Net Revenue, and now what?
In the last years, we have been onboarding hundreds of hotels on our platform. Most of these hotels are working with Net revenue Analytics and have been optimizing distribution costs and improving their results year over year. Every time we onboard a new hotel though and the team gets a sense where they stand with their Net Revenue KPI’s the same question pops up all over again. And now what? Why is that? Is it that hoteliers lack imagination? Certainly not. It is just that Net Revenue is a complex multifaceted area for optimization. So when you know how much your Net Revpar number is….
In this article, we are exploring 5 NOW WHAT actions you can take once you know where you stand once your net revenue KPI’s.
1) Its all in the business mix
Understanding net contribution by segment is instrumental in optimizing Net Revenue. The range between the best yielding segment and worse yielding segment can be up to 25%. it is therefore important to draft a profitable business mix strategy and to engage the hotel teams. From Revenue to Sales to Distribution and meeting and events. Break Silos, think profit
2) It all in the channel mix
The channel mix is equally important. Here it is easy to fall in traps. In our research we could see that often hotels spend more to acquire business directly than the commissions that are paid to ota’s. Measure how much is invested in direct business? Is it too much? Is it not enough perhaps? Take a look at the market channel mix using a tool such as demand 360 or Agency 360. Are there opportunities to drive more
3) It’s about Sales and Marketing Allocation
Typically Sales and Marketing plans are drafted by adding a few % points. Re-engineering the Sales and Marketing budget every year vs the segmentation budget is a no brainer. Attribute sales and marketing spend to each channel and each segment. Can we spot imbalances? Going further one can also attribute sales and marketing cost vs the stages in customer journey. Are we overspending for example in acquisition but underspending in retention and loyalty?
4) It’s about Daily tactics
1. Room types: When restricting room types monitor the impact on net revenue. often corporate rates are closed for standard rooms however BAR rates for standard might still be open. When removing acquisition costs it might be that BAR yields a lower Net Revenue. It is therefore important to look at the rate hierarchy at the net level.
2. Peak demand days: Analyze net contribution on the books for these days. do we have the right channel mix? The right segment mix? Do we yield a better Net Revenue than non peak days? What inventory management tactics can be set?
3. Take a look at the length of stay and stay pattern. A certain channel can be less profitable but yield business on shoulder or need days.
5) It’s about pricing
Pricing is a powerful lever to pull to optimize net revenue. With open pricing becoming the norm, taking acquisition costs into consideration when setting prices is crucial. For example discounted rate plans that are subject to marketing campaigns tend to cost more. When not taking costs in consideration a hotel could potentially displace more profitable business.