Olympics: Revenue Management for the Olympics

With the Olympics drawing closer, we bring together a panel of prominent revenue management practitioners and ask what hoteliers can do to maximise revenues during the Olympics.

Our Olympics panel:

  • Jennifer Keen: director, Total Revenue Solutions
  • Richard Noake: senior revenue manager, Travelodge
  • Paul van Meerendonk: senior consultant, IDeaS Advantage

Hotel-industry.co.uk: Which revenue management strategies do you think will be most important to fully capitalise on the expected peak in demand during the Olympics?

Meerendonk: I think the key is for hoteliers to avoid the extreme peaks and valleys during this period and implement an optimal business mix. Having a good base in the hotel that covers the shoulder nights and long-term strategies of the hotel, combined with the ability to drive higher rates during the peak nights is essential to ensure optimal RevPAR for the duration of the event.

Keen: We should also remember that data from previous Olympic Games suggests that the peak in demand will be for a relatively short period of time. Therefore, I would recommend that hoteliers see this is an opportunity to maximise their total revenue, at a time of year when these revenue streams might not otherwise be so strong. Focus on F&B and C&E. Also focus on how to capture as much of the customer spend as possible. Think long-term and make sure you don’t sacrifice long-term relationships with loyal customers and operators in the hope of maximising a few weeks of Olympic demand.

Noake: With many hoteliers giving large allocations of Inventory to the London Organising Committee of the Olympic and Paralympic Games (LOCOG), the constrained bed stock available in the market will drive the onus on maximising Average Daily Rate (ADR) in the remaining rooms. This will be achieved by appropriate dynamic pricing and Length of Stay (LOS) restrictions to assist poor performing shoulder evenings and weeks.

Hotel-industry.co.uk: What sort of revenue increase do you expect during the Olympics?

Noake: The ADR which has been committed to LOCOG will be based on an average of the achieved room rates over the previous four years by room type. This will ensure a fair rate is charged. The remaining [pullquote]inventory is likely to achieve record revenue and RevPAR increases[/pullquote]. The Olympic Games in Beijing is a prime example: ADR trebled!

Meerendonk: Overall, I think hoteliers can expect at least double digit RevPAR growth year-on-year for the summer months. When we consider that the Olympics will coincide with the peak summer season and the Farnborough Air Show, significant RevPAR growth is highly achievable

Hotel-industry.co.uk: How vital is it to get the right people behind the current revenue management system?

Keen: It is critical that hotels have a clear Olympic strategy in place, and that the entire management team understands it. This needs to be happening very soon to ensure that enquiries are dealt with effectively.

Meerendonk: The upshot is that planning for 2012 should already be underway – It should have started the moment the event was confirmed for London. Contracts have been or are being signed for that period already and if mistakes are made at this crucial early stage, hoteliers could find themselves without room to manoeuvre and limiting their ability to optimise rates and inventory for 2012.

Keen: It is also important to add here that your hotel will still experience some non-Olympic travel! Hoteliers need to be clear on how this will be managed.

Hotel-industry.co.uk: What can you do to help train hotel-based revenue managers and other staff? Are you experiencing more demand for this?

Meerendonk: We are seeing a definite upward trend in the need for revenue management training, systems and support. I don’t think this is solely down to the Olympics, but more a response to the changing business environment. A lot of hotels have realised the importance of revenue management during the economic turmoil of the past few years and want to be in a good position to tackle both the current situation and the forecasted peaks of the coming years – this of course includes the summer of 2012.

Keen: We are experiencing an increase in demand from smaller properties that need an revenue management “audit” and some support to pull their pricing and distribution strategies together. The level of support offered ranges from 3 days to several months.

Hotel-industry.co.uk: What is the biggest revenue management mistake a UK hotelier can make in 2012?

Noake: Whilst every hotel has an opportunity to maximise rate throughout the period, I believe each segment of the market holds a responsibility to the consumer to remain competitive. Previous Olympic Games have witnessed over inflated price points being removed closer to the arrival date. By 2012 we expect an additional 12,000 rooms to be available in the London market, so it’s imperative that hotels not only focus on the 17 days of the event but also the two shoulder periods that surround it.

Keen: I think the biggest mistake would be to get too greedy and go for a few “big wins” at the expense of long-term customer value and loyalty. [pullquote]Remember the guests, contracts and operators who have supported you during the downturn – you will need them for long-term RevPAR success![/pullquote]

Meerendonk: The biggest mistake would be to have a lop-sided strategy and business mix. Aiming for pure high-rated transient non-contracted business or only for confirmed group business limits the hotel’s ability to adapt to changes in demand in the market and restricts its flexibility to optimize in either high-demand or low-demand periods.

Hotel-industry.co.uk: What’s your 2012 Mantra?

Meerendonk: “Spread your risk!” The demand for hotels during the Olympics in London is still very uncertain, and the combination of several events during the same period creates an even very unpredictable situation. Will the Olympics perhaps have a negative effect on European, Middle East and US tourism business, the traditional drivers during the summer period? Will the Olympics affect demand during Farnborough? What will the economic situation be in 2012? These are all uncertainties that cannot be answered or predicted until the very last moment. Hotels need to ensure that they have the right business mix to ensure a good comfortable base that is locked in, with enough inventory to adjust to market conditions at the very last minute. This will allow hotels to optimise revenues for both the long and short term.

Noake: My mantra would be “utilise every piece of information available and interact with the RMS in order to guarantee an accurate forecast in the run up to the Games”. Make the most of every revenue management technique available to not only maximise strong performance but also assist weaker shoulder and trough periods. Focus on getting the pricing right and remaining competitive in the market. Also, manage distribution channels effectively and encourage longer length stays.

These key strategies will ensure we maximise the full potential of this exciting and unique period.

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