There are lots of tools that help us monitor our website and much of our focus and effort is on generating traffic with the expectation of direct reservations. The dynamization of social networks, marketing campaigns, newsletters or blogs sometimes favor this task. However, it turns out that much of this traffic gets lost in our booking engine.

We must put ourselves in the perspective of the visitor and detect the constraints that may affect their shopping experience and consequent lack of direct booking. An outdated booking engine, as well as being unattractive, is not user friendly and not simple for our prospective client. Recent studies point to an effective conversion close to 2% in direct bookings. What happened to the remaining 98%? It is here that we focus our attention and realize what may have gone wrong. What difficulties did they have? What distractions or losses of interest have led to the abandonment of the purchase? Since our point of view may be "infected" due to involvement in the creation process, to minimize this, we can do the following: Ask a group of non-hotel friends to make some test reservations and share their findings. You will get truly amazing results!

What constraints or barriers may the potential client encounter during their attempt to purchase? There are several impediments you may encounter, however, we highlighted four key points:

1. They do not like what they see
2. They do not find what they want
3. Process is long and complex
4. Distrust in website and company

Consumers do not like what they see

Consumers are becoming increasingly attentive and demanding, as they search and navigate in an efficient way to get the best price. That does not mean you have to have the best price available, but your offer will have to be the one that adds the most value to that type of customer. Packages with honest value (whose sum of the parts is greater than the package purchase) and exclusive offers or promotions, several are the techniques to capture a purchase on your website.

Errors in loading prices or offers, delays when sending the data, and mismanagement of inventory availability can lead to a lack of price parity. This inconsistency is reflected in the choice of hotel.

Clarity and simplicity in the offer

We want to sell everything to everyone, and this mistake can be fatal. We constantly fall into the temptation to have a complex list of products / room types, ending with an intricate list of terms and conditions. OTAs, on the other hand, have simple processes, people can find quickly what is sought, compare prices and finalize the purchase without major restrictions. It is this clarity and simplicity that we have to follow on our side. Remember that the more room types we offer, the less availability we will have for each of them, and if a customer is faced with a lack of availability, we lose to OTAs, as its base typology will certainly have more availability.
Simple typologies and prices in the first stage capture the attention, and in the next step, we come up with suggestions for upgrading or offers packaged together, is undoubtedly the solution we are looking for.

We can not forget the Booking Terms and Conditions. If it is very restricted, the client will look for other alternatives. Many OTAs are adept at working with this flexibility of purchase that your customer needs.

Long and complex shopping process

Again, clarity and simplicity throughout the customer's "journey" until the payment step. Nowadays this point is easier to manage, taking into account the wide range of Booking Engine softwares available in the market.

Almost every Booking Engine that has great performances, the buying process is fluid, simple, and is highly responsive. For an effective reservation it should not take much more than 3 clicks for a direct booking.

Distrust in the website or reservation process

A large percentage of people turn to review websites or friends before moving on to a purchase. In this way there is confirmation of whether or not the product has the value that is displayed on the website. The same confidence that we want the customer to feel with our product has to be identified under our conditions, otherwise the potential client will abandon the purchase because they feel being called into question..

They may also lose their confidence when they have to read extensive Terms and Conditions, when are asked for deposits, when rates are non-refundable or when that information was not transmitted at an earlier stage of the purchase process. People do not feel comfortable entering credit card details even if there is no charge on it.

We will have to be honest and trustworthy, taking the customer to buy in a reliable environment, with all the security and comfort as if they were in the hotel itself.

When someone chooses a hotel and a product, they expect it to be a simple, clear and honest process. Otherwise, they can choose another channel or even another hotel.

Contact us

There are no companies nowadays that have not questioned whether outsourcing would be an asset or not in their activity. The concern for fixed costs reduction and its flexibility, resources and revenue optimization leads us exactly to this question.

We have all noticed that hotels and accommodation properties are increasingly flexible, adapting to the increasingly distinct business realities that have invaded our country. It is now time for them to answer back to the market by basing their core activities on what is essential and a critical success factor. In this assumption, they are based  on well-known business models like Airbnb.

On the other hand, the technological requirements of the sector require large and unbearable investments for most small properties, which do not have the necessary human resources, know-how or other resources.

Administrative services virtualization of this type of small-scale organizations can be seen as a major competitive advantage.

Transforming fixed into variable costs, depending solely and exclusively on your core business financial flow. Service Outsourcing drastically reduces risk and boosts operating income in the medium term.

But what is really Outsourcing and what are its implications?

As the term indicates, outsourcing means subcontracting, seeking out. We turn to an outside company to meet service needs, whether temporary or permanent. Through this hiring process, a company hires another to perform activities that it cannot or has no interest in performing.

With the current demands of the markets where we operate, we are forced to focus on truly vital areas in which we dominate the processes. Commonly we see examples of outsourcing in services like housekeeping, room-service, kitchen, security, laundry or maintenance. But it is not limited to this, we can use external services in the most diverse areas such as human resources, financial, strategic, marketing, sales, administrative, legal, production, logistics or even tax residence and physical offices.

10 main benefits that lead companies or sole proprietors to use third parties

1- Reduction and control of operating costs with transformation of fixed costs into variables
2- Access to highly specialized professionals, inaccessible if hired directly
3- Reduction of the staff, as well as the expenses inherent to it
4- Increase the company's focus and its operational competitiveness
5- Free human resources for company main activities
6- Increase efficiency on time consuming tasks
7- Empowering services and adding value to the organization
8- Perform activities difficult to control or manage
9- Sharing of risks and their liability with the partner / provider
10- Acquisition of new skills, know-how and technological capability of systems

But these reasons are not enough to reach the decision of contracting these types of services, before proceeding with an outsourcing strategy of a certain service, a detailed and meticulous analysis should be carried out, knowing in advance the appropriate partner to our business type and possible disadvantages if not applied correctly.

5 most common disadvantages in an outsourcing process that is not adjusted to the reality of the hotel and lodging business:

1- Little involvement of the partner and little identification with the project
2- Less control of activities and greater difficulty in information flow
3- Poor alignment with company culture and strategy
4- Costs may be higher if they do not produce results
5- Greater administrative dependence

It is undoubtedly a strategy that brings many benefits, but only if well applied and well implemented can produce the desired results for all parties involved.

It is not only the outsourcing service provider that has to adapt to the implementation of new processes or realities, the contracting company must also reflect and facilitate the necessary conditions for the smooth running of the activities.

Five phases are identified in a Outsourcing services implementation process:

1- Opportunities diagnosis and identification
At this stage we define the company's strategy and its competitive advantages. Here we will know what are the company strengths, its key competencies, keep their execution, under penalty of losing competitiveness.

2- Opportunity evaluation
After identifying the opportunities mentioned in the previous point, we must evaluate the quality of the cost / benefit in the way they are currently carried out in the company. We need a complete description of the activity that you want to subcontract, as well as tools for evaluating the performance and desired level of the activity. Based on the comparison of values between the two scenarios, we can proceed to the next phase.

3- Identification and selection of service provider for the business area
After researching and identifying potential service providers, you must establish the conditions under which the new partnership will be created and the requirements of these providers. With all the information in hand and after an evaluation of the proposals, you can choose which guarantees the best service.

4- Implementation of new outsourcing processes
Never neglecting the company focus and service, we must elaborate a plan of action duly scheduled, so that all the processes are carefully created, promoting a fluid communication and a cohesive interconnection with the other company processes.

5- Monitoring and evaluation of all parties performances (Contractor and Subcontractor)
Based on the tools created to evaluate partnership performance, we must analyze and adjust the plan / conditions of this partnership in order to maximize this opportunity. After a predetermined period, within the assigned goals you must evaluate whether you will bet on continuity or not.

Main types of Outsourcing services in Hospitality and local accommodation

1- Transportation
Transport rental or creating covenants with specific suppliers is a constant in this type of business. Several types of companies already make formal or informal agreements with taxis companies, transfers, uber, etc. so that they direct customers to those companies. These practices are common in restaurants, hotels or local accommodation spaces.

2- Operations
It is common to see outsourcing services such as housekeeping, room service, kitchen, security, laundry or maintenance. In these operating areas, some properties choose to subcontract because of the high fixed costs of purchasing specialized workers (maintenance) or high values of space in urban centres per m2 which may make it unfeasible to have non-productive areas (laundries, etc.)

3- Marketing and sales
In the area of marketing and sales, due to lack of technical skills with the increasing business digitalization, hotels feel many difficulties to follow the technological evolution opting for companies of software and marketing.

5- Revenue Management
Outsourcing Revenue Management services in Portugal is relatively recent, however in other countries it is common to make this type of contracts in exchange for a percentage on sales and is being a development area in the telework because of its characteristics. When synchronized with the IT, Marketing and Sales areas, they can produce truly amazing results.

6- Information Technology (IT)
This is perhaps one of the most common areas nowadays due to the latest legal changes in consumer privacy and growing technological need.

7- Administrative services
The area of administrative services is perhaps one of the oldest in outsourcing, for example accounting services, finance, salary processing, human resources, etc.

8- Facilities rental, parking, virtual offices or tax residence
These points correspond to one of the most recent market needs, with the explosion of local accommodation spaces and the rising costs per m2, many companies are choosing to their businesses by not having their physical offices installed. They prefer to turn spaces into productive areas where they can make additional revenue rather than making room for the administrative services. On the other hand, the space constraint of local accommodation requires having virtual offices in places other than the premises of the dwellings themselves, for example in private houses or other unconventional solutions. With the emergence of new solutions these entrepreneurs find themselves professionalizing their services, changing their tax residence to coworking companies or virtual offices.

The interesting thing is when we find in the market a globalized solution that can fit all these valences or most of them in one service, as is our case in Revmanager. Talk with us and request your quotation here.

Key Points for a Successful Partnership:

• Clear mission and vision, shared with the provider partner
• Planning and strategic vision
• Selection of the appropriate partner according to the area of activity
• Relationship management
• Clear and well-structured contractual conditions between the parties
• Open communication with interested parties
• Attention to questions of personnel and teams
• Assignment of a contact person with the provider to cover your absence
• Involvement and support of the executive team
• Mid-term financial evaluation

Outsourcing is no solution for every company or business. This solution offers unquestionable financial and operational advantages, but these only occur when several conditions, based on values, planning, as well as in choosing the ideal partner for the type of business in question, are met.

Request Quotation

The Tourism and specifically Hospitality is one of the most driven industry by customer loyalty and brands trust. Many customers make their hotel choose based on experiences, service, feelings and at the end by the price.

We can influence and make consumer choice easier

On high competitive environments, the ability to influence hotels choice is becoming more and more important, with countless international chains struggling each other by their loyalty programs increase. These companies guest rewards are made through hotel points, credit cards and through partnerships with airlines for wider coverage. Using data provided by guests, the hotel industry has been actively exploring the implementation of BI programs ^[1].

BI systems represent a competitive advantage for hotels and travel agencies

While many IT ^[2] (only as a tool) can be easily imitated and replicated, BI systems can be used methodically to gain a sustained competitive advantage over competitors in the industry. These systems can provide a competitive advantage for companies that feel high competitive pressure, for example common at urban centers. All these systems, can be simpler or more complex, depending on our type of business but they are always generators of useful intel about the guests.

Nowadays BI systems are accessible to anyone

BI systems ^[1:1] allow hotel units a systematic analysis, through the collection of statistical data and intensive processing of data obtained real advantage among competitors. This data through OLAP and DataMining systems will allow us to understand patterns of behaviour and assist in targeting our audience. This tool is extremely important, it will help administrations and financial management to make decisions based on qualified scientific data.

Self- service Business Intelligence (BI) platforms have revolutionized the accessibility from professionals to this kind of tool.

Currently we can see a transition of external distribution system systems, to process automation and gather consumer data, almost directly. Are our professionals properly trained to take advantage of the information already in systems from hotels or travel agencies?

With constant growth of data volume these systems become mandatory

With IoT ^[3], technology currently in place is itself a challenge. We need companies to adopt new technologies available in the market for the benefit their guests increasing the service levels provided. However, these organizations must be able to manage a huge quantity of intel, needing all possible help from these tools.

Nowadays companies are facing a challenge, the fact is that technology evolves at the speed of light and resources are limited. In this way we can do another question.

Are people and organizations ready to keep up all these changes?

In the Tourism and Hotel sector, the technological aspect assumes an increasing importance specifically on revenue generation and business performance. However, during more than a decade of experience on the sector, we saw a profound lack of knowledge of the entire IT architecture in the hotels and travel agencies can be easily detected. People who have decision-making power are not sensitized to the importance of their subject matter and are unaware deepen its operation and advantages in new business model’s implementation.

It’s urgent to raise awareness among hotel managers about this subject, hoteliers are essential for companies competitiveness, modernizing them into competitive and digital environments.

Companies are starting to be aware of the role of revenue management inside hotel, however, if we look at their reality, it turns out that most of the people who fill the Revenue functions in the companies come from the sales or marketing areas. Not having any specific training in Revenue Management or data analysis, the need for hotel companies to hire people oriented to numbers and analysis is essential to start new and innovative pricing techniques.

How many people can be able to work the information from system databases, for analysis in an effective way?

Nowadays reality shows us that revenue managers have a variety of tools and useful data to learn more about guests, however they are not knowing how to take advantage of this information, it’s not intelligible for organizations managers.

BI can have a huge impact on revenue volume

Any experienced revenue manager knows that in the last five years (perhaps less) the in-house revenue management and digital marketing have changed dramatically. Now that’s all about an effective digital channel distribution strategy.

"We are not only responsible for implementing processes, we need to make sure that we are filling hotels with the most profitable guests."

This only became an reality if we have an organizational strategy and a revenue optimization culture implemented. The sales, marketing, finance and revenue management department must be in perfect tuned, only in this way it will be possible to generate a greater return on investment than our competitors. However, the lack of knowledge about consumer behaviour in digital environments in hotel units it’s remarkable and many professionals still don’t understand its real significance.

"In a medium-sized unit, this lost share of business can represent between 25% and 35%, which can often be translated into 1 million euros on the end of the economical year."

The exact data of a guest it’s what make them loyal customers, come back and enjoy another stay or even recommend to a family member or friend. If this repetition was rare in the past for certain tourist destination, nowadays with short flights at low cost, this become a day by day reality.

Future considerations:

Every revenue management implementations must be follow by an applicable technological landscape for every company reality, professionals can provide meaningful revenue responses, meeting the wishes of all the administrations while them ensure their workplace. Those professionals must have freedom for action and do their work properly, always having in mind the best possible total revenue performance. They must have adequate training and knowing all processes that lead to value creation inside business units. In Tourism and Hotel sector, technological systems have a greater importance in revenue production and business performance, however, there is a profound lack of knowledge about IT systems and consumer behaviour in digital environments. We can also verify that there is a direct relationship between the level of investment in IT structures and the final service quality to the guest. Service innovations are essential for business competitiveness and modernization on competitive environments, increasing revenues and a greater guest satisfaction.

Contact us

Smells like summer ;-) at Revmanager, we take the opportunity of this early December to wish everyone a Merry Christmas and a Happy New Year. With this end of the year so close and with Christmas knocking at the door, it is time to implement all the plans that were made in mid-September, at the next year’s budgeting season. This planning will condition all next year’s management activity as well as revenue optimization. We have already renegotiated contracts with the operators and we are ready for the new year. At least, this is how it is expected on a demanding activity like ours.

But is it really like this?

On many occasions hotel professionals, local accommodation spaces, travel agencies or other tourism businesses are so overwhelmed with day-to-day activity and solving the daily problems that are looming, that they completely forget about the new year that is coming around the Christmas corner. As we all know, this is an entire activity that takes place between at least three to six months in advance.

All of the activity planning proves to be vital for revenue creation and optimization.

In this way, we take the chance to suggest a task check list to go through before starting the new year. Before we begin we know in advance that the next seasons of great booking flows will be Carnival, Easter and then Summer. A good preparation of the first two seasons (Carnival and Easter) almost dictate a good start of the year, however, do not be neglect the months before the carnival.

Actions to be taken immediately (if not ready yet):

• Promotions to stimulate bookings after new year’s eve (promotional campaigns and special packages for low season).
• Distribution of packages and special offers for Carnival and Easter by traditional agencies, tour operators and OTAs (availability management for these seasons).
• Send new catalogues to the foreign agencies and carry out with them a charm operation for the whole year (this should have already been done, but we know that this is not always the case in the sales reality).
• Be present in nearest fairs in order to develop and capture new businesses (beginning of the year in BTL and FITUR). Plan participation in international fairs, check here all fairs with the participation of Turismo de Portugal, IP for 2019. | See here

Santa’s Check List for Revenue Managers, for the upcoming year...

This Santa’s Check List takes into account all steps of the revenue optimizing process, with regards to the virtuous cycle of THRM (Miguel Costa, 2017). This list tries to frame all points always taking into account the continuous revenue optimization. Here are presented several analytical models considered essential for a good execution of the management model of the revenue creation system. Make sure you already apply or adapt the template to your specific business model for increasing value creation throughout the year.

1. Diagnosis in the THRM system and evaluate the points to improve in the upcoming year

Industry

• Model of Porter's Five Forces
  Here we must proceed with the planning of the different existing pressures in our business, including the entry of new competitors in the market and the anticipation of conflict management within the owners and operators (stakeholders).

Environmental Analysis

• PESTEL
• SWOT

Strategic Competitive Analysis

• Positioning strategic redefinition towards the competition (generic price strategies)
• Competitive SET definition
• Services matrix
• Tariff matrix

Reputation Analysis (Online Vs Offline)

• Reputational matrix and guests feedback analysis

In this analysis it is essential to note if there is a correct management of the future guests expectations and the service that is delivered, if not, this can lead to complaints. It is essential to check if there are any gaps (gaps of the quality management model SERVQUAL) between what is the perception of those responsible for the management and the guests perception.

Proposals for the future and Goals

• Value chain analysis
• Model of Porte’s 7 P's
• Canvas Model (Business Models)

It is through these models that we often notice a technological gap towards our direct competitors and we make the corrective proposals or acquisition of new tools or Software, leading to the Upgrade of IT Systems. When confirming new solutions, we should take into account the following systems: ERP, Cloud PMS, CMS, Web Booking Engines, CRS, GDS, Channel Managers (CM), Rate Shoppers, RMS and CRM. Apart from these there are other systems, however it is imperative to have, nowadays, a distribution system and distribution management fully two-way integrated (2 ways Interface - XML connections).

It is here that we must detect strategic direction failures suggesting the implementation of corrective actions leading to strategic changes that will be passed on to the whole team in the future. There is also the definition of the correct Marketing Mix and all its corrections compared to the previous year.

2. Demand and its stimulation

• Demand map, with dates and special events. Review the annual map of special dates and busiest dates (bank holidays, holidays and events)
• Map of strategic means planning, where are defined concrete actions for the special and busiest dates (together with marketing and sales departments - improving communication between these 3 departments).
• Ensure that all content in the operators , OTA's and GDS's has been properly reviewed (Photographs, Room Descriptions, Room Types, Packages, etc) or corrected if necessary.
• Ensure that all actions are properly synchronized with the marketing and sales departments, improve communication with each other.
• Analysis of patterns of demand behaviour based on historical data and identification of new patterns and opportunities.

3. Demand Forecasting

Whatever the mathematical method you use for carrying out the bookings forecast map, in a generalized way, we must always take into account the generic elements that are included in the following formula:

Forecast = Historical data +/- [(Bookings in the System +/- Expected Bookings)]

• Analysis of On The Books (OTB)
  -STR Reports
• Rate Shopper Reports
  -Assure daily analysis of Managers Report and Daily Report
• Analysis of general news and announcements of events (clipping report)
• Take into account the annual map of the special dates (possibility of greater flow of reservations)
• Assure that forecasts for next year are properly calculated according to the mathematic method that suits your business type.
• Ensure data extraction from the database directly into a Self-Service Business Intelligence tool.
• Use the historical data for the forecast.
• Ensure forecast charts updating at least once a month or at least analysis of pickups 90 days in advance.
• All forecast maps should be made as detailed as possible, when we have the resources to do so (sales forecast by market segment, by channel and different rates).

Most commonly used forecasting methods (in order of simplicity of calculation / choose the one that best fits your business model):

1. Forecast for historical data
2. Forecast for historical data (with previous years average)
3. Forecast by advanced method
4. Forecast by combined method
5. Forecast by “Puly” method

4. Overbookings, no-shows and cancellations

• Calculation of the Cancellation rates for the different seasons of the year in our propriety
• Calculation of no-shows average rate throughout the year
• Calculation of the Optimum Overbooking (nº of rooms in overbooking)
• Identify and understand the reasons for rejections, cancellations and no-shows, in order to prepare the entire revenue strategy.
• Ensure that all staff members know the procedures to be followed, when there is overbooking, no-show or cancellations.
• Ensure one or more contracts with partner hotels for busy seasons.

5. Pricing and targeting management

• Alignment of pricing strategy with the general strategic guidelines
• Elaboration or confirmation of the segmentation (reports by segments)
• Review of price discrimination
• Calculation of demand elasticity
• Ensure the implementation of dynamic prices
• Confirm the Lowest Price Guaranteed (on your own website)

6. Groups management (displacement analysis)

• Preparation of the “displacement analysis” , strategic decisions to be included for comparison in the analysis (what services or sources of revenue to take into account when comparing the revenue generated by the individual tourists segment, when compared to the advantage of group bookings).

7. Inventory Management

The Revenue Manager must ensure the correct functioning of the following points, even if it is in a zealous or delegative way, this should prevent any difficulties that may occur in these essential actions.

Strategic actions

• Increase or decrease of capacity (number of rooms)
• Management of the optimum occupancy rate, taking into account the deterioration of the provided service.
• Ability to respond to demand by closing or opening areas / floors to guests (control by fixed costs).

Tactics (daily management)

• Employee schedule management
• Arrival or departure of guests
• Service period
• Maintenance of housing units
• Rooms out of service or house use (unavailability)
• Process planning
• Services processes and guests engagement

Revenue management actions (directly related or dependent on RM)

• Ensure the preparation, completion and updating of the Pickup.
• Adjust the forecasts taking into account the competition, company goals, the projection of results and some subjective considerations (personal/market sensitivity).
• Determination and adjustment of forecasts margin of error (MAD^[1] and MAPE^[2]).

8. Distribution and Channel Management

• Knowing well the portfolio of markets distribution channels (advantages and disadvantages of each distribution channel)
• Revaluation and choice of the distribution channels or identification of new distribution channels (due to market changes), with the aid of a report with channel distribution costs and total.
• Strengthen the commercial relationship with distribution channels and have well-identified contacts or account managers.
• Determinations of booking conditions and rates per distribution channel
• Definition of the main markets we intend to achieve
• Identification of rate disparities (corrective measures to minimize disparities) - Rate Parity Report
• Confirmation of all the contractual conditions with each distributor (content adjustments – media and information)
• Allotments allocation (when existing or allotments elimination)
• Commissions and payment conditions (renegotiation)
• Technological aspect for the distribution (definition, adjustment and contracting of new platforms that help management of the defined strategy).

9 . Guest feedback and reputation management

The work of reputation management is a continuous work throughout the year and it is dependent on all employees, however there are five essential pillars in reputation management and that the Revenue Managers should be especially aware of.

Creation of original content

• Creation of original content about the hotel, using the words of the guests
  Personalization
• Special treatment for loyal customers.
• Personalization of all customers communications
• Service personalization (welcome guest on the room)

Emphasize organization values

• Hotel Facilities
• Details of the quality of service
• hotel details (story telling)

Assertive management of negative feedback (resolution)

• Use of means for direct complaint to the hotel (to avoid online), i.e. virtual chats or surveys on the hotel page.
• Encourage contact with hotel through own means (feedback survey, live chat, etc.)

Distribution and Rates

• Assertive, transparent and parity distribution policies in all channels.
• Consistency when the customer comes in direct contact with the front-office.
• Clear advantages on own website’s bookings.

For example: Use of Rate Match tools in real time, while ensuring the lowest price on the website.

10. Evaluation of THRM efforts

Nowadays the evaluation of all the implemented changes, in a generic way, is verified as an essential element of the whole system of revenue optimization. Thus, the implementation and definition of a Balanced Score Card (BSC) and a Web Metrics Score Card (WMSC) in hotels is an essential step in performance monitoring.

In its implementation we should always think "Where We Are, where we go, and where we want to be in the future."

The calculations of indicators such as the ones below are essential in modern hotels that focus on future performance (in addition to other complementary indicators). These are: Occupancy Rate, ADR, RevPAR, TrevPAR, RevPAG, RGI, EBITDA and GopPAR.

Final considerations

With the help of this check list, we managed in a simple, organized and clear way, to guide ourselves towards a conscious and efficient planning. The constant answer to the questions of who we are, where we are and where we want to go will be mirrored in our strategy, point to point, assuring us of our correct positioning and anticipating possible deviations. This is the path, which has gone through historical data, crossed the present and is projected into a new year, with new and undoubtedly better results.

Contact us

When we think in Revenue Management (RM) usually we associate with practices related with economic growth and prosperity where demand exceeds supply. Although these techniques of Revenue Management that help to boost the moments of growth, become more effectiveness, relevant and priceless in times of economic downturn.

In those moments, they can be the difference between life and death of a company or represent the difference between negative or positive results at the end of the economic period. Experienced managers know that business restructurings and process reengineering should not be done in times of crisis. These implementations must be done in times of prosperity, where we can take some risk or actions that could take some time to achieve the goals we have set in medium and long-term period.

Now, in a context where other alternative tourism markets rise again from the ashes, this issue seems to be too relevant again for sector companies. It's a certainty that will be a moment of contraction in demand again, sooner or later, it becomes a reality. Markets such as North Africa or even some countries from the emerging Middle East are a strong competition for the national (Portuguese) tourism market in the future.

How can we fight these hard times when supply exceeds demand?

If we assume that hotel managers are doing their homework and implement efficiently revenue management procedures and systems, we could divide these actions into four main categories studied by Sheryl Kimes ^[1] and Chris Anderson ^[2].

1. Rate discounts or reductions
2. Rate opacity
3. Marketing
4. Cuts in operating costs

In these groups from analysis we look the most efficient, regarding the increase of revenue and optimization in periods of crisis and we became achieving some surprising results. Usually, we can say that the practices that increase value for customer and capture new market segments are able to resist more effectively in times of economic downturn, obtaining superior key indicators of performance when compared with the average. We can easily conclude that actions associated with group 2) Rate Opacity and 3) Marketing become preponderant in success of business units in those troubled times.

1. Rate discounts or reductions
They consist in discounts concessions or carry out a rate reduction in a decontextualized way, without any prior conditions or barriers. Instead of creating value they create an inverse movement in the market or dumping, contrary to its main objective. This is seen as one of the least efficient resource measures from the point of view of performance indicators. However, this not mean that it is not beneficial when applied with discretion and with useful restrictions.
Example: When we offer a discount on special dates with a condition when booking (birthdays, over 65 in low season, large families), guests loyalty (for 3 repeated visits or more) or when we want to reinforce the OTA’s ranking boosting the " Billboard Effect " by creating a " limited time offer or service " special rate (very useful in competitive urban centers).

Discounts on rates are one of the most used instruments in the industry, however when used erratically and without strategy can be harmful to the KPI’s leading to the decrease of revenue. We recommend using them outside the periods of high demand and with some fences or conditions for their attribution.

2. Rate Opacity:

• Creation of value added packages for the guest

It consists in the simple creation of pack services under a single price and that represent an effective advantage for those who buy it. The purchase of the services together should be more advantageous than the same purchase separately. Most of the time it’s possible to stimulate the use of other outlets such as Spa, Sports facilities, rooms and much more.

• One-night free offer (extra)

Depending on our goal, we give an extra night to those who spend at least X number of nights in our hotel, by this way we can dilute the cost per guest stayover with a smaller impact on the unit image when compared to a direct discount.

• Using opaque rate channels

The use of opaque rates sometimes is being controversial, when well used, they can be a great ally in the fight against the crisis. In this way, we can minimize price pressure on the image and brand while we are able to make effective sales at a lower value. If we use this kind of strategies, we should have a greater control over the costs of distribution, because we know that the probability of their increase could be real.

• Breakfast offer

This already is a common practice within the hotel industry, consisting of the sale of breakfast included in the price of the room. However, its opposite also happens, in moments when we have more freedom we can charge the breakfast separately from accommodation.

• 2 for 1 promotion

This tactic can also be used for the purposes of marketing and to promote the hotel unit for a limited time or in a media stream campaign.

• Pre-paid vouchers with F&B packages

With these pre-purchase F&B vouchers we have been able to increase the revenue of other outlets in addition to the accommodation, taking some advantage in the profitability of these spaces.

• Creation of packages with flights and / or car rental

This is a great and an effective action although for getting some big revenues, this practice requires planning with greater anticipation. It is necessary not to forget that those purchases are made while the customer buys his air ticket. It is more difficult to carry out this option directly, however, there are some OTAs that allow you to make this type of offer, for example as it happens on Expedia.

This category has a high intrinsic value to increase our revenue, many of the practices tested can still be used as an integral part of marketing and promotion activities. These packages with breakfast or F&B, as well as the use of opaque rates and extra night offers are the proven tactics for a more effective contribution to the revenue increase.

3. Marketing:

• New market segments acquisition

Capturing and focusing on new market opportunities is one of the most effective elements in these times of crisis, however, it is up to you be able identify these opportunities through the available information on the hotel through BI and Data Mining techniques.

• Pay Per Click (PPC)

In the worst times, the acquisition of potential customers is crucial, so taking some PPC actions become essential for all strategy, to acquiring new customers and attracting new segments.

• Revenue diversification with other hotel outlets

It’s important to remember that we have other outlets besides accommodation, these kinds of facilities can play a key role in maintaining the hotel alive and for the integration with local community. In Portugal it is not very usual to see hotel units working properly these existing infrastructures to achieve a steady stream of revenues, however this may represent a competitive advantage among competitors.

The category that is directly associated with the marketing effort is the most effective among all the others, so contrary to what normally happens your budgets should be strengthened in times of crisis and not being shortened.

4. Cuts in operating costs:

• Reduction of operating hours
• Facilities Closing or operational cancellation

Regarding this action highly popular among financial managers, they should not call into question the level of quality of service provided, otherwise it would have an adverse effect on what is desired. One of the elements with a perception as being the most effective from the point of view of revenue Kpi’s will be the closing of facilities for some renewal increments. In this way, we have the temporary closure of a certain area for future service improvements and a fiscal impact advantages through investment.

One of the main goals from the strategic balance of all these elements is to be able to draw up a resource plan for a time of low demand. The important is for hotel units is to achieve consistent strategy and integrate these tactics into their structure to minimize the negative impact on revenue on economic downturn.

Some suggestions for the future are summarized below:

• Do not panic and do not fall into temptation to compare good times with worst moments
• Make a strategic repositioning of the business unit (competitive set)
• Review and measure all distribution channels
• Make strategic partnerships
• Compete through quality of service and not price
• Make some contracts renegotiation with distribution intermediaries and reinforce favourable conditions for opaque rates
• Just have greater strategic coherence in all actions taken
• Do not drop prices without conditions only driven by fear of failure
• Be resistant to rate discounts without conditions for their attribution
• Increase your marketing efforts and budgets
• Biggest bet on SEO and SEM actions
• Increase the effort to capture new market segments
• Make a greater investment in PPC
• Greater relationships reinforcement with the customers (CRM techniques)
• Increase cross selling strategies
• Increase marketing efforts at the point of sale
• Further staff internal training for up-selling results
• Commissions allocation by sales made for internal staff
• Consider marketing strategies and actions that generate value
• Implement rate opacity techniques
• To take advantage of the moments of less demand, carry out some renovations and improvements in the existing infrastructures of business units
• Maintain or even increase your quality service levels
• Diversify your revenue sources (other outlets)

Contact us

Once upon a time there was a company that wanted to increase its revenue … All the most beautiful stories start like this and this is no different case. One of the most valuable assets in hospitality and specifically in the accommodation sector in Portugal is people. This is a sector made of people and for people who are living “The Dream of Being Happy” in our country. Well, as in all tales, people who dream don't like to see their dream or dream trip ruined before their desired happy ending.  

This means that one way or another the tourism and hotel industry employees who are responsible for setting expectations for their customers must satisfy them by creating perfect and catastrophic disaster-proof experiences, that are not always manageable. For this herculean and Olympus god’s ode-worthy task, all entrepreneurs must support their employees in the most diverse dimensions.

This seems like an impossible mission for our friend “Tom Cruise”, but he is not available to the cast of hotel companies in Portugal. For this, we have the excellence of national workers, coveted in the four corners of the world and with performances comparable to top athletes, with CR7 mark of Cristiano Ronaldo as national flag.

“Portuguese hoteliers have one of the most coveted assets in the world, which are their employees.”

Are we in times of change in Tourism and Hospitality?

National hoteliers should begin to think that their core business of “Welcoming People” is only with satisfied and high motivated employees. Their employees must obtain the necessary recognition, be professionally fulfilled, in good working conditions and in balance with their personal life. This is most noticeable in younger generations, who are much more available to move between different countries, disregarding purely financial conditions to the detriment of more appealing proposals for their personal lives. This is the Millennial generation, loved by some and hated by others.

It is my belief that we are on the verge of profound change and a new paradigm in the tourism labour market in Portugal.

António Brandão de Vasconcelos, chairman of Everis consultant in Portugal, told Visão magazine in 2018 "If a company needs human resources and does not treat them well, then it is ruining its own business”. This is a company that operates in the field of technology consulting, noting a marked growth in recent years, similar to what is happening now in the tourism and hospitality industry.

Nowadays companies linked to software have difficulties in fixing their staff, having to create better working conditions, financial and non-financial incentive mechanisms, almost blameless to their employees. The same will have to happen in the tourism and hotel industry if we really want to have people to provide services in a unique way to those who come to visit us.

“There is an urgent need to retain qualified people within the country and within a sector whose main asset is its employees.”

Lately we have heard repeatedly in the media, from various entities, that there is a high lack of labour for this sector. However, it will be necessary to understand the reason for this and why businessmen in the industry complain so much. It is a reality that there are highly qualified people to work within and outside the country, but nowadays it is a highly globalized industry and national companies are also competing with players from other countries. On the other hand, in recent years mistakes have also been made by various organizations and we all have increased responsibilities in what is currently happening to the human resources sector, requiring a deep thought and medium and long-term strategic policies.

What are the facts that help people to avoid working in the hotel industry?

1 Underused highly qualified training;
2. Lack of training impact assessment, especially training funded by Community frameworks;
3. Lack of assessment of careers and continuity of activity of graduates in Portugal;
4. Excessively low wages (sector average below national average);
5. Failure to pay overtime working (bank holidays, overtime, time off, etc.);
6. Failure to pay perks already covered by national legislation (Ex: languages subsidy, additional night work, among others);
7. Lack of career perspective, medium and long term evolution;
8. Instability in personal life;
9. Staff has difficulties to reconcile family and private life with professional life;
10 There is a manifest devaluation of work within the sector;
11. Highly penalizing operational shifts for employee health and social welfare (non-regular rotating shifts);
12. Increased psychosocial risks ^[1] (Ex: Physical harassment, moral, third-party violence, excessive workloads, mismanagement of organizational changes, job insecurity, among others);
13. Turnover of human resources within the sector;
14. Work insecurity and instability;
15. Poor workplace conditions and lack of compulsory (annual) training;
16. Excessive free labour for employers (eg. curricular internships, professional internships, etc.) and increase of informal employees;
17. Entrepreneurs prefer to hire people without specific training and train internally, rather than hiring people with specific training (due to the amounts paid);
18. Seasonality and lack of continuity of operations;
19. Payments made through false “green receipts”;
20. Countries within the European Union with salaries much higher than in Portugal (eg. a waitress in Spain earns easily three times more than in Portugal.);
21. Lack of periodic inspections in the sector (of the various competent entities eg. ACT ^[2]);

What has happened to young graduates from vocation schools in recent years?

Currently there is no assessment of the impact of training on labour activity in companies, or the continuity of activity of trained (highly qualified) staff. It is a reality that most young graduates change areas due to lack of working conditions and sustainability within the sector. This is noticeable, for example, in waiters, housekeeping and spa staff, among others. If we look closely at some of the facts highlighted, we find that many of them have an almost immediate resolution as soon as the various organizations and players in the sector want it.
These highly qualified staff having a high ease of relocation to other countries choose to work outside Portugal where they easily get better working conditions.

But how can hoteliers balance this difficult equation?

It is here that a correct implementation of measures related to safety and health at work (OSH ^[3]), social responsibility and conciliation between professional, family and personal life, can help significantly to the retention of national talent. These types of certifications, which are still rare in the national hotel scene, will have to become more and more common under penalty of, one day in the future, entrepreneurs need people to work with and will not have qualified staff available (as is already the case in some operational areas).

OSH ^[3:1] in the tourism and hotel industry in Portugal

In the hotel industry, it is very common to use external companies to comply with OSH legal requirements ^[3:2], but this is not enough, as these organizations need somebody responsible to liaise with HR departments in order to apply a new human resources strategic policy, that goes far beyond the legal obligations, which are currently manifestly insufficient for this sector to perform well.

Is required a redefinition of the role of corporate HR departments and their hiring policies, which are stripped of any strategic organizational value.

These departments are merely based on short-term policies and day-to-day operational tasks. Entrepreneurs need to decide whether they want these departments to do such things as contracting, salary processing, recruitment processes that are devoid of purpose for the organization, or otherwise, they need these departments to strategically deliver additional value to their companies with medium and long term policies.

“We are not short of highly qualified people, we are short of strategic policies within organizations that enhance the performance of this valuable resource, which are people.”

Although Hospitality is currently one of the most regulated sectors, it does not mean that it is not subject to specific risks, whether physical, biological or psychosocial ^[1:1] that need to be diagnosed, minimized and controlled. We know that there has been a great deal of progress in recent years on this matter, but despite this, is manifestly insufficient.

It should be borne in mind that the tourism industry and the hotel sector in particular, aggregate a set of labour intensive activities, having a very significant weight in their cost structure. Employees in an organization are a very costly resource not to be harnessed and leveraged for higher returns.

We currently have a set of Portuguese Standards and directives in this area, however, I would like to highlight those mentioned above, which have a set of undeniable advantages for the creation of additional revenue in the national hotel properties and in which we are in deficit.

Existing Certifications and Standards:

• ISO 45001:2018 ^[4] - Occupational Health and Safety Management Systems;
• ISO 26000:2010 ^[4:1] - Social Responsibility (guidelines);
• SA8000:2014 ^[5] - Social Responsibility Management;
• NP 4552:2016 ^[6] - Reconciliation between work, family and personal life;

Currently there are very few or almost zero entities in the hotel sector that have certifications in these areas.

New generation hotel properties must have all of these issues and other concerns as a priority within their organizations. Practices such as indoor air control, thermally controllable environmental conditions, chemical handling rules, fire hazards, emergency plans, fall prevention, electrocution hazard control, ergonomic hazards, biohazard control, personal protective equipment distribution, periodic drills and safe work environments ^[7].

The major advantages of these guidelines, for the most part, are the implementation of procedures and processes focused on people. These policies help implement a true socially responsible culture that is conducive to the excellent performance of the organization and its employees.

These practices are essential not only for the well-being of the employee, but also for the proper functioning of the entire hotel property and the safety of its own guests.

One of the national pioneers in this type of certification was Delta Cafés ^[8] which in 2003 became the first company certified under the Social Responsibility standard through SA8000 ^[5:1].

At first glance it seems careless, but if we look at the cases we have already observed in the media, we find that much remains to be done in the national properties. There have been several cases in recent years, for example Legionella in several hotels, fires in which guests needed evacuation, robberies at hotels, theft of guest information databases, thermal shocks due to misuse of equipment. (e.g. Spa's), among others.

As can be seen, if there was proper planning of occupational health and safety conditions and good staff training, many of these recurring problems were properly addressed, also preventing the safety and welfare of guests.

Occupational safety and health in a synthetic and simplistic way associates the social, mental and physical well-being of employees, creating safe working environments ^[7:1] and favourable to their good performance in the developed activities.

As main guiding goals (ILO ^[9], 2009) we will have:

1. Promotion and maintenance of high levels of physical, mental and social well-being of employees from all sectors of activity;
2. Prevention of adverse health effects of employees resulting from their working conditions;
3. Protection of employees against risks arising from their working conditions;
4. Placement and maintenance of employees in work environments ^[7:2] adjusted to their physical and mental needs;
5. Adaptation of work to the worker (not the other way around);

It is necessary to have a concrete sense of the existing reality in these sectors and always bear in mind that there are rights and duties on both sides of the barricade. The associated costs and benefits are reflected on both sides, whether for employees or entrepreneurs. The aim of these measures is the improvement of conditions for both sides, minimizing their harmful effects, resulting from the activity for the properties good performance and for the maintenance of the existing jobs.

The promotion and improvement of working conditions must be strongly identified in all places and working areas, as there are risk factors associated with all of them, bringing consequences not only for their employees, but also for clients, as is well known in the Hotels and Food and Beverages sector.

These costs are associated with both sides and can be avoided with proper management of occupational safety and health, as can be seen below (ILO ^[9:1], 2009).

Costs associated with employees:

1. Accidents or occupational diseases;
2. Suffering and distress caused by accident or illness;
3. Loss of income;
4. Possible loss of job;
5. Costs associated with healthcare arising from the conditions of their work activity;

Costs associated with employers:

1. Costs of remuneration for work not performed (inefficiencies);
2. Costs of absenteeism and replacement of employees;
3. Medical expenses and compensation costs;
4. Repair and replacement of damaged equipment (misuse);
5. Production stops and breaks;
6. Reduction in the quality of products and services provided;
7. Increase in initial (new staff) and additional training (on-the-job training) expenses;
8. Increase in insurance premiums;

From these cost lists we can easily conclude that these two stakeholder groups both have much to lose. However, it is clear that entrepreneurs should do their homework because the impact these visible costs can have on their final income is too high not to be taken seriously. All these factors should already be part of the properties active revenue management policies to the detriment of castrating human resources management (HR) policies, which lead to multiple direct and indirect losses.

These policies to be as effective as possible should be based on dialogue with employees, their consultation and their involvement in improving their working conditions. Only in this way, we can implement measures that are also valued and perceived by them, as an asset with real impact on their daily life and balance with their personal life.

As can be seen immediately, there is a great responsibility for all stakeholders and leaders such as administrators, managers, officers, associative leaders, supervisors or owners. All of them have an increased responsibility for managing occupational safety and health, employee well-being and their retention in companies.

These stakeholders are responsible for:

1. Promote occupational safety and health as a pillar in the organization;
2. Communicate OSH policies to all employees facilitating their involvement;
3. Establish strategy, policies and objectives for consistent OSH management;
4. To monitor and measure the evolution of these practices over time;
5. Provide the example of good practice through their own conduct;
6. Establish a culture favourable to OSH policies;
7. Maintain OSH as a priority of their daily activity;
8. Give all employees the opportunity to adopt preventive measures;
9. Provide employees with training in OSH and the necessary personal protective equipment for the proper performance of their tasks.
10. Involvement of all staff in OSH decisions (EU-OSHA ^[10], 2012)

The well-being and health of employees is essential to one of the main focuses of corporate competitiveness in these sectors. We now know that healthy and motivated employees produce more and better, reflecting on the quality of customer service that has a direct impact on their properties image in a highly competitive global market. Proper OSH management saves lives and is a good investment for companies, allowing employer’s inefficiencies with absenteeism, replacement of employees, production shortages, and poor quality of service or lack of motivation to work.

Can we create more revenue from OSH policies?

Applying efficient OSH policies has many advantages for those organizations who implement it, including:

1. Reduction of accident and sickness rates;
2. Cost and risk reduction, with lower absenteeism rates, lower employee turnover, fewer accidents and lower threat of lawsuits;
3. With the participation of employees in the planning phase, there is greater involvement, most effective measures and solving concrete problems.
4. Greater responsiveness in the prevention of occupational accidents and health degradation with a better cost-effectiveness ratio;
5. Strengthening of image with suppliers and partners;
6. Strengthening reputation on topics such as corporate social responsibility with investors, customers and communities;
7. Increased employee productivity with healthier, more satisfied and motivated employees.
8. Reduction of absenteeism rates;
9. Savings of considerable amounts through better plant maintenance;
10. Decrease in claims and insurance premiums;
11. Significant improvements in pre-contract qualification levels;
12. Satisfied employees, with higher levels of mood and motivation, favour increased concentration at work;
13. Decrease in the time of services execution (delivery);
14. Increased employee performance increases customer satisfaction;
15. Reinforcement of employees commitments to the company;
16. Allows the company to meet customer expectations for OSH;
17. Encourage employees to stay active longer;
18. Increase competitiveness (among competitors), profitability and effectiveness of the company;
19. Better social climate within the company;
20. Allows better process management;
21. Increases professional achievement and employee recognition;
22. Promotes healthier lifestyles;
23. Improved employee retention capacity with greater ability to retain top talent;

As you can see from applying a full OSH program, it can greatly foster the creation of safe environments ^[7:3] and promote employee satisfaction, helping them significantly increase their performance and can help the organization achieve all their previously outlined goals.

Final considerations:

It is well known that there is a problem that is difficult to solve within the sector, however all companies are questioning their sustainability in the context of a global market if they do not take appropriate precautions and preventive measures. There is an urgent need to adopt measures that favour the establishment of employees in companies and in our country.

It is essential that companies invest in good work management and in periodic vocational training tailored to their needs. It is a certainty that employees increasingly informed, motivated, with safety conditions and well-being at work improve significantly the quality of service, the productivity of businesses and, consequently, guest satisfaction.

Companies need to carry out a set of certifications to help them implement processes and best practices for business sustainability in the medium and long term. This is where good OSH practices can make an important contribution by helping to set up safe work environments ^[7:4] that deliver excellent employee performance within organizations and with the rigor required.

Through the improvement in all these points as shown in various studies (EU-OSHA ^[10:1], 2012), companies will see huge financial gains having a direct impact on revenue generated in organizations and consequently available for future investments. This set of gains is beneficial to both parties leading to a perfect match between employees and employers.

Only by creating these synergies can everyone have a happy ending and be happy forever.

Request Quotation

Accounting has a flexibility adaptive to company’s nature and to the activity practiced in a quasi-chameleonic way ad is through this that we obtain the necessary information for its management. Its main function is the preparation of all corporate information documents, mandatory and statutory documents (financial statements) or management and information reports for the operational directors.

Why do you need a management accounting system tailored to your needs?

Currently there is an urgency of information in real time, this way, financial and management accounting are key in supporting decision making and future development of the company.

Financial accounting is known as general accounting, and reports company’s financial position through financial statements and past performance as if it were a business photography.

This information is useful for shareholders, investors, clients, government, suppliers and others. Having this information a fundamental role in communicating with all the company stakeholders ,this is much more aimed at the interested public outside the company. Financial accounting is compulsory in Portugal, it is currently standardized by the SNC ^[1], and its accounting principles are generally accepted and standardized. The frequency of these reports depends mainly on the company's needs or legal requirements, and can be monthly, quarterly, half-yearly or annual. These features transform this information making accounting comparable to other companies, reliable, objective, accurate, consistent and useful.

The management accounting, arises from the need for an analytical accounting and has as main goal the management of the costs of the products / services sold or rendered.

Usually this information is of internal utility, for the directors and managers. There is no obligation by law, nor have accounting principles for it being developed depending on the needs of the organization and its managers. This is a way of communicating company status to its internal stakeholders. Being focused on their managers, any prior study should be preceded by in-depth knowledge about the day-to-day reality of the organization, its managers, the information they need and their business environment as a whole. One of the most internationally used systems for the hotel and lodging industry is USALI and for food and beverage companies -USAR, these are nothing more than the standardization of management accounting systems for types of establishments with very specific needs, responding to the need for information for management and much more towards the future of the organization.

In this way, for example, a hotel manager knows in what department there are wastage of resources, whether or not to increase a certain operational area or proceed to its implementation plan. The same goes for directors or owners of restaurants, tour operators and travel agencies. In travel agencies this is crucial in making decisions among market segments, package providers, or even franchising decisions.

Management accounting is the main source of decision support information for all managers who perform planning, direction, motivation and control of all company’s activity.

Planning is directly related to how we choose the course to take and the choice of the way to achieve our goals, as well as the entire implementation process. The direction and motivation consists in the mobilization of all the personnel around the plans for the accomplishment of the operations towards the traced goals. The business management control ensures the fulfillment of the plan in pursuit of the goals and ensure as well the respective corrections in a timely manner according to performance and circumstances. Management accounting plays a key role in these and other management activities, however their need is most noticeable in planning and control functions. Often companies find it difficult to achieve their goals due to a lack of planning and control of results due to multiple factors such as; poor system configuration; lack of integration between systems (i.e. PMS and ERPs ), management accounting system inadequate to the sector where it operates, etc.

Summary of the main differences between financial accounting and management accounting.

Financial or General Accounting:

1- Information for people outside the organization
2- The focus is on the consequences of past activities
3- Data objectivity and consistency
4- Information must be accurate
5- Summary information about the organization as a whole
6- Based on generally accepted accounting principles
7- The publication of the financial statements is legally mandatory.

Management Accounting or Analytics:

1- It is directed for people within the organization and is intended for planning, direction, motivation, control and performance evaluation.
2- The focus is on decisions that affect the organization future.
3- Data relevance and flexibility.
4- The information should be timely and useful
5- Elaboration and comparison with detailed sectoral reports on departments, products, customers or employees.
6- It is not mandatory to observe the generally accepted accounting principles
7- Not mandatory

In general we can say that the obligation of financial accounting from the legal point of view, makes this type of accounting the most used. However, if an organization aspires to have the best performance possible and optimize all its resources, we can even say that the management accounting system has a vital preponderance to its objectives, providing answers in which the general accounting system is inefficient or limited.

Contact us

It is widely known that the United Kingdom wants to leave the European Union, after the decision of its members, which gave the green light to its exit scheduled for March 2019 and that would not materialize.  There is an extension of this date until 31 October 2019, two years after the official launch of the whole exit process, three years after the referendum of 23 June 2016, where 52% of the British people voted in favour of 'Brexit'.

But will this umbilical disconnection be so burdensome and disastrous for the member states of the European Union, breaking with the free movement of people and goods? What will be its economic effects and what will be the impact from the point of view of tourism in Portugal?

"... it is common sense that the most catastrophic scenarios, nor the most optimistic ones, will probably not occur..."

There is a lot of speculation about this subject, however, it is common sense that the most catastrophic scenarios, nor the most optimistic ones, are probably not going to happen. Their effects will probably be in the midst of these two realities, the United Kingdom will not cease to be the strong economy it is suddenly, nor will it isolate itself from the world by failing to do business with its partners.

Tourism behaviour in recent years

The weight of Tourism in the national economy has increased notably in recent years. According to TravelBI - Tourism of Portugal, the Tourism Revenues in Portugal accounted for 8,2% of the Gross Domestic Product, corresponding to 16,6 billion euros, as well as representing 18,6% of Global Exports.

Tourism Revenues in Portugal reached 8,2 % of GDP in 2018

This result evidences an increase of 9,6% compared to 2017, a year in which tourism revenues in Portugal were worth 7,8 % of GDP. Since 2014, the annual growth of this indicator was 0,4 points, so last year's registration (+2, 2 points vs. 2014) becomes even more significant.
More than 12,76 million foreign tourists visited Portugal in 2018, a growth of 0,4% over the last year. This growth rate shows a strong slowdown in the trend that we have been experiencing in the previous years, being the highest, of 11,7%, from 2016 to 2017. Regarding tourism consumption by foreign tourists, data about 2018 is not yet available, however, the previous data shows us the weight of foreign tourists in the tourist consumption in the territory rose from 61,2% in 2014 to 63,1% in 2017. Also the Gross Value Added (GVA) generated by Tourism increased significantly, from 6,9% in 2016 to 7,5% in 2017.

Study of the Business Confederation of Portugal (CIP) about “Brexit”

In 2018 the CIP developed a study on the impact of “brexit” in Portugal, with the support of Ernst & Young - Augusto Mateus & Associados (EY-AM & A), which pointed Tourism and exports to the automotive sector as two activities on the high risk of suffering a recurring high impact of Brexit, however there are others with a high dependence on exports that have a much higher risk.
This paper analyzed the impact of the departure of the United Kingdom from the European Union (brexit) in which several Portuguese products and services exported to that country may be subject to restrictions in the future (customs fees, taxes, etc.).

What can happen in the Tourism sector?

It is expected that there will be a break in the purchasing power of the English, due to this we may be in the presence of services subject to some price pressures.

From our point of view and in spite of the general fall that will be felt in the foreign tourist market associated with the United Kingdom, it is well-known that there is a greater price sensitivity in inferior segments with less purchasing power, observing greater resistance to baskets of products for classes with greater purchasing power or niche.

The CIP study also highlights the impact on tourism, where the UK has a significant influence (See study).

"In 2016, there were around two million British guests who spent more than 9,5 million nights in Portugal. In fact, the vast majority of European tourists arriving in Portugal in 2016 were English, accounting for 21% of guests and 28% of overnight stays in hotel establishments, having grown at an average annual rate since 2010 of around 10%/year in both the cases".

However, in relation to the British market in 2019 there has been a growth of 6,8% so far compared to the same period last year (See lastest data in TravelBI ).

Measures adopted by the Portuguese government to minimize the effects of Brexit

The Government in Portugal has approved a Contingency Plan for Brexit in the event of a departure by the United Kingdom from the European Union without agreement, this plan includes measures such as facilitating the entry of British tourists through Faro and Funchal airports. The plan aims to avoid obstacles and encourage reciprocity with Portuguese citizens who work and live in the United Kingdom and for Portuguese tourists in that country. In addition, the Portuguese government is keen to make every promotional effort to maintain the same level of flow of British tourists in Portugal (See the plan here).

Measures to be adopted by accommodation establishments owners

Similar to the Portuguese government, hoteliers should prepare themselves for a brexit with or without an agreement, so they must carry out some measures in order to minimize its effects and safeguard the business. All businesses will be generally affected, however there are specific businesses such as Hotels, Tourist Accommodation Establishments, Restaurants, Hostels , Rural Hotels, Camping Parks, Resorts, among others.

20 measures to be taken to minimize "brexit":

1. Be widely informed about the news of " brexit " by following it in International media and National.
2. Implement a revenue optimization system or "Revenue Management", in outsourcing.
3. Recruitment of Revenue Management specialist in outsourcing;
4. Increase planning and booking forecast up to 12 months;
5. Reinforcement of sales, marketing and IT team through outsourcing;
6. Marketing campaigns in tune with the strategic definitions of the company and strategy of "Revenue Management";
7. Favouring direct bookings in the hotel website;
8. Demand stimulus with direct online advertising to redirect traffic to the hotel's website (Google Adwords to Bing , with Metasearch and Social channels);
9. Ensure that the website is translated into several languages and is able to promote the hotel in multiple markets;
10. Increase "Retargeting campaigns";
11. Increase bet on SEO and SEM;
12. Translation of hotel contents into multiple languages (besides English);
13. Entry into new markets;
14. Contracts with new distribution channels (niche and trends);
15. Increase guests loyalty and promotional campaigns directed to repetitions;
16. Reinforcement of resources in alternative English speaking markets (eg Ireland, USA, Canada, Malta, New Zealand, Australia, etc.);
17. Work the existing data in the property systems through BI techniques, in order to know the ideal guest for each market and his buying habits.
18. Send general conditions information to English tourists when visiting Portugal in case of " brexit " (when it happen);
19. Promotion of packages, with added value for the client (bundle);
20. Create direct communication channels with customers and guests (eg Livechat, robots, etc.). These direct communication channels can inform English guests about precautions to be taken before coming to Portugal and encouraging the visit;

Final considerations

The effects of Brexit (news) are starting to appear only now in Portugal in regions more dependent on mass markets or segments with lower purchasing power, however the UK market in Portugal is still growing at this moment (2019).
A weaker pound theoretically means a lower purchasing power, however, within Europe, Portugal continues to be seen as a fairly affordable tourist destination for UK tourists. Theoretically these tourists will prefer to stay within the UK at the expense of traveling to countries where the currency loses value.
Hotels, as well as other tourism businesses, should remain flexible and ready to adapt. As the news and solution for Brexit becomes a reality these businesses should have agility and a near-instant market reaction capability. To maintain direct bookings in an uncertain market, follow-up and planning in advance are essential.

Request Quotation

The Portuguese Tourism Market incurs in a great growth phenomenon with direct impact on demand and supply dynamics. Empirical studies show that one of the consequences of markets development growth maturation, results in implementation of new business optimization concepts and techniques such as implementation of Revenue Management practices.

Beginning a brand-new Revenue Management Implementation in Restaurant and Beverage Establishments (RBE's ^[1])

In this article we propose several general topics that have a great importance for RBEs when they intent to implement some revenue management processes.

Contrary to what is observed within accommodation in hotels or hostels, where the implementation of advanced revenue management techniques already exists, nowadays in RBE’s those practices are still not very expressive. This huge gap in RBEs is the cause of some concerns for the hospitality sector, where the dynamics of demand and supply are imperatives in an increasingly highly competitive market.

1. Specificities of RBEs
2. Structural pillars of Revenue Magement system in RBE's
3. Cost structure and accounting management (USAR ^[2])
4. Main performance indicators (KPI's ^[3]) of financial statements (P&L ^[4])

The Revenue Management model is based on the maximization of Revenue, using the knowledge we have about the customer and adding value to their experience with the correct sales timing.

The excellent results of its application in other businesses areas, such as hotel accommodation, aviation, travel agencies, tour operators, rent-a-car agencies, venues or events, prove the advantages of applying it to RBEs as well.

However, we can observe that these establishments have unique characteristics or specificities that can condition all their operation, from the perspective of revenue increase. We must always keep in mind the following characteristics to minimize the risk of implementation, only in this way we can take full advantage of the whole system and proceed with its correct workflow configuration.

1. Characteristics of Services and RBE's:

Intangibility - Services can’t be seen, tasted, heard, or smelled before being acquired because they are said to be intangible.

Expiry of service and perishability of your goods (raw supplies) - Services can’t be stored. When demand is stable there is a need for base supplies different from when it breaks out and can cause operational losses due to its perishability.

Heterogeneity - service inconsistencies (human factor and changes in demand), this is not uniform, with the same characteristics, varying from provider to provider. Services are highly dependent from his provider, as well as they are delivered, it’s a highly variable game. It’s imperative to invest in human resources quality processes to ensure customer satisfaction. Services can be composed by other general services increasing the value for customer with a "service package".

Simultaneity and Inseparability - Services are produced and consumed simultaneously, which is not the case with products, they are produced, stored, distributed and consumed later. The interaction with customers is a constant, being one of the most relevant characteristics in services, both are part of the process and influence directly result.

Rigidity of Supply - Services must be provided in a controlled environment, usually an establishment that has a fixed number of seats (limited and fixed capacity) and cannot be transported to another place or region (space). The time for providing the service is limited according to the predefined service standards.

Complementarity - A service can be combined with several other "accessory" services, but complementary to each other. For example, in the RBE's we can have other services to complement the experience of the visitor (ex: entertainment shows, music, workshops, etc ...)

We can say with certainty that the characteristics of the services depend on intangible elements to proceed with the creation of value, so their evaluation becomes subjective and variable from client to client. For organizations, the relentless pursuit of the relative excellence of services and the measurement of the intrinsic quality have become strategies for obtaining a competitive advantage based on some models of quality assessment (which will be addressed in another article in more detail) and are essential in RBE's revenue management models.

2. Structural pillars in the Revenue Management system in RBE's

The Revenue Management System multiple areas where it is applied, derive from the practice of price oscillation according to the demand, this practice was denominated yield management. It uses statistical and mathematical tools applied to the prior goal of revenue maximization for the global company benefit. Over time, this concept has evolved adopting a new designation "Revenue Management" that is constantly changing and is currently much more holistic affecting multiple business departments. In RBE's we can say that an RM system is based on the following structuring pillars of revenue increase and management.

• Business Analysis and diagnosis for Revenue Management system implementation
• Business concept and USP (unique selling proposition)
• Demand Stimulation
• Forecasting
• Booking management – no-shows, cancellations and overbooking management.
• Sales pricing and targeting management
• Restaurant menu management
• Groups management in RBE's - Menu with fixed price
• Inventory planning and availability management - total capacity, turnover and meal times (seats)
• Active promo and actions at the point of sale - upselling and suggestive selling
• Distribution and channels management
• Quality management
• Guest feedback and reputation management
• Control and evaluation of RM efforts

We will analyse and develop in future articles each one of these pillars of revenues increase on RBE's, already used in several business units.

This systems and revenue management processes can be complex, depending from the type of establishment that we have or from the available resources. That’s because of this lack of knowledge and resources that many establishments prefer hiring externally a specialized team (outsourcing), to manage the whole process of implementation and business follow-up.

3. Cost structure and management accounting (USAR)

This whole system must be tuned with our accounting system and internal information for the management of the unit, otherwise all this produced data wouldn’t make any sense and is useless for revenue optimization.

In the image below, we can find a proposal for an operating income statement (summary) that will be the basis for all revenue management and optimization work. In this general proposal some reference relative values can be found for a small or medium-sized unit, although these values tend to vary significantly depending on the type of establishment we have, however, they serve as a reference and it’s our starting point for a good business development.

From this P&L statement, we will be able to calculate and work on some key performance indicators that will indicate company success. This Kpi’s serve almost as a road sign on a dangerous road with many curves, setting what we are doing well and where we need to improve. Those statements, when properly configured in our accounting information systems (ERP), tend to be easy to consult and very useful to establishments business management.

4. Key performance indicators (KPIs)

There are other indicators that will be explored in the future, however the criteria for choosing these have to do with their functionality and readability through this P&L statement (USAR), facilitating the start of the entire process of implementation of a functional revenue management system for producing useful and real-time information.

One of the main goals of this initial analysis will be to verify if all unit in question is properly balanced or if needs some hard corrections. This will be the beginning of a path guided by the change of old habits and implementation of new procedures that increase the probability of high results.

• Seat Turnover (seating places)

$$Seat Turnover = \frac{\text{Number of customers (Catered)}} {\text{Available places}}$$

• Cost of food sales (CSfood)

$$CSfood ={\text{Initial Inventory + Purchases – Ending Inventory}}$$

• Cost of beverages sales (CSbeverage)

$$CSbeverage ={\text{Initial Inventory + Purchases – Ending Inventory}}$$

• Food Cost (Food Cost %)

$$Food Cost = \frac{\text{Cost Food Sales (€)}}{\text{Food Revenue (€)}}* 100$$

• Beverage Cost %

$$Beverage Cost = \frac{\text{Cost of Beverage Sales (€)}}{\text{Beverage Revenue (€)}}* 100$$

• Cost of Goods Sold (COGS ^[5])

$$ COGS = {\text{Beverage Cost (€) + Food Cost (€)}}$$

• Prime Cost (Cprime)

$$ Cprime ={\text{Cost of Goods Sold (COGS) + Labor expenses}}$$

• Average Check (Ckperson)

$$ CKperson = \frac{\text{Food and Beverage Revenues (€)}}{\text{Total Number of Guests Served}}$$

• Average Ticket (Atticket)

$$ ATticket = \frac{\text{Food and Beverage Revenues (€)}}{\text{Total Number of Tickets}}$$

• Revenue per available seat hour (RevPASH)

$$ RevPASH = \frac{\text{Total Revenue F & B (€)}}{\text{restaurant seats x work hours}}$$

• Total Revenue per available seat hour (TRevPASH)

$$ TRevPASH = \frac{\text{Total revenue (F & B) + other merchandising}}{\text{restaurant seats x work hours}}$$

• Gross operating profit per available seat hour (GOPPASH)

$$GOPPASH = \frac{\text{Total Revenue - Operating Costs}}{\text{restaurant seats x work hours}}$$

• Net Contribution Margin (MCL %)

$$ MCL = \frac{\text{Net Result}}{\text{Revenues}}* 100$$

Many other indicators could be presented considering the complexity of RBEs management, such as the CashFlow indicator, RevPASQM ^[6] (most commonly used in conference and event organizers) or customer loyalty rate. However, as these indicators are not directly mirrored in the present P&L statement, we intent to present them at a future opportunity in specific BSC (Balanced Scorecard) models. The performance indicators presented allow a quick and comprehensive diagnosis of the entire company operation beginning the process of Revenue Management (RM) system implementation.

Authors:
This article was written in coautorship by Soraia Mourinho and Miguel Costa

Contact us

In this article we intend, from a strategic point of view, to strengthen the integration role of all the different systems of an hotel, as this is the main challenge for the future of a THRO system. The greater the integration degree of the multiple hospitality systems, traditional or new, the greater the use of data in favour of the hotel organization competitiveness.

Nowadays, there is a lack of use of all the technological components already existing within the organizations, either due to lack of configuration or lack of knowledge, the fact is that the use of existing data is almost nil.

Hotels and various accommodation properties are now major wasting centres of valuable data on their guests and potential clients.

This phenomenon is mainly felt in small and medium-sized properties, which are referred to as independent properties, not belonging to any chain.

It is estimated that in small or medium-sized properties we can lose around 600€ to 1400€ per day, due to the waste of existing resources.

For example, all properties have a PMS, whether big, small or medium-sized, however, how many are able to extract sales by market and distribution channel? How many really know who their guests are? How many can make a sales forecast per channel? These are the questions that can be answered immediately if the PMS is well configured and parameterized. However, few are the independent properties that are able to give these answers with accuracy and security.

Another issue that can be easily solved is the costing system of the properties themselves. Most of them already have ERP information systems integrated with their accounting systems, however, very few use their integrated system with their existing PMS, what often creates disparities. One of the things that they can easily do is the systems integration through API's and the use of the USALI system (uniform system of accounts for the lodging industry) specifically designed for hotel properties. With this system in place, many issues that PMS’s have some difficulty in answering could easily be met if there were a correct use of the costing system.

The following table intends to make a summary of all the different systems and their relationships within a medium-sized hotel company, however, there are some that are primordial and should be integrated for a correct implementation within the THRO system, or we should think about taking steps towards its integration.

Due to their great relevance, identified in blue for easy identification and reading, these are: the ERP that must be properly configured with the USALI system, accounting or finance, central reservations, revenue management, sales, PMS , data analysis, BSC systems, and decision support systems for management. This flow, in addition to the others that are also important, are determinants for the correct information flow to the board towards the decision making.

10 technologies information sources to pay special attention to in hotels (summary):

1. ERP (USALI) and Supply Chain Management (SCM)
2. Accounting and payments
3. Central reservations and distribution systems (GDS/IDS/CRS)
4. Revenue Management Systems (RMS)
5. Sales and catering, sales force automation and sales support systems (EMS)
6. CRM
7. PMS
8. Data Mining
9. Business Information Systems and Balanced Score Card
10. Decision support systems

The results of, for example, an integration of hotel management software with an ERP translate into significant gains because they allow hotel properties to obtain information to support management and decision-making in a timely manner. Thus the productivity in the hotel properties increases, reducing administrative costs. On the other hand, management can distribute all information horizontally across all organization, making business processes and decision-making models more rational.
In this way, hoteliers can have a global view of their reality, either of the whole operation, whether the entire financial and accounting aspects.
There is a multitude of system data that hotel properties are wasting, so that all this information becomes useful we must be careful so that this data can be extracted in a reliable way.

Basic considerations to favour the correct use of data in the system:

1. End the information silos (technologies and systems integration)
2. Debugging databases (cleaning)
3. Procedures for the insertion of the data in system
4. Minimizing insertion errors with staff training
5. Use of Data Mining and Business Intelligence tools
6. Making data information intelligible
7. Encourage and ensure data security
8. Use data for Revenue Management optimization and revenue capture

When all the information, from multiple sources, are connected with an integrated system, we gain the possibility of working with data in real time and not estimates or assumptions. Its correct use results in highly qualified and useful information about the accommodation property, either an hotel, hostel, motel or local accommodation.

Crossing these synergies will allow employees to save time effectively. For example, employees who only inserted reservations in the PMS, with the automation of this processes, can now proceed to the analysis of data standards and make decisions based on this data in a reasoned way.
All the time that the employee wastes in inserting reservations and performing its treatment, can now be used to put together a strategy to improve the hotel's revenue management. They can now plan when to raise or lower a rate, actively manage channels and allocations of availability, plan packages, assign promotions to specific dates, choose partners, etc.

Employees are fundamental to the development of the entire system and management of a more efficient technological system, contributing decisively to the creation of more revenue.
In practice, a better system and more system integrations means higher return to the hotel, an increase in revenue and efficiency in the Revenue Management strategy.

Impact on the relationship with the guest

With a continuous flow of information across the whole property, in several information systems, it allows a much more personalized service to the guest, since there is a greater degree of collection of data about this in a precise and systematic way.

Advantages for the guest with more integration systems:

-More customization of service
-Decrease of the propensity for error of reservations and service
-More security
-Improvement
-Warranty of the best price for the same service
-Improvement of experience

By simplifying the administrative process, it allows us to pay more attention to the guest and to make a greater service customization. This can mean an after departure email thanking for have chosen us, a personalized message or a reminder with a suggestion of an additional service.

This allows a higher guest satisfaction by raising reputation ratings. Only this detail, by itself, exerts a positive pressure on prices.

Final considerations

With better integrations, the hotel has direct and indirect gains in operational efficiency. Employees, who are one of the hotel's most expensive resources, have more time to perform tasks that add value to the project.

With a quality database, which is a difficulty in the hotel industry, we managed to generate a revenue increase of about 45%.

Employee participation is essential, we need extra care when filling in guest data. Without the correct insertion of the guest's basic information, it is very difficult to personalize his stay, this is a great competitive advantage in the differentiation battle between accommodation properties. The integration of information systems ensures that all information is entered correctly and properly classified from the beginning of the reservation process, enhancing the revenue increase. In this way, we highlight its real importance, however, it should be remembered that the data only becomes useful when it is used to create a higher revenue. This means that we must extend it to all sectors.

Contact us

We could approach the traditional job description of Rev Man or Revenue Manager. However, with this article we want to give a clearer idea of ​​what is the day-to-day life of this professional and all his team. Its most strategic role within the organization is structuring. This is a recent job in the Portuguese reality, which a few years ago did not have such important label for business units viability and growth.

The Revenue Manager job description may vary from propriety to propriety, depending on its structure and goals or propriety type. Usually these are multipurpose professionals and the area where they operate requires knowledge that goes far beyond traditional hotel management.

They are true "Wizards", since for outsiders, the magic happens based on innumerable factors that these professionals master. For others it is almost the fruit of occult and magic potions based on statistical calculation.

This is responsible for the preparation, implementation of the strategy and procedures for revenue creation in the hotel, using various practices and growth techniques. Identifies opportunities based on a constant market study, with all its elements (competitors, customers, etc.). It is responsible for optimizing the distribution and sale of the hotel, analyzing production per channel with intrinsic knowledge of the costs involved. It is the expert that through analysis of historical data and comparison with forecast, creates the best strategy for getting the best price, at the best time, to the right customer, the best possible offer for a future date.

In a revenue management team, in more complex structures, we can observe several functions organized according to the level of experience of their performers. Below we can see several designations, being the entry position in the company as "Yield Analyst" and the position that requires more experience as "Corporate Director of Revenue Management". All the tasks of the revenue management department are performed by these professionals and all are fundamental, and these are divided by the different functions according to their degree of responsibility or technical knowledge.

Key roles in Revenue Management departments:

• Yield Analyst
• Junior Revenue Manager
• Market Revenue Manager
• Cluster Revenue Manager
• Senior Area Revenue Manager
• Director of Revenue Management
• Corporate Director of Revenue Management

This position is so crucial, that it is increasingly common to see these professionals sitting at the table in board meetings, reporting directly to it and directing other departmental teams such as Marketing, Sales, commercial or operational teams. This is simple to understand , any decision of a Revenue Manager or his team directly affects the revenue generated by the hotel. The hotel positioning must be in line with the revenue strategy. It is intended, therefore, that in addition to an excellent revenue manager, this manager is also a human asset manager, in order to build a team, with a single direction oriented towards the same common objective. In this last point, the reality is quite different and we are still far from the practices already adopted in other international markets.

However, it is desirable for Board members and the CEOs to place the RM team in an autonomous position so that it can create the needed synergies to influence all other departments and their revenue optimization habits.

But the market data show that this is the trend and these departments are increasingly gaining notoriety and relevance.

Integration of the RM department into the organizational structure:

There is a HSMAI study that showed that in most of the hotels surveyed, 36% of these Revenue Managers reported to the General Manager, 23% to another departmental director (DOSM or Rooms Division Director), 16% to the Board Vice President, 16% to the RM Regional Director and 9% to the CEO. What we can observe is that in more mature companies these professionals are more autonomous reporting directly to the General Manager or directly to the Board. There is a consensus in the industry that these professionals should be as autonomous as possible, so we understand that this department, in the limit, should be at the level of the propriety main departments, reporting directly to the general management or Board, working in tune directly with the finance department (CFO), Marketing and Sales (DOSM). Otherwise, these departments should level up above all others and report directly to the Board or General Management of the propriety.

The 10 pillars of the revenue optimization process:

Its main functions go from developing strategies for optimizing revenues for the hotel or other accommodation units, based on the main 10 pillars of revenue creation.

These 10 pillars are as diverse as:

1. Diagnosis
2. Demand Stimulation
3. Demand Forecasting
4. Short-term operational management (overbookings, no-shows and cancellations)
5. Sales price management (pricing and segmentation)
6. Displacement analysis (groups)
7. Inventory Management
8. Distribution (channel management and distribution costs)
9. Reputation management (online and offline guest feedback)
10. Evaluation (efforts of revenue management actions)

These professionals work closely with the marketing, sales, commercial, reservations, or front-office teams, reporting directly to the board or chief executive officer. They are highly specialized, constantly attentive to market changes and multiple actions by their competitor group, adjusting the offer based on these external data and the company's internal response capability with the available resources for a given moment.

General Duties and Responsibilities:

In order to achieve the desired revenue optimization for the hotel or other accommodation propriety within the hotel and tourism industry, this professional should perform the following tasks:

1. Monitor all hotel revenue
The hotel structure should be properly organized, with accounts assigned to the various revenue generating centres. It is essential to have budgeting per department, as well as allocation of the corresponding cost centres. The entire computer system and its tools should be parameterized for a sustained analysis of correct data. In this way, the RM will be able to calculate the revenue generated by nature/outlet . With the information generated, he should suggest corrections and optimize revenue in line with the existing accounting system.

2. Create Pricing strategies and make price management
This is undoubtedly the main challenge of the Revenue Manager, this task is nothing more than determining and establishing the rates to practice in order to make the hotel competitive and create revenue. Sales price management and segmentation are preponderant factors in the revenue optimization dynamics, thus deep customer knowledge becomes fundamental.

3. Constant competition and demand analysis
The environment where the hotel is located and its competitive group is a factor that influences the definition of competitive prices and the hotel performance. This professional will have to identify demand and sector trends, defining the market segments to bet on, which future events and changes in the economic scenario can positively or negatively affect the propriety.

4. Preparation, production, monitoring of performance reports and forecast production
As this professional works directly with the top management, it is up to him to prepare all the intelligible information on the propriety performance. These reports will highlight the difficulties for future dates (forecasts) as well as solutions for minimizing the impact and maximizing revenue (for example, marketing campaigns or preparation of charm offensives carried out by commercial departments, etc.).

Core skills of a Revenue Manager:

Such a multidisciplinary position obliges a professional with varied characteristics within the organizational sphere.

We emphasize the following:

• Creative Thinking
• Excellent analytical and mathematical ability to deconstruct data quickly
• Master communication skills, whether customer service, meetings or reporting.
• Strong relational skills
• Born sellers
• Strong ability in team management
• Attention to detail as well as ability to prioritize revenue generation over time-consuming and non-productive tasks.
• Ability to deal with stressful situations
• High level of motivation, determination and commitment
• Result-oriented
• Operational experience (hotel)
• Strong skills for team building
• Advanced user of computer systems
• Database and Excel knowledge
• Expert in digital marketing
• Knowledge, interpretation of financial statements and P&L
• Management background
• Focused on goals
• High confidence and technical skills in Revenue Management

How are divided the functions of a Revenue Management team?

The permanent monitoring of external and internal data to carry out the adopted strategy leads to the organization of the functions at 5 frequency levels (daily, weekly, monthly, quarterly and annual), which can be adjusted according to the Revenue Management team as well as the company where it is inserted and its structure dimension (being more or less complex). However, this systematized frequency is a critical success factor when implementing an efficient strategic optimization of total revenue (THRMO) system. Only in this way can Revenue department teams clearly identify who, what, when and how revenue management tasks need to be executed quickly.

We suggest a distribution of tasks as follows:

• Daily

1. It is recommended, at the beginning of the day, to analyze the pick-up of hotel reservations. This pick-up report will indicate the reservations fluctuations made from the previous day to the present, for the next 14 days.
2. Analyze the prices of our competitors for the next 14 days through tools like Rate Shoppers, as well as dates on which they have no availability.
3. Review hotel rates based on the above collected information. Adjust rates and discounts if needed (Early Bookings % discount).
4. Review the "House Status", overbookings for the next 14 days (increase or decrease rates according to established)
5. Review rates restrictions for the next 3 months (LOS, CTA, etc.), when applied.
6. Based on the PMS reports, we should analyze the performance of the last night based on the indicators (OCC, ADR, RevPAR , etc.), compared to the budgeted.
7. Analysis of the groups pick-up and MICE segment in the last 24 hours for the next 14 days. Act in accordance with the previously analysed.
8. Reputation Management of social networks, using specific platforms for this purpose (online and feedback forms available to guests).

• Weekly

1. Review pick-up from the last 24 hours for the next 3 months.
2. Analysis of Competitive Set prices for the same period (3 months), as well as dates with lack of availability.
3. Based on the above mentioned reports, adjust rates, promotions and restrictions for the same period (Early Bookings % discount).
4. Review the "House Status", overbookings for the next 90 days (increase or decrease rates according to established)
5. Check overbooking situations for the next 3 months according to unit strategy. Adjust if necessary.
6. Review all content of the hotel on the website (CMS) and OTA's, making sure that it is updated accordingly.
7. Manage channels according to its production, availability and associated distribution costs (OTA's and Soft Brands). Confirm your most popular dates and close the rates for Early Bookings, discounted rates or Opaque when justified.

• Monthly

1. Review pick-up from the last 24 hours to the end of the inventory.
2. Manage inventory for the end of inventory period.
3. Compare "Comp Set" rates to the end of inventory as well as dates with no availability (Rate Shopper).
4. Review and adjust, if necessary, all rates, restrictions and discounts (BAR and EB % discount).
5. Review Overbooking levels for the end of inventory.
6. Review RM reports, based on history, analyzing trends, to confirm that all actions are as planned, adjust if necessary. Analyze for the next 12 months, which are the most searched dates in order to adjust inventory, rates and/or restrictions (LOS and CTA).
7. Analyze revenue by distribution channel, comparing the associated costs (net revenue per distribution channel).
8. Meet with the general management and departmental managers to discuss the sales strategy, forecasting, demand, OTB business, overbooking, sales mix, STR results, up-selling and cross-selling strategy, etc... in order to engage in the strategy, the GM, DOSM, FBM, Reservations Manager and Rooms Division Manager must be present to direct them towards the same objective.

• Quarterly

1. Full analysis of content in all locations (OTAs, TA, Web, TO, etc.), update information and photos.
2. Review sales strategy through product configuration checks and mappings.
3. Complete audit of OTAs, comparison of net production with global revenue and content update.

• Yearly

1. Renegotiate contracts with operators, companies, OTAs , etc., based on production, weight on hotel revenue and respective distribution costs.
2. Budget definition and revenue strategy based on historical data and future trends (choose the most appropriate method).
3. Meet with reservations department staff, analyze their production and bet on a visit to familiarize themselves with the propriety.
4. Redefining the Comp Set (parameters and new competitors)
5. Preparation of annual forecasts

Final considerations

The professionals of RM, are professionals with a high degree of attention to detail, capacity of analysis and the deconstruction of data is fundamental to the position of Revenue Manager. A large roll of skills is expected from this set of professionals, these bear the responsibility of each action for the production of additional revenue. It is desirable that these professionals be increasingly independent of other departments, reporting directly to general management or the Board. The growth and viability of the company as well as other jobs depend on these professionals. It is easy to conclude that, in the near future, these professionals will be more autonomous, with a strong emphasis on the organizational structure, having a transversal influence throughout the organizational structure related to the production and optimization of revenues. In order to carry out all this management these professionals use a set of tools, which will be addressed in a next article.

Contact us

In the constant hotel struggle to lower booking distribution costs charged by OTAs, we find a small light at the end of the tunnel that leads us to believe that the future brings an alternative. This light comes with a name - Blockchain. With the next few lines we hope to elucidate a little on this topic and how this new type of distribution can put the hotel on sale without being charged a commission by a third party.

Needless to say how much we are pushed on a daily basis to higher and higher commissions, since much of our production comes via OTAs, and as all of them tend to pull in the same direction, we hoteliers, are forced to accept those conditions, in order to not compromise the hotel's revenue. If we are an independent hotel, little or none will be our ability to negotiate with these giants, so it is assumed that these same hotels will be the pioneers to sell within the blockchain system. So, what is the blockchain? Let's dismantle the topic and see how this can be the solution to the end of the intermediation and its huge costs, supported by customers and suppliers.

It is not just about understanding and installing. This new system requires investment in technology and know-how to completely replace the current distribution scene, and this is where many will be left behind. Without the right tools and the right human resources to match the new challenge, exchange is not possible.

Blockchain, a chain of blocks

Nothing more than a chain of blocks, linked all together. Everything is based on a network, like a web, that joins several blocks. Blocks with information - records, constantly updated and capable of being copied and keeping these same updates, with the added value that cannot be erased or altered. These records maintain the confidentiality of those who register, and any element of the blockchain has access to it and its veracity and security is unquestionable since they are encrypted. There is at no time, a central or intermediate element, allowing transactions from A to B without any third party regulating or requiring commission. This is the base system of virtual currencies, without banks that centralize, intervene and charge for their presence.

For this to be possible, all the blockchain technology is decentralized, all the information is not stored in one place. In this way, it is possible to prevent the manipulation and makes all the information transparent to all the actors of the network. Any new information added, is accompanied with a time stamp and this allows any information to be tracked, promoting the database transparency.

Where to apply Blockchain in hotel and tourism industry?

The advantages are undeniable. Without third parties, distribution costs are drastically reduced. Transactions are secure and carried out to the second, and as there is no third parties, there are no bank fees. For this practiced, proprieties will have to accept virtual currencies as a means of payment. This database never goes offline and is immune to any computer attack. This stability brings security to all financial transactions.
This methodology can allow efficiency throughout the travel process, not only in the hotel purchase, but also in expediting identification while travelling, baggage tracking, access to loyalty programs, etc. It is a whole new logic based on a network with inviolable data, encrypted, with total security and confidentiality of who enters the data.

The following video demonstrates all this dynamics in a very practical way:

Everything seems impossible until it is done. [^1]

Final considerations

Everything is new and what is new frightens in the beginning. Internet was like this in the last decade of the last century, although this seems like it was a long time ago, it was just over 20 years ago, and today, there is nothing and nobody who lives and grows offline. Based on this evidence, we want to lift the veil and bring the opportunity that comes to our attention. At first it seems complicated. Accessible only to IT crowd and away from the hotel reality. It is a new scenario, completely disruptive of the current one. But the advantages are so many and so great that it cannot be ignored. It is important to know how it works, how it is established in the economic environment and mainly how it behaves. But as with any strategic step, we will have to know where we are and know well where we want to go and how. It is in this "how" that we put emphasis and add the "if". If this is really a way to go, for our company, our business.

With this article we want to present a system that in all its theory is genius. We must separate it from the case of Bitcoin and its bubble effect. We also do not want to pass on the idea that everything that is new and technological is the way to go. We suggest information, analysis and above all, a strategic thinking. In the future we will deepen the subject and clarify questions that you may arise.

There are already several companies in the industry that are already in this adventure, from airlines to operators. Explore the topic, see what is written, become familiar with it. Very soon the time will come for the first step.

Contact us

[^ 1]: Nelson Mandela

Reward those who return and trust our product is crucial to the health of your hotel, however the size and format it adopts. Gone are the days when access to loyalty programs was something selective, creating idea of ​​exclusivity and only practiced by major brands.

The goal is simple: Capture, retain and make this guest a business promotion partner. “Word of mouth” is the most honest and fair way to recognize the value of what we do and the most inexpensive way to acquire new guests. In terms of costs, it is much more efficient to retain satisfied guests than to invest to capture new ones.
Nowadays, we even find this system reversed. Some people sell loyalty programs even before the person becomes a guest or a customer.

How can we recognize and reward those who trust and return to us?

The entire team must be involved in the process, as several points of contact with the guest are required. We will have to establish distinguishes them from others guests, create and implement systems and procedures. Not only is it a way of thanking the trust, but also encouraging this relationship to continue in the next visits.

Examples of rewards:

• Points that can be exchanged for discounts on rates, for free nights or even services
• Access to exclusive or limited services such as priority check-in or late check-out
• Free room upgrade
• Partnerships with external entities at special prices
  As far as rewards are concerned we must be creative, but do not be limited to it but also the way we identify the guests. You can and should establish a grid of levels with different rewards, in order to maintain the idea of exclusivity and add value

Promote the loyalty program

Broadly promote the advantages associated with who visits us again as well as the loyalty program. You can even take the chance to ask a simple question at check-in. Ask if you can associate his visit to the loyalty program. Then, if the guest has not signed up yet, he will know then the associated advantages if he returns on his next visit to the city. Check if there is in-room information about the program and make sure this information is visible offline and online. Involve the team to make known the program and its advantages.

Even if the guest identifies himself with the hotel, in terms of brand, location, amenities, design, is its human factor that touches him deeply, in all interactions during his stay. It is the staff that conquers and promotes the guest's return. It's the team that makes him feel at home. Ensure that the whole team, one by one, regardless of their department and function, understands the advantages of customer loyalty and its program. Train the team for guest recognition, in order to thank him for the visit and customize service with his preferences.

Take advantage of technology

Use marketing tools, create different communications with guests after their departure. As an example, for the first timers, you can send an email to thank the visit and make known the advantages of the loyalty program. For frequent guests who have not yet sign up the loyalty program, you can always reiterate its benefits and advantages.
Optimize tools to handle all relevant guest information. Use PMS and CRM or loyalty program software. There are several solutions on the market. Keep a careful management of all pertinent information, such as room-nights, number of bookings, revenue generated, segments, etc. Identify your best guests and tag them for special treatment.
Show all advantages and create an atmosphere of enthusiasm and esteem with guests through the multiple channels. Make them feel involved and identified. The probability of return increases substantially.

Which are the steps to build a loyalty program?

1. Choose a unique and appealing name for the program - The program will have to arouse curiosity and encourage guests to subscribe. You will have to pass on the idea of the many advantages that it offers and be enthusiastic for those who participate in it.
2. Make the program more than a balance of points - In addition to the general advantages of any loyalty program, offer through it, added information a create value. Take advantage of this new channel of contact with your preferred guest.
3. Reward the various forms of guest interaction – Guests who engage with our social networks, who share content and actively promote our hotel, should also be rewarded through the loyalty program.
4. Create Reward Levels - Make a flexible program, give it depth. Different offers for different frequent guests. Possibility of using points or credits in several ways. Your client will privilege this flexibility.
5. Explore multiple partnerships - Extend the program outside the hotel through partnerships with other products of interest to the traveller.
6. Use metrics to analyze production per guest - There are many indicators that help decision making in a company. There are also indicators to measure loyalty. We show here two examples, percentage of repeat guests, and revenue generated by them over total revenue:

$$\text{% Repeat Guests} = \frac{\text{Number of repetitions}}{\text{Number of occupied rooms}}\text x 100$$
$$\text{% Revenue Repeat Guests} = \frac{\text{Revenue generated by the repetitions}}{\text{Total Revenue}}\text x 100$$

7. Make the loyalty program a game - Encourage the participant with a fun program, in a game full of levels that translate into points through an embedded applications in it.

If you are looking for a more complete loyalty program for your business and you are unable to implement one, you can always use multiple solutions in the market for loyalty networks, or you can also affiliate a soft brand ^[1].

Final considerations

If the guest enjoys the benefits of our program, he will recommend the same to his friends and family. As mentioned above, this is the most honest and trustworthy way of recommendation. These kind of recommendations will generate content for reviews websites like Tripadvisor, directly affecting our online reputation. Loyalty programs that encourage evaluation on these platforms and on social networks will result in user-generated, reliable, and authentic content.
Take advantage of these guests who have deep knowledge of your property and ask them for feedback on new services, amenities or policies. Nothing like the customer and his point of view to help in a constant development and perfection of our business.
The advantages are countless and go beyond revenue collection. It does not end in the guest, as it expands to its network of contacts and makes him a valuable partner.
In a future article, we promise to go deeper into the ratios that can be taken into account in your loyalty program.

Contact us

For a perfect conception of the Revenue Management strategy we count with several data. These indicators serve as a basis and support the entire Revenue strategy, driving the hotel towards a more sustained and prosperous future. It is notorious that the choices of these indicators can vary from hotel to hotel or type of business. For one hotel, one indicator may be more important than another.

"If you cannot measure it, you cannot improve it" ^[1]

Starting from historical data, turning them to performance values, we began an evaluation and analysis process. Naturally, everything that can be measured intuitively leads to a more conscious, efficient and effective performance. In the following suggestion only internal performance indicators (which we can control) are considered, leaving out the benchmarking indicators and our expectations (forecast KPIs ^[2]).

KPIs are nothing more than performance metrics for a hotel. From the most generic to the most specific, there is no shortage of indicators for analysis. In the hotel industry, KPIs should allow rapid analysis for clear and well defined objectives. Sharing this information to the employees will promote mission, vision and values, this way, they will end up embodying the strategy as well as enhancing its efficiency and effectiveness.

Which are these performance indicators?

Already well known to all hoteliers, we have the Occupancy Rate (OCC), the average daily rate (ADR) and the average revenue per available room (RevPAR). Individually, it reveal little information, and have great limitations when it comes to creating revenue. We must take into account the depth of each indicator, know its substance, the nature of the data we work with.

Understanding the hotel's results, based on historical data with the same metrics, crossing, identifying behaviors or trends is essential to correct and point paths. Preparing the whole strategy for revenue optimization, boosting the growth of a company, is not something that is immediate and takes its time to execute. The entire course must be carefully evaluated and conditions must be met so that at least the indicators presented are properly calculated, leading to a greater consistency and sustainability of the business in the medium and long term.

The old ones, but no less important (OCC, ADR and RevPAR)

These have become the industry benchmarks due to their ease of calculation and high comparability between hotels, however they have high limitations, not translating the property whole reality.

OCC: Occupancy Rate - sets the occupancy of a certain number of available rooms over a period of time as a percentage. It is calculated by dividing the number of occupied rooms by the number of available rooms.

$$OCC = \frac{\text{Number of occupied rooms}}{\text{Number of available rooms}}$$

ADR: Average daily rate - is the average rate practiced per sold room in a given period. It is obtained by dividing the revenue generated in the period by the number of rooms sold. It is imperative that we work on NET rates in order to find the correct average.

$$ADR = \frac{\text{Revenue generated}}{\text{Number of rooms sold}}$$

RevPAR: Revenue per available room - is based on the revenue generated by the rooms sold, based on the number of available rooms for sale. It can be calculated by dividing the revenue generated by rooms over the available rooms for sale, or multiplying the daily average rate (ADR) by the occupancy rate (OCC).
This KPI is very used when we want to realize our performance, however this is limiting when we want to evaluate the overall performance of the hotel, because it does not take into account other hotel outlets (F&B, SPA, etc...).

$$RevPAR = \frac{\text{ADR}}{\text{Number of available rooms}}$$

or
$$RevPAR = {\text{ADR X OCC}}$$

Filling in some gaps in traditional performance indicators:

TRevPOR: Total revenue per occupied room - this indicator is similar to the well known RevPAR, however, it takes into account the total revenue generated; (restaurants, spa, bars, fitness centers, golf, casino, meetings, etc.) based on rooms that were effectively occupied.

$$TRevPOR = \frac{\text{Rooms revenue + other outlets revenue}}{\text{Number of occupied rooms}}$$

CPOR: Cost per occupied room - This indicator helps to calculate the average cost per occupied room. In this way we can determine if the operation costs per room are reasonable, as it is an important data in the pricing strategy. This indicator is calculated by the quotient of the total cost of the rooms department divided by the number of rooms sold.

$$CPOR = \frac{\text{Total Cost of Rooms Department}}{\text{Number of occupied rooms}}$$

TrevPAR: Total revenue per available room - More comprehensively to all hotel revenue sources, this indicator agglomerates all revenue (F&B, leisure, rooms, shops, etc.) in addition to rooms and it is divided by the available rooms. This indicator immediately tells you which areas of revenue need adjustment in order to optimize total revenue.

$$TrevPAR = \frac{\text{Hotel's total revenue}}{\text{Number of available rooms}}$$

NRevPar: Net Revenue per Available Room - Much like RevPar, this metric takes into account the revenue free of distribution costs from the sale of the rooms. Therefore, to the Rooms Revenue, the commissions and other distribution costs are deducted. This amount is then divided by the total number of available rooms. This indicator is therefore more realistic than RevPar, as it demonstrates more clearly the increase of effectiveness of sales.

$$NRevPar = \frac{\text{Net Revenue}}{\text{Number of available rooms}}$$

This indicator can and should also be calculated by distribution channel, as we often have different ways of calculating commissions, seriously distorting many of our conclusions. In this way we can make a direct comparison between channels and allocate accommodation accordingly, increasing the probability of revenue.

Focus on the Guest as a proactive element generating future revenue

TrevPEC: Total revenue per customer - Total revenue divided by the number of guests at the hotel, this is a more complete indicator, which is highly relevant when calculated by market segments, where you can see trends of segments that spend more when compared to others.

$$TrevPEC = \frac{\text{Total Revenue}}{\text{Number of guests}}$$

CSAT ^[3] e NPS ^[4]: CSAT consists on guest satisfaction over the generality of the provided services, is usually achieved by the hotel through satisfaction surveys with evaluations of 1 to 5 or other scales such as stars or satisfaction states (faces), this evaluation is done only with internal hotel resources.

$$CSAT = \frac{\text{Number of evaluations between 4 / 5}}{\text{Number of answered surveys}}$$

$$NPS = \frac{\text{% Promoter guests}}{\text{% Defamatory guests}}$$

NPS (methodology created by Fred Reichheld) ^[5] differs from the CSAT, as this last can evaluate a diversity of points of our service. In NPS evaluation only a question is made to the guest: "Rate the probability of recommending our hotel in a scale from 1 to 10". Guests will be classified with the following scale that will be used in the calculation of the indicator:

• Defamatory Guests: Ratings between 1 and 6
• Neutral Guests: Ratings between 7 and 8
• Promoter Guests: Ratings between 9 and 10

It is with these data that we can obtain the map to a continuous improvement of the hotel, focus on the guest and resulting in the increase of future results.

Online reviews: It is generally known that we are interested in as many reviews as possible and the higher the number of reviews, the greater the credibility of its average. However, these can vary from platform to platform depending on other factors. There are platforms in the market that create a general classification based on an algorithm, however, if the hotel does not have one of these platforms can be guided by the official classification of each platform individually whether this is an OTA or Metasearch.

When does our evaluation starts getting interesting?

EBITDA ^[6]: This calculation gives us information on how much profit the unit is generating, based on its operating activity, not taking into account the financial and tax impact. We can realize whether the company is profitable and efficient without the burden of contaminating any valuation. If EBITDA is negative, it means that the operation is not profitable, however, it does not mean that it has losses, as it may have gains resulting, for example, from return on investments. We can use this indicator if we want to buy companies in different tax areas, in countries with different tax regimes, since the indicator is not affected by this data and provides a clean way to compare data.

GOPPAR: Gross operating profit per available room - This indicator divides the obtained operating profit by the available rooms. This is one of the most effective methods of measuring the performance of the hotel, as it gives a greater understanding of the hotel, demonstrating the value of the property as a whole. It is understood as the KPI of excellence.

$$GOPPAR = \frac{\text{Obtained operating profit}}{\text{Number of available rooms}}$$

RGI (the only benchmarking indicator): Revenue Generation Index or RevPAR Index - Calculation used to determine if a property is achieving a fair market share, versus a competing property. Much more important than the simple value of RevPAR and its growth, this index takes into account the competitive environment, giving us more concrete information of our market share. It is determined using our RevPAR over our competing property RevPAR.

$$RGI = \frac{\text{Our RevPAR}}{\text{Competing property RevPAR}}$$

Final considerations

It is easy to see that each indicator has its relevance to Revenue Manager, but we highlight that for a thorough and detailed analysis of the property's performance, whether it be a hotel, local accommodation, restaurant, travel agency, etc., these indicators should take into account the context in which they are inserted, and in parallel with other indicators. They are valuable Revenue tools to analyze historical data, measure the present and align strategies for the future. In case you cannot calculate for some reason, something is wrong in your operating structure, advising you to correct it as quickly as possible. This is only a guide of the essential indicators for a correct management in order to create, manage and improve the total revenue generated. It can always be complemented by other indicators through its BSC ^[7] (which will be discussed in a future article).

Contact us

From a strategic point of view, hotels can apply different pricing strategies for the purpose of creating value. In the following table we can find a brief summary of the various strategies for creating value according to the chosen option. This strategic choice depends on some factors, such as the type of accommodation we have, type of property, offered services, business goals, competitors and other factors discussed below.

What is pricing?

It is the practice or set of practices adopted by a company in a more or less procedural way with the purpose of defining its selling price. It usually depends on multiple factors and goals of the company. There are different pricing methods and strategies that take into account several factors^[1], such as:

-Ease of calculation
-Estimation and evaluation of costs
-Market competitive analysis

These are the most used factors to choose a method of calculation, however with the development of new revenue management tools (RMS) it is possible to be more dynamically adaptable to the market and with a greater degree of customization to the client and his needs in a much more effective way. The approach to the calculation methods will be made in a next opportunity. In this article the focus will be to know the different pricing strategies and factors to be taken into account for an effective revenue creation strategy.

1. The implementation of an effective pricing strategy

In general, we can say that for the development of a good pricing strategy, the hotel has to carry out a multidisciplinary analysis, appealing to all the departments of the organization. In this way, six organizational skills are identified that are essential for establishing a highly effective and successful pricing strategy.

Essential Skills:

1. Price execution (policies and procedures)
2. Pricing strategy
3. Advanced analysis and pricing
4. Organizational and management alignment
5. Technology and data management
6. Taxes and regulatory efficiency

In these specific points all the properties must carry out a benchmarking exercise with the best competitors of the industry for their type of business, this practice has the main goal of identifying in which pillars we can have room to improve and where we should focus our attention as a priority. These are the generic pillars, however there are factors such as, category, quality / value, image, product life cycle stage, additional services, competition, sales volume, demand, elasticity of the demand, affiliation in a chain, distribution power, marketing strategy, organizational structure, taxes policy and costs, which will decisively influence our pricing strategy.

2. General pricing strategies

Prices (value) based on demand:
This is perhaps one of the most commonly used models today. The hotel establishes high prices for those who have a larger budget, there being a low price elasticity, but producing a great value perception. This model is consistent with THRM^[2] goals of revenue maximization, but it may cause some dissatisfaction with who pays for the higher fares.

Price based on cost
The price of services at the hotel is established based on the associated costs, the fixed and variable costs are calculated and the price is established by a predefined margin or objective of the result. It is easy to apply however, it does not take into consideration the fundamentals of THRM, such as variation of demand, occupancy or revenue already performed.

Targeted price for market penetration
A low price is established with the main objective of attracting and stimulating demand, this is widely used when there is a new property opening or it wants to expand its market (increase market share or capture a specific segment of customers).

Price skimming
It is characterized as being almost the opposite of the previous strategy of market penetration. High prices are set to meet the high demand, for example for a new service or product (it is intended to reach an interested segment with high associated value).

Price set in packages (Bundle or Packaging)
The hotel proposes to sell two or more services together in a package, with a single price for example, spa with accommodation, accommodation with meals and spa, etc. The goal is to stimulate the sale of other hotel services, reaching superior revenue. The total price of the package must be less than the purchase of the services carried out separately.

Optimum product price
A base price is included only for accommodation or bed and breakfast (the lowest). All other services are paid for and sold separately. It is a more comprehensive pricing strategy with base values and higher options if the guest desires so.

Psychological price
The price is established considering the psychological influence of numbers. For example, there are numbers which are psychologically associated with promotions for example, numbers ending in 9 or 99. While others have exactly the opposite effect and communicate value, for example, 0 or 100. It is proven that there is an effect associated with some numbers which may favor the booking and revenue (Collins & Parsa, 2006).

Promotional price
Hotels opt for a generalized temporary price cuts, to increase their competitiveness and attract more bookings in that period. This reduction is temporary, with a predetermined period of time.

Captive product pricing
Applied when the consumption of two or more products, are dependent on each other and linked. For example, consumables and printers, companies put one product cheaper at the expense of the other. In the hotel proprieties we can lower the accommodation to the detriment of the purchase of complementary products such as golf, spa, restaurant, etc.

3. 3D model pricing strategies

Based on all pricing strategies, hotels must make a correct planning to figure out which ones to use and what they are going to give away for the best results. As previously noted, the goal is to optimize revenue, so consistency is a key factor in a strategy. Probably throughout the year hotels will be able to use at different times, different strategies combined with each other, that will reinforce their identity and achieve company goals.
 

In addition to the traditional pricing strategies, we can also find a price strategy model called the 3D pricing model. This is more complex (Ivanov, 2014)^[3], as it takes into account three major dimensions: strategic length, strategic width and strategic depth. These three dimensions will help properties in the process of defining and characterizing their pricing strategy, taking into account their main objectives.
The length of the strategy will correspond to the seasonality presented by the rates. Through the representation by seasons, the more seasons the property uses the longer will be its strategy from the conceptual point of view. This practice is more associated to leisure markets, with large tourist flows, located in regions of high seasonal fluctuations. Properties located in these destinations use multiple periods in which they establish differentiated rates, the highest in periods of high demand and lower rates in low season. On the other hand, hotels with higher levels of service and higher classifications are more associated with a lower number of seasons with lower rate variations (Espinete t al., 2012).
The width of the strategy corresponds to the different practiced prices, depending on the different booking conditions, for example, with free cancellation, non-refundable, early bookings or length of stay.
The depth corresponds to the rate levels used for the commercialization of accommodation services, according to their distribution channel. The hotels establish different rates for different distribution channels, according to their designation, direct sales, GDS, OTA's, Operators, travel agents, websites of group purchases, etc.

4. Main pricing tools in Revenue Management

Price is one of the strongest tools with regard to the positioning of our hotel in the market, through this are created expectations for future guests about the service provided and their expected quality. From a strategic point of view we cannot use contradictory tools or that go against the pre-established pricing strategy, otherwise we will destroy the hotel's image or value. In these revenue management tools we find those that specifically concern price, non-price related tools and mixed tools (we will list the first and third only).

Tools specifically related to price:

• Price discrimination (tariff barriers)
• Dynamic prices implementation
• Best price guarantee
• How the price is presented to the customer
• Price parity

Mixed tools:

• Correct management of distribution channels
• Optimum allocation of the rate per room and its rate structure

For example, we should not use abusively aggressive discounts when we are based on a value and high prices strategy or on skimming strategy.

Final considerations:

It is important to keep in mind that whatever our pricing policy is and the strategy adopted, it must be consensual throughout the organization and made in a procedural way. The whole strategy must be aligned and one of the key factors for its success is the consistency of the tools used, with the strategic aspect, the booking conditions and sales policies. In this way we will have a winning pricing model that we will use for the elaboration of a correct rate structure (to be addressed in a next article).

Contact us