What Should I Look for When Purchasing a Revenue Management System?
Introductions Christopher Yellen, CHA Choice Hotels International Rom Hendler The Venetian M. Thomas Buoy Ian Schrager Hotels
Agenda RM Systems in Brief Situation Background The Venetian Situation Background Ian Schrager Hotels Moderated Panel Discussion Questions and Answers Other Resources
Christopher Yellen, CHA Vice President, Property Systems and Performance Services Choice Hotels International
What Is RM All About Anyhow? Revenue Management is the science of using past history and current levels of booking activity to forecast demand as accurately as possible to maximize revenue.
What Is RM About Anyhow? Knowing what future demand will be, you can safely impose stay restrictions and limit discounting to generate the best mix of guests, lengths of stay, and rates earning the highest possible revenue.
An Example
How an Automated Solution Can Help Accurate forecasting using all available data points Quick response to changing demand patterns Builds optimization based on modeling Imposes optimal sell strategy in the PMS
System Basics Most systems extract data from the PMS Build a forecast Model the optimal selling strategy Suggest or impose restrictions, hurdle rates or sell through dates Provide a mechanism for analyzing groups
Who Can Use an RM System? Virtually all hotels Special consideration should be applied if the hotel: Has a high percentage of group business sold based on last room availability at pre-negotiated rates Has a high concentration of walk-ins Is seldom sold out
Some Success Factors A revenue focused culture A strong commitment from management Interface with the PMS An appropriate amount of historical data Monitoring and attention to suggested selling strategy
What s New Channel Management solutions City or multi-site solutions Addition of shopping tools that look at competitive rates
Rom Hendler Director of Revenue Management The Venetian
Revenue Management: Selecting a Revenue Management System
Selecting a Revenue Management System Overview of the Venetian Introducing Revenue Management Implementing a manual environment Creating a semi automatic environment Implementing a Fully-automated Solution
The Venetian Opened May 4th, 1999 Owned by Mr. Sheldon Adelson 4,049 Suites 1.9 Million square feet of exhibition space (including the Sands Expo) 174 Meeting Rooms $1.5 Billion building expense World-renowned Guggenheim and Hermitage Museums on property
The Venetian Market Mix 2002 35.7% 2002 YTD Revenue Mix Segm entation 3.2% 1.4% 11.7% Casino Conv + Grps. Wholesale FIT Admin. Att/For. Dep. 38.3% 35.1% 2002 YTD Suite Night Segm entation 1.6% 2.5% 12.8% Casino Conv + Grps. Wholesale FIT Admin. Att/For. Dep. 35.7% 9.7% 12.3%
The Venetian Macau project in developmental stages Venetian stage 2, adding another 3,036 suite tower, in developmental stages
Introducing Revenue Management
Implementing A Manual Environment ADR and Occupancy Vs. RevPAR Occupancy Percentage Vs. Occupied Suites Product differentiation Data Collection
Creating A Semi-automated Looking for tools to: Environment - improve forecasts - provide information in a timely manner - save labor - be accurate and reliable
Creating A Semi-automated Environment Tools used to create this environment YM Werks Showcase Excel Macros LMS rate controls
Date: 6/16/02 No Show Forecast: 53 Forecast 67 33 64 Time Same Day Resv Walk In Resv Same Day Extension Total Sold Same Day Cancel Unexpected Departure Inventory Increase Expected Check Outs Expected Arrival 5am 0 0 0 0 0 0 0 1685 1373 6am 2 0 3 5 0 0 0 1619 1372 7am 3 0 3 6 0 0 0 1553 1365 8am 4 0 3 7 0 1 1 1480 1355 9am 8 1 7 16-1 3 2 1366 1344 10am 9 5 12 26-1 7 6 1035 1305 11am 10 6 18 34-1 7 6 847 1269 12pm 5 15 20 40 0 9 9 585 1140 1pm 9 19 25 53 0 13 13 342 993 2pm 11 22 30 63 2 16 18 221 852 3pm 13 28 31 72 2 16 18 162 717 4pm 13 28 31 72 2 16 18 162 717 5pm 8 43 33 84 6 20 26 65 430
Excel Macros
Controlling Length Of Stay 16-Jun 17-Jun 18-Jun 19-Jun 20-Jun 21-Jun 22-Jun Sun Mon Tue Wed Thu Fri Sat RATES: $159 $159 $219 $159 $159 $179 $199 Change to: $199 Remax: $159 $159 $249 $159 $159 $179 $279 Change to : $229 Resos: $159 $159 $219 2nm $159 $159 $179 $199 2nm Change to : $199 2nm GDS Rate: $119 $119 $249 $119 $119 $179 $279 Change to: $229 Wholesale: $79 $139 $179 $99 $99 $179 $179 Change to :
Implementing A Fully-automated Solution A fully-automated system will: Forecast demand more accurately Control length of stay by arrival Run numerous optimizations Change rates automatically Save Labor Analyze groups Forecast Wash Provide additional reports
Review your segments and your property needs Compare the features of the different vendors Rank them based on your priorities
Revenue Software Comparison-Version 2 FIT 1a. Does the software forecast by suite type? b. Rate elasticity 2a. Does the software forecast same-day reservations? b. Walk-in reservations c. Same-day extenstions d. Can the system forecast the overbooking level for future sameday cancellations? e. No-Shows f. Overall cancellations g. Early checkouts h. Unexpected departures 3. Does the software analyze the call center and web site reservations as separate channels? 4. How does the software work with the different GDS systems? 5. What type of LOS controls is the software capable of? 6. If the software controls LOS, does it open and close the rates? 7. Can the system create packages and track the revenue and profit?
Revenue Software Comparison-Version 2 Group 1. Forecast future group business? 2. Analyze and forecast the probability of a prospective group turning tentative/definite? 3. Capture all of the Group's history? 4a. Track and forecast group wash by Trade Show vs. In-House? b. Rooming list vs. Call-in block? c. Day of the program? 5a. Analyze displacement by the overall demand for all of the segments? b. Profit vs. Revenue? c. Space Ratio? d. Ancillary Revenues? 6. Can it protect future group rates by putting high rates for the FIT segment more than six months into the future? 7. Can it recommend alternative dates for particular groups? 8. Does it offer contract evaluation? 9. Is the forecast based on past request only or on current rate and demand as well?
Revenue Software Comparison-Appendix B Wholesale 1. Can the Wholesale be forecast with the FIT? 2. Can it generate e-mail blasts or fax blasts for a stop sale? 3. Does it recommend future rates, black out dates & stop sell dates? Casino 1. What solutions do you propose for this segment?
Revenue Software Comparison-Version 2 Miscellaneous 1. Estimated increase in revenue from the system & gaurantee 2. Is leasing software an option? 3. Instillation and training process and give a timeline? 4. What kind of support is provided? 5. What will be the detailed cost for adding 1000 suites to the property? 6. How often is optimization being done? 7. Is a forecast error report provided? 8. Is a detailed exception report provided? 9a. Do you have LMS & Delphi interfaces? b. What is the cost? c. If you don't have them, when will they be available? 10. Does it have a budget feature? 11. Is it a decision making system or a recommendation system where decisions need to be approved? 12. If it is a decision maker, how does it deal with overrides?
Revenue Software Comparison-Appendix B Process 1. Sales 2. Cost per suite-license 3. Cost per suite-maintenance 4. Total cost per suite 5. Maintenance 6. System building and data analyses 6. Interface access Fee to Lms/Pms 7. Interface license fee to Newmarket int'l/delphi 8. Executive Planning Session 9. Business Practice Review 6. Training 7. Total Start-up Cost 8. Cost to add 1000 suites 9. Support 10. Interest in the Venetian 11. Yearly Maintenance and Service
Conclusion The most difficult part is to prepare the organization for a change and to start changing! From there, it is all just hard work and persistence.
M. Thomas Buoy Corporate Director of Revenue Management Ian Schrager Hotels
Ian Schrager Hotels A collection of critically acclaimed hotels/destinations Pioneered the revolutionary Boutique Hotel concept Creating a highly provocative and visceral experience Exploring and redrawing the outer boundaries of what a hotel can be
Ian Schrager Hotel Properties Morgans, New York City, 1984, 113 rooms Royalton, New York City, 1987, 169 rooms Paramount, New York City, 1991, 593 rooms Delano, Miami Beach, 1995, 208 rooms Mondrian, Los Angeles, 1996, 238 rooms St. Martins Lane, London, 1999, 204 rooms Sanderson, London, 2000, 150 rooms Hudson, New York City, 2000, 823 rooms Clift, San Francisco, 2001, 375 rooms
Operating Environment RM Organization PMS: Lodging Touch (MAI) CRS: RezView (Pegasus) CRO: Virtual Agent Services (VAS) RMS: IDeaS (contract pending) SCS: Daylight Two-way Interface (PMS/CRS)
Server Data PMS/CRS 2-way Interface Mainframe Data Server Data PMS/CRS 2-way Interface Server Data Server Data
The Road to Automation RMS RFI 2000 (RM Diagnostic, Selection Criteria, Cultural Shift and laying the infrastructure for change) Vendor Presentations Site Visits (Customers and Vendors) Financial Analysis (IRR, ROI, Risks) User Review (Plug and Play) Methodology Functionality Data Management (Forecast Error) Implementation/Training Support (Levels I and II) Interfaces (CRS, PMS, SCS, ADS) Infrastructure (ASP vs. Distributed Model) Negotiation/Contract Review
Functionality Transient Module (Transaction vs Aggregate Data) Wholesale Module Group Module Contract Evaluation Event Management Channel Management User Overrides Reporting/Access Forecasting-Variables (Constrained/Unconstrained) Optimization Controls/Fences (FPLOS) Overbooking Recalibration Bid Price Biasing Outlier Management Risk Management
Panel Discussion
Questions?
Contact Information christopher_yellen@choicehotels.com HendlerR@venetian.com Tom.Buoy@IanSchragerHotels.com