Hotel Group Sales Blog

Optimizing Groups Sales, Revenue & Cost

4 Steps to improve GOPPAR in Group Sales

Hotel Performance measurement has evolved over time and one of the latest measures is GOPPAR( Gross Operating Profit Per Available Room). This is considered a better measure than REVPAR(Revenue Per Available Room) for the hotel's performance as a whole since REVPAR only looks at room revenue and ignores non-room revenue and cost completely. GOPPAR becomes even more relevant for the group segment since hotels have many costs associated with selling and servicing groups and groups have significant spend on non-room aspects like F&B, meeting space rental, audio-visual, etc. each of which have different profitability. 

While many hotels have now started measuring performance by GOPPAR, how do we actually improve it? In the group segment, following are some of the aspects to manage well to improve GOPPAR.

Manage Contracted Non-Room Revenue

Revenue management has become increasingly sophisticated for guest rooms,but many hotels still use the gut-feel technique (well, not really a technique) to manage non-room revenue. This must change and equal responsibility for meeting budget must be assigned to meeting space and catering as revenue and profit generators. More specifically, hotels should define targets  for revenue and profit for conference rooms by seasonality and strive to meet that in every quote. It should also be reviewed often and updated for changing market conditions.

Consider the following from HOTSTAT MENA report. Even though ADR and occupancy fell, and expenses increased, GOPPAR increased due to F&B demand,.
Doha hotels felt the effects of the summer slowdown early as performance levels dropped during May with a 1.3 percentage point reduction in occupancy to 74.9% and a 2.8% fall in ARR to US$210.27. The softer rooms performance saw a 4.4% decline in RevPAR, however stronger food and beverage demand resulted in a 4.9% growth in TRevPAR to US$408.85. Although operating expenses were higher during the month, the increase in overall revenues was sufficient enough to ensure the GOPPAR increase of 1.8% to US$181.52.

This shows how important it is to have a holistic view in order to capitalize on one aspect when another is not doing so well.

Increase Non-Contracted Revenue Per Attendee

Conference attendees have budgets beyond what the conference organizer has contracted. Hotels should aim to get the most from that spending ability by cross selling other services and amenities to group attendees. For example, hotels can offer a discount on their bar or spa to group attendees and attract not just the attendees staying in the hotel but ones staying elsewhere too. Getting these promotions in front of the attendees at the right time can be a challenge, but can be done effectively using the event's mobile app or hotel's own mobile app like the free app provided by GroupRevMax.

Plug Profit Leaks

To win group business, hotels offer a myriad of freebies including upgrades, complimentary rooms, discounted rooms, etc. While these may be necessary to gain the business, it's important to watch what you give away and factor it into the price. Make sure your revenue managers and revenue management systems factor all these into pricing a group. 

Further, all costs associated with group sales and service must be factored into the budget and profitability goals should be assigned with those factored in. Group sales staff salaries, costs of reservation agents entering group reservations into PMS, agents taking calls for group bookings should all be factored in to get the full picture. 

In essence, all group pricing should be done based on not just revenue goals, but also profit goals if you are to really support an increase in GOPPAR.

Aim for Balanced Sales

Revenue managers at hotels with significant meeting space understand that space is more profitable when sold with room component than when it's sold to catering only events. So, in order to achieve maximum profitability, hotels should try to sell these two assets in a balanced way so as to not sell out one and reduce value of the other.

Implementing these can go a long way in optimizing your GOPPAR, but these are tough to include in a sales process without the proper tools. GroupRevMax has revenue management for contracted non-room revenue, a mobile app to cross sell and increase non-contracted revenue, profit goals based pricing, and room to space ratio analysis to support increasing your GOPPAR while improving your speed to market significantly. To schedule and online one-on-one presentation or request a free trial, send us a note by clicking here.
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A Lesson From Retail Industry to Reduce OTA Commissions

Retailers, online or brick and mortar, have used one technique effectively to increase repeat sales that hotels can learn from. The concept is simple - offer incentives or coupons to existing customers for repeat business. Hotels can use the same technique to gain more direct bookings and make OTAs more of a referral partner like online shopping comparison sites.

This might be an over-generalization and there are obviously differences between retail and hotel industry. We look at some of these below.

Rate Parity

Unlike retailers, hotels have a rate parity agreement with OTAs they don't want to violate, but it only covers publicly available rates. Websites like Hotwire offer unpublished rates without making them available online, so a coupon should work the same way and shouldn't be available online and hence doesn't violate parity agreements

Coupon Delivery

An additional complication that hotels have in terms of sending out coupons is to make sure that the coupons cannot be transferred or republished on coupon sites, which then becomes a grey area in terms of it being a publicly available rate. Some delivery options are as follows.

Loyalty Program

One way is to tie the coupon to a loyalty program so you have to sign in to use the coupon. This makes it easy for the customer to use it since it's stored in a convenient location and no code is necessary. 

Mobile App

If you have a mobile app, make sure users register themselves and tie the coupon to that specific instance of the app. The app also makes it easy for the customer to find and use the coupon and can also be built to remind customers of coupon expiry. 

PMS Profile

Another way is to tie it to the PMS profile at booking, so the coupon is only valid for a profile that already existed in the PMS. Hotels will have to add this feature to their booking engine or redirect coupon users to an engine that supports such a check and sits on top of the regular booking engine.

Audience

Retailers send coupons to as many people as they can and don't worry too much about whether the person or someone else used the coupon or if someone published a coupon code online. Hotels, however have to be careful due to rate parity reasons mentioned before. So, how can hotels have go beyond their existing customers and have a broad audience while making sure rate parity clauses are still met? Following are some segments that can be targeted.

Group Attendees

Attendees of events at your hotel is one such segment even if they are not staying at your hotel using other touch points with the hotel. It's possible to physically hand out paper coupons to attendees, but is more likely to be lost. If the group has a mobile app or facility, hotels can partner with the group to push the coupons. For groups that don't have a mobile app, hotels can provide them one by partnering with companies like GroupRevMax Mobile App to provide groups an app they can use for their marketing and hotels can use for coupons as well as future marketing.

Friends and Family

Hotels can also allow people to book for a certain number of their friends and relatives. By limiting the number of people, hotels eliminate the risk of the rate being public, but still broaden the audience by that multiple. 

Conclusion

In conclusion, like referral sites work for online retailers, OTAs should ideally be just a referral site for the first time customer. Once a guest has stayed at your hotel, he/she should have an incentive to book your hotel direct on your website and a coupon gives them just that. They could still compare hotels on OTA sites and you might lose him if your compset is better in spite of the coupon, but if they decide to book your hotel, chances are they will book on your website and use the coupon. It's not as good as a direct reservation generated through reputation and digital marketing, but can be still better than paying OTA commissions.

GroupRevMax allows hotels to convert group attendees to leisure travelers using their mobile app that hotels can provide free to group organizers and can then use as a marketing tool to enhance direct booking and customer loyalty. Click here to learn more.
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TravelClick predicts 3.5% increase in Group ADR. Will your hotel capitalize on this?

TravelClick predicts 3.5% increase in Group ADR. Will your hotel capitalize on this?


TravelClick’s NAHR predicts that group ADR is poised to go up 3.5% due to strong pace in third quarter of 2105. Further, group occupancy for the next 12 months is predicted to go up by 1.9%. That’s the average, but some hotels will benefit more and some less. Here’s a few questions to ask yourself to see if you are positioning yourself well to benefit the most.


Are you accepting the right business?

As group demand increases in convention markets, hotels will have to weigh every group lead against future group and transient potential. For example, business that negatively impacts the ratio of guest room to meeting space availability for future sales should be scrutinized more since the revenue potential of meeting space reduces when there aren’t enough guest rooms to match and vice versa. Another factor is overall profitability of the group across guest rooms, F&B, room rental and other ancillary revenue. Evaluating each group on these aspects will help identify good and bad business, but it has to be done in an automated way so you don’t impact speed to market.


Is your group pricing dynamic enough to capitalize on new demand?

Many hotels use a strategy known as MAR (Minimum Acceptable Rate) for pricing groups. MAR is generally derived from transient rates with a discount percentage, so the logic is that since we do good revenue management for transient rooms, it will flow into groups as well. However, groups are not the same as transient and a few factors when not considered can result in significant reduction of revenue and profit. 


Revenue leaks

Groups have many requests from hotels like complimentary rooms, upgrades, staff rooms, etc. In addition some groups come from commissionable channels and some are direct. Pricing everyone the same or can result in up to 15% loss of profit. 


Group Size 

Every sales manager loves a large group that fills up rooms, but from a revenue perspective smaller groups give revenue managers the opportunity to incrementally increase rates. In order to maximize revenue, hotels must consider loss of the opportunity to incrementally increase rates for larger groups after every so many rooms. The following chart shows the difference between price increase of $5 every 10 rooms and MAR pricing for a 300 room block.




Are you maximizing total revenue or focusing on guest rooms only?


The focus on ADR in TravelClick’s report is representative of the minimal focus that other revenue areas like meeting space and catering receive in most hotels. Hotels that enforce revenue and profit goals for conference space and catering are much better positioned to take full advantage of the improved pace to add to their bottom lines.
In addition, hotels can also adopt revenue management principles and variable pricing for conference space. As an example, if guest rooms are sold out, meeting space revenue goals could be reduced to enable them to be sold to catering only events. Also, as you get closer to the date, hotels could further reduce F&B minimum and rental to bring in any revenue that’s possible as long as it’s above cost. All this can be done manually, but is cumbersome and an automated pricing tool for conference space will sever hotels well. 


Is your speed to market good enough?


As markets get more compressed, meeting planners want to make sure they don’t lose good deals by waiting for every quote to come in and tend to finalize the first quote that meets their budget and other criteria. Hotels need to look at every aspect of their group sales cycle to see how speed to market can be optimized without sacrificing due diligence. The factors discussed in sections above should also be implemented so as to not impact speed to market.


How to fill the gaps?


So, you found some aspects that could be improved, so how do you do it? One solution in the market that can dramatically improve your speed to market while considering all the above factors is GroupRevMax. It’s cloud based and can be implemented in a few days to better position your hotel to take advantage of the group occupancy and ADR growth.  Visit their website at www.grouprevmax.com to learn more and set up a free demo.


Original article with TravelClick forecast can be found at http://www.hospitalitynet.org/performance/us/147000409/4070765.html


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