Yield management, more recently known as revenue management, is the main tool for strategically selling perishable inventory (such as guest rooms and meeting space) to the right customer, at the right time, and at the right price. This is the responsibility of the hotel revenue manager, who considers historical data, statistics, economic trends, anticipated events, day/month/seasonal history, holidays, and more to predict hotel occupancy and arrive at daily, weekly, monthly, and annual revenue goals for the property. The calculations are critical, since a hotel can never get back the revenue lost from unsold inventory. One major hotel chain credits revenue management for an annual increase in sales of between $150 million and $200 million!
Know the Big Picture
If you’ve been planning meetings a while, you’ve no doubt noticed that during the past 10 years or so, the revenue manager has gained tremendous influence over the pricing of hotel rooms. However, it is still the sales function to get “heads in beds,” at least when it comes to group business. Hotel decision-makers allocate a percentage of inventory to groups—as much as 60 percent or as little as 0 percent, depending on dates. The remaining rooms are sold to the more lucrative business and leisure travelers who are willing to pay higher rates. If revenue per available room (RevPAR) predictions are off, that’s when you see low Internet rates and other discounts offered on a limited number of rooms with the goal of bringing in the price-conscious vacationer.
Know What to Negotiate
It wasn’t too long ago that salespeople felt it was better to “ask forgiveness, not permission” in making deals. It now appears that if a salesperson wants to negotiate rates other than those specified by the revenue manager, then the salesperson needs prior approval. This, of course, ties salespeoples’ hands and lengthens the negotiating process. (Just as an aside, keep in mind that even the revenue manager’s desires can’t supplant a signed contract. One revenue manager tried to increase my rates for pre- and post-meeting stays, even though my negotiated group rates for pre- and post- were guaranteed in the contract. I had to go to the owners of the hotel to get the issue resolved.)
If you’re at a room-rates impasse in negotiation, consider other areas where reduction of overall expenses may be achieved without affecting the quality of your program. Reviewing the hotel’s proposal and its effect on you is a good starting point. Then decide what is most important to you. Is it additional amenities, guest room views, attrition, the deposit policy, cutoff date or dates, cancellation clause, meeting space, upgrades, discounts, or something else? Or is lowering your room rate still your main objective?
Flexibility Is Key
Your dates, room type, meeting space, arrival/departure pattern, holidays, length of stay, and how far into the future you book affects your salesperson’s initial proposal. But if you can be flexible—use the hotel’s “value dates,” offer additional banquet revenue, arrive on a Sunday at resorts, or use a weekend at a city hotel—you will have more clout when your salesperson approaches management with your needs/demands.
There is a saying among hoteliers: “The client can have any two needs—dates, rates, or space—and the hotel gets the other.” That is, if you want specific dates and specific meeting space, then the hotel will demand a specific rate. Or, if you say rates and space are most important, then the hotel will offer the dates (off season, holes, or holidays). Not having your heart set on one facility is still one of the best negotiating tools there is. When a property knows it is the only hotel being considered, that reduces your negotiating power.
Mark Kustwan, CMP, is founder of OnTheMark Meetings & Incentives, www.onthemarkevents.com.