How to Think Like a Hotel Revenue Manager

Hotel contract risk reduction and cost containment are important metrics in today’s strategic meetings management (SMM) landscape. Demand is far outpacing hotel room supply, so hoteliers can be choosy about what meetings they accept. To be successful in negotiations, planners must create a plan based on specific hotel revenue management criteria. For each RFP and set of meeting dates, evaluate the following: Total Hotel Room Block  At 77 percent average gross profit, this is the hotel’s biggest profit center according to an independent survey of hotel chain executives by Meeting Sites Resource. Calculate the RFP response on sleeping room and suite rates by your projected room block to understand total room spend contribution. Additionally, track spend by individual hotel and chain, and use consolidated revenues to maximize negotiations success. Peak Night Pattern All hotels use pattern selling by market segment to maximize occupancy and revenues. Determine if your peak night pattern is in sync with the hotel’s expectations. Sometimes shifting your pattern by a night or two can enhance your RFP value and save 10 to 15 percent on group rates. Rooms-to-Space Ratio This metric is critical to a hotel’s success, especially in a seller’s market. Hoteliers assign a portion of total sleeping room inventory to transient business and the remaining inventory to meetings. Meeting space is used to sell group room inventory, and unless you have a buyout, the hotel will want to give you premium space based on your group sleeping room commitment. F&B This is the second-largest profit center for a hotel at 38 percent average gross profit (also according to the survey), and the hotel will ask for a guaranteed F&B amount in the contract. From your RFP, calculate all F&B events and use average menu pricing, not including tax and service charge. Ask your sales contact what his or her F&B expectations are for each set of dates. If your amount is higher, that helps the negotiation process. Season Both domestically and internationally, you will encounter high, low and shoulder seasons, which will impact your negotiations strategy. For example, meeting dates in January through April in Scottsdale, Arizona, will produce quite a different RFP than summer or September through December. It is important to evaluate demand over each set of dates and use this as part of your negotiations plan. Ancillary Revenues While the hotel group sales focus is on sleeping rooms and F&B revenues, other ancillary revenues—such as audiovisual, production, technology, business center, golf, spa and more—are important, so track historical and projected revenues for these items. These revenues can be combined with your projected sleeping rooms and F&B contributions to strengthen and leverage your negotiations. Regardless of shifts in the marketplace, when planners think like a hotel revenue manager and have a strategic negotiations plan, they can add more value to their meeting and bottom line. Cheryl Payne, CMP, is director of accounts and global meeting management services at Meeting Sites Resource, a global strategic meetings management solutions organization. She also speaks on SMM at industry events, including Collaborate Marketplace.