Conferences and Events: The New Frontier of Revenue Management?
By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | August 28, 2011
With conferences and event revenues accounting for a significant portion of a hotel's financial performance, an increasing number of hotel groups are starting to focus on these activities to support their facility's bottom lines. However, with the rise in prominence of conferences and events, there are a number of key issues that savvy revenue managers should consider to ensure that they are optimizing their conference and event spaces.
Given the maturity of room management within the revenue management sector, hotels are increasingly looking towards conferences and events as the next source of business growth. This is due to the significant contribution that conferences and events can make to the total revenues of a typical hotel – anywhere between 15 to 50 per cent and more of overall revenue in many cases. In a Cornell Hotel School survey on the Future of Revenue Management conducted with 500 revenue management professionals in 2010, a hotel's function space also rated as the most likely area that future revenue management practices will be applied to.
Conferences and events have been underestimated in the past by hoteliers due to a lack of in-depth understanding and appreciation of the positive benefits that these activities can bring. Additionally, the overlapping nature of the revenue streams across catering, function spaces and sleeping rooms add complexity to the overall business opportunity identification, which has slowed innovation in the areas of conference and events. In reality, an opportunity in one revenue stream can hardly be separable from the other. Rather than approaching conferences and events from business viewpoint, it may actually be more appropriate to approach it from the consumer's point of view. In this case, it is serving the needs of "groups" of people that have varying areas of needs in catering, function space and sleeping rooms.
Most experienced RM practitioners will understand that for any optimal Revenue Management process to work, the hotel must be able to effectively manage consumer demand through a thorough understanding and analysis of market segmentation, accurate demand forecasting and application of various levers for each of its products to be able to pick the optimal customer at the optimal price for the optimal time and the optimal product. The concept is the same whether revenue management is applied in rooms or function spaces.
While the process of managing each area within the conference and events cycle forms the basis of any sophisticated revenue management approach, the best results will only be achieved through optimal combination of the right processes, technology and people.
One of the primary issues needing to be addressed by any hotelier looking to enhance their returns from conferences and events focuses on developing the right forecasting methodology to predict demand for function space. This can be done via utilizing forecasting which is based on scientifically-driven calculations rather than based on experience or gut-feel. The forecasting should be performed with sufficient amount of granularity such as by segment or event type, day of week or time of day. Forecasting also needs to consider data points that provide overall picture of demand sources.