Is fear the new trend?

By Florencia Benaim & Nihal Patel

Dear diary,

I’ve just finished a team meeting with my fellow Revenue Managers (RMs) that got me thinking… could it be that after what we’ve been through in the past 15 months, now that it’s looks like demand is finally back, we’re scared that we will chase it away if we try to maximize revenue?

Special dates, such as Memorial Day or 4th of July, are excellent selling opportunities to increase your RevPar (revenue per available room). Moving closer to Memorial Day this year, a fellow Revenue Manager, encouraged a General Manager (GM) in his portfolio to raise BAR and keep very close track of the pick-up, since we expected to see a lot of demand in that area. RM outlined that the few previous weekends had had a significant number of last-minute bookings and highlighted how the trend had changed compared to 2019. The GM wasn’t so sure about it, but he finally agreed to the strategy. Rooms started filling up and the RM continued to push the rate higher. Almost at the finish line, they were 24hs away from Memorial Day and poof! This GM got nervous about the occupancy and asked the RM to lower the rate quite a bit. The RM emphasized the comp set had not lowered their rates and highlighted that the booking window for the past months had been -terribly- last minute. But the GM wasn’t convinced, so they disregarded the RM’s rate recommendations and lowered the rate. The result, of course, was a decline in the ADR (average daily rate).

Once the holiday was over, our reports showed a higher occupancy over 2019, but a slightly lower ADR. When checking the comp-set’s performance for this year, average ADR was almost 15USD higher than ours at an equal occupancy. In other words, the comp set grew ADR whereas this property did not.

It is fair to say a potential 1,500/2,000USD were left on the table.

Truth to be told, this past year and a half we have been so desperate for demand that we’ve been doing promotions, lowering rates, looking in every corner. Now that demand is coming back, it seems we’ve not really adjusted our mindset to maximizing revenue — we’re still living in demand generating “mode”.

Knowing that 4th of July is just around the corner, what would be the best strategy to maximize revenue?

My fellow RM talked to the GM about it, using Memorial Day’s results as an example. He was still hesitant and mainly worried about filling rooms, and not so much about increasing ADR. He was still in fear that having a higher rate could deeply affect the bottom line.

I believe the lesson here is we need to hit the re-set button — we are truly in the recovery, and it’s time to get back to revenue maximizing strategies!

While trusting your gut is always good practice, we should make an effort to use both data and experience combined. If the data says demand is there, and the price is right, trust it (just like you would/should have done in 2019).

Also, it is important to be open to take some risks; because unless and until we try, how can we know whether it is working or not! A real-life example of Schrodinger equation! 😊.

Starting to rise from the ashes after COVID-19 is for sure a big challenge and there is no room to miss out on big selling opportunities. Learning to trust current trends and re-adapt will be a game changer. Be aware of your early pick for special dates/events even 90 days prior to arrival to avoid losing any advance purchase share; and try your best to trust your data and be brave enough to hold until the very last minute.