re all driving rate higher, so I think it’s going to actually give us an opportunity to bring our rates up and still be a great value.” She adds that the convention center is currently going through an expansion, which should mean more business for everyone. “If Anaheim can bring in bigger conventions, then we all share in the growth.”

While there are plenty of opportunities to drive occupancy, the trick is to do it while still capturing a hotel’s fair share of revenue from the market. According to GM Hooper, Torres has made a huge impact on the Red Lion Anaheim’s performance despite only having been there for nine months. In the first quarter of 2015, the room revenue for the property was up by 11 percent over last year. A few hotels in their comp set have even started benchmarking their prices off the regular adjustments Torres makes to her numbers. “I see rate changes in my market almost hourly,” she says. “And when we adjust our rates, I’ll see our comp set adjust theirs. If I come down, they come down.”

There are three nearby hotels that Torres pays particular attention to—the 1,500-room Hilton Anaheim, the 1,000-room Anaheim Marriott, and the 800-room Sheraton Park Hotel. “I regularly look to see where they’re at and how I want to position against them,” she says. “They have big fluctuations and a lot of pull in the market.” If these hotels drop their rates and she doesn’t react in time, then her 300-room property will lose a lot of business to them. While Duetto is automated enough to send up a flare at drastic rate changes like these, Torres has set up a series of rules in the software to alert her when things like this happen. Or when the opposite occurs and one or more of these three hotels raise their rates through the roof. “That’s an indication that they’re getting low on inventory, which means I need to watch them closely to know when they hit the sell out point and my rate needs to go up. If all three are sold out, the sky’s the limit on our price point.”

Top of Mind
This morning, Torres was training Morgan Martin, a revenue strategist who recently joined the Red Lion Hotel team from Sceptre Hospitality Resources. One of the properties Martin will be managing is the Hotel RL Baltimore, which will be the first of the company’s new upscale lifestyle brand when it opens this August in Baltimore’s Inner Harbor. She’ll be facing a unique challenge when she goes to set rates and connect them to promotional programs because there aren’t any historic numbers or trend data to build a model from.

She can lean on Duetto for some of this, since the software taps into information such as airline ticket prices, events, search activity, and even weather forecasts to understand and predict the wealth of consumer behavior behind hotel room pricing trends. But she also needs to get out and do her own research.

“Getting to know the comp set is the first step,” Martin says. “And that means going around and seeing how far away each hotel is from ours, which one has a nicer product, and how recently each one has been renovated.” Then she says she’ll hunker down with a STAR report to see the ADR numbers across the Baltimore Inner Harbor from one week to the next. Finally, she says she’ll look at what sort of convention center business is available for a 150-room property like this. Coming out of the gate, she admits that most of the promotional programs for the Hotel RL Baltimore will be mainly geared toward building brand awareness. “In the months prior to the opening, when we’re loading inventory and taking reservations, we’ll most likely have some travel ads running to get the name out there,” she says. “When a hotel doesn’t have history in a system, then it will get pushed to the bottom of the search results. So you have to build up some conversions before a site like Expedia will actually start moving you.”

The flexibility of the RLHC’s RevPAK system means that a hotel can run a digital marketing campaign with an OTA like Expedia and track the results within the system since the Windsurfer channel manager plugs directly into Duetto. “This helps me make sure I’m priced and positioned correctly to get the conversion,” says Torres, who uses Expedia to occasionally fill the Red Lion Anaheim’s demand valleys. “I almost always use travel ads to make sure that price is getting the necessary exposure to the customer.” In the Anaheim market, she says, when the rooms are priced right on Expedia, her conversion rate is amazingly high. And while she has to constantly fine-tune the campaign due to market changes, the results are worth it.

Last year, Torres set up another Expedia campaign in South Korea for outgoing Disneyland tourists when she read about country’s visa waiver program establishing visa-free travel to the U.S. “In three weeks, we picked up 1,200 room nights,” she says. “And it’s super easy to turn on and off a program like that whenever you need it.” This sort of automation makes hunches like hers pay off.

In fact, so much of what the new revenue management tools allow hotel operators to do revolves around automating the many tedious, mind-numbing accounting tasks, and unleashing the creative and critical thinking aspects of revenue strategy.

It’s a welcome change for Stephenie Torres, who sees a time in the near future when the suitcase sitting near her desk will be her own instead of a guest’s. And she will wheel it out of the room in the middle of the day and go off on her own family vacation.

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