Hotels need to look at the total revenue picture

MINNEAPOLIS—Now, more than ever, hotels need to maximize their revenues, ensuring that all areas of the business are working as efficiently as possible. While certain services and amenities might look different in the near term, and hoteliers are assessing offerings like food and beverage—namely, how to ensure best safety practices in this time of social distancing—there’s no denying that ancillary revenue streams are an important part of a hotel’s profitability. Ideas Revenue Solutions, a provider of revenue management software and services, has a new solution that aims to help hoteliers build a forward-looking total revenue plan and budget.

It’s called Ideas RevPlan, and it’s a cloud-based module that complements the company’s flagship RMS products. James Echert, the company’s product marketing manager, noted that hotels have long needed a tool to help plan operations for their total business.

“Most hotels can forecast operational needs for the guestroom side of the business within 5% accuracy, and those using an automated revenue management system (RMS) have even more precision. The great opportunity for advancement lies with non-rooms revenue—food & beverage, parking, gift shop, and other ancillary streams—which for some hotels comprises more than half of their total revenue,” he said.

“Due to the complexity, limited access, and amount of data generated, forecasting for non-rooms revenue is extremely difficult,” he added. “The overwhelming majority of hotels forecast non-rooms revenue manually using spreadsheets, often simply taking last year’s actuals and adding 3%. With these unscientific methods, hotels can wind up more than 10% off their non-rooms forecast, resulting in inefficient staffing and purchasing decisions and higher costs for revenue streams, which already have smaller profit margins than guestrooms.

“Working side by side with hoteliers for more than 30 years, we have grown to understand the challenges they face when it comes to forecasting total revenue,” Echert said. “We have observed our RMS clients using their demand forecast as a building block for their operations forecast. But there is a separate process for budgeting and forecasting handled in spreadsheets, and we have grown to understand that any solution to optimize this process would need to address the accuracy and efficiency challenges they face when it comes to forecasting total revenue, especially on the F&B side.”

The module utilizes automation and scientific forecasting to enable revenue managers, finance directors and hotel leaders to effectively budget and strategize. Hotel data is consolidated at the enterprise level, enabling strategic decision-making by revenue stream, region or brand.

“Ideas RevPlan was developed by hoteliers for hoteliers to fit naturally into their existing technology to automate the time-consuming, error-prone forecasting and budgeting processes from start to final submission to finance for the entire business, including rooms and F&B, to drive greater overall profitability,” Echert said. “Hotels are empowered to tackle planning for their total business through automated data collection, organization and scientific forecasting of all revenue streams. Forecasting tasks that previously took up to 10 hours a week can be completed in minutes with greater accuracy, boosting staff productivity and performance.”

While Echert noted that all hotels must plan and budget for their total business—and so all can stand to gain from implementing this solution—he did note that full-service hotels and hotel groups would see the greatest benefit. “In addition to enjoying the automation and scientific forecasting RevPlan delivers, a hotel group will also benefit from the consolidation and data translation across the entire portfolio, creating one source of truth and empowering corporate leaders to build a strategy and formulate tactics grounded in data,” he said.

And, he noted, it’s a step forward in an evolving future. “Total revenue management has been a buzzing topic for over a decade now,” he said. “However, hotel progress has been slowed by data fragmentation, departmental silos and outdated technology. Ideas RevPlan breaks down data and silos across the hotel organization to scientifically forecast all revenue streams in a scalable and sustainable way for hotels of all sizes. With total revenue intelligence at their fingertips, hotel and revenue leaders can build a smart, forward-looking total revenue strategy.

“In this era of economic and demand uncertainty, hoteliers need to find creative new ways to drive revenue and profitability. A treasure trove of untapped opportunities awaits in F&B, meetings and events, and other revenue streams,” he concluded. HB

To see content in magazine format, click here.