Corinthia sells over a million hotel room nights a year – and achieving the highest return on sales is both an art and a science. Paula Frey, Corinthia Hotels’ Director of Revenue, talks to Insider+ about the processes at work in revenue management.
To understand how revenue management works in high-end hospitality, there’s no better place to start than looking at another global business – the airline industry. Today every airline uses some sort of pricing and revenue management service to sell tickets, and to determine the most profitable prices. That pricing is based on a range of factors – the number of seats available at the time, the amount of time remaining to sell the seats, and vitally, how much the competition are charging for the same seat. It’s this flexible pricing that allows airlines to price according to what the market determines is appropriate, as opposed to having fixed prices throughout. And that is why when you fly, your plane is usually full, or close to it.
For luxury hotel companies the approach is virtually identical when it comes to selling rooms and maximising revenue. At Corinthia we operate a revenue management system – also known as ‘yield management’ that guides our hotels on segment and sub-segment selling choices on room rates , aiming to always drive the highest rates and the highest occupancies.
I’ve been working for Corinthia heading up our revenue operations from London for seven years now; it’s constantly stimulating and the engine that drives Corinthia Hotels’ profits, allowing us to maximise return on our fabulous products and services.
“At Corinthia we operate a revenue management system – also known as ‘yield management’ that guides our hotels on segment and sub-segment selling choices on room rates , aiming to always drive the highest rates and the highest occupancies.
Revenue management essentially means selling the hotel inventory to its full potential. It’s a fluid function that demands the ability to adapt to a whole range of factors, but the ‘science’ of it allows us to determine price strategy. We use state-of-the-art software to help us manage the yield management process, and employing such software enables us to compete on a level playing field with the larger competitor brands.
How important is it to define Corinthia’s competitive set in revenue management?
One of the key factors is defining this set. Competitors are chosen based on similar company standards to the ones we aim to achieve, along with their inventory; their size, room category split, location, pricing and performance in the market. In London for instance, the Dorchester, Claridges and the Savoy are three of the hotels we benchmark our rates against.In any major hotel group’s selling strategy, revenue management is key to making the best decisions about pricing, and makes sure that the business gets the highest profits from its sales teams. It is vital to remember that it’s not just about achieving the highest room rate and the highest occupancy; it’s about combining these factors to deliver the highest RevPAR – Revenue per available room.
Tell us about how revenue management works across the Group
The revenue teams I work with are a fundamental part of pricing decisions, which then inform the sales teams. In a nutshell, our goal is to ensure that a hotel performs to its full potential, driving the highest room rates and the highest occupancies. There is an element of ‘art’ and creativity to what we do; not only must we crunch the numbers, but we need to constantly consider market changes, how our competitors are faring , as wells as the latest destination trends.
“Revenue management in the industry has evolved tremendously over the last two decades, with hotels having to move away from traditional approaches to bookings, sales and customer interaction.”
We analyse historical data and booking patterns, and are constantly reviewing, on a daily basis, our pricing with our competitive set. We also identify trends to forecast demand. All these factors support me and the revenue managers in each hotel in predicting a customer’s behaviour, and then to estimate what price that customer would be willing to pay for that product at that specific time.
Revenue management in the industry has evolved tremendously over the last two decades, with hotels having to move away from traditional approaches to bookings, sales and customer interaction. And of course, the internet. Guests having 24/7 independent access to booking engines through dozens of different websites has fundamentally changed the way our industry operates.
“A poker player’s eye for the odds and a stock broker’s flare for riding the market is always helpful.”
But the fundamentals of revenue management are still the same – no matter from which source or market a guest comes from, they still have a price they are willing to pay, and it’s up to us as revenue managers to decide whether this sale could maximise revenue, or if we have other opportunities that would deliver a better level of revenue.
What does it take to make a successful revenue manager?
Well, some savvy maths skills are good, but a poker player’s eye for the odds and a stock broker’s flare for riding the market is always helpful. Often it’s about holding your nerve and being able to predict the next trend on the market. As you can see, there’s more to it than meets the eye when it comes to turning sales into profit!