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Neil L. Salerno, CHME, CHA

Hotel Revenue Management

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Featured Article

"What the Heck is Hotel Revenue Management, Anyway?"


Revenue Grabbing Tips for Independent Hotels;

Start Thinking Like the Chains

By: Neil Salerno  

In many Florida coastal cities, and cities across the country, smaller independent hotels struggle with the daily task of selling rooms along-side franchised brands. 

Most Independent hotels have to contend with relative obscurity in the marketplace, limited marketing funds, and sometimes a need to rely on overflow from their larger franchised neighbors. But, what happens when there is no overflow? 

Consolidated marketing and the synergy of chain branding threaten the future existence of many independent hotels, but now there are some solutions on the horizon. 

Thanks to the Internet and other forms of electronic sales tools, independent hotels have their best shot at playing on a more level playing field, but they may need to borrow some techniques from the playbook of the chains. 

Reservations Contribution

Reservations contribution has been the bastion of hotel franchises for many years. Central reservations offices, participation in the Global Distribution System, instant electronic access to rates and inventory, and brand advertising are formidable franchise assets. The promise of 25%, 30%, 35%, or more in reservations contribution to total sales is the strongest reason to buy a franchise. 

The sheer nature of the Internet and the popularity of online third party aggregators are changing the playing field itself. Itís now possible for Independent hotels to get 30% or more reservations contribution directly from the Internet; without a franchise. The fact that most franchise fees are upwards of 5% or 6% of total room sales, while Internet sales costs are so low, is causing some consternation among many franchisees. 

The franchisesí self-imposed war against third-party aggregators was caused, at least in part, by their fear that the success of third party bookers could threaten their reservations base and their very way of life by also eroding brand loyalty. In part, their fears are warranted. Third-party suppliers are developing their own brand loyalty. Independent hotels can play the third-party game.

The proliferation of specialized brand types, created by the franchises, has caused some confusion in the marketplace. In their effort to fill niche markets, some franchises have diluted their branding effort by creating too many brands and confusing at least some of the traveling public. Frankly, I know many knowledgeable hotel people who canít define or describe all the latest products in the marketplace; imagine the plight of the average traveler. 

Now, donít get me wrong, I certainly donít predict the doom of hotel franchising. For the most part, they employ brilliant people and do a great job for their franchisees. I do, however, feel that smaller independent hotels, for the first time, have a wonderful opportunity to compete. 

Many franchised hotels are now taking a second look at their franchiseís reservations contribution to their properties. 

The Importance of Electronic Sales

The most obvious lesson to be learned from franchised hotels is the value of the Internet. As experts have said for quite some time, the Internet is still the most effective and value-packed sales tool ever devised. Yet, itís hard to believe that there are still many independent hotels which have not yet discovered the many benefits of the net. 

There are now many independent hotels receiving upwards of 30-35% of their total sales online, just like their bigger franchise brothers. The Internet has raised independent hotels from relative obscurity in the marketplace to global players in the world-market. 

Through third-party players like GenaRes in Texas, independent hotels have access to the valuable Global Distribution System which enables travel agents, airlines and car rental companies to book their hotels. Fees are reasonable and it squares them with the franchises. Travel agent reservations are on the rise again.

Expert Hotel Business Advice 

Another strong advantage enjoyed by franchisees has always been the expert knowledge base provided by the franchise itself. Good business advice from knowledgeable and talented franchise people helps their members set the right course in marketing and operating their hotels. 

They assist with rate and market positioning, valuable market data collection, data analysis, and provide sales techniques to franchisees, which, in turn, help them to develop successful operational strategies. Many independent hotels are still flying by the seat of their pants, often without a good strategic plan. 

The entrepreneurial spirit of many independent hotel operators, in some respects, has hindered many of them from seeking outside expert advice and assistance. In some cases, itís that inside-the-box thinking which has limited their growth. In addition, most of the membership affiliations, available to smaller independent hotels, have neither the budget nor the expertise to help their members in the same ways in which franchises offer their franchisees.

There are resources available to independent hoteliers, but unlike franchises, they need to reach-out to find them. There are many experienced hoteliers who can provide guidance, sound solutions, and technical expertise for modest fees. Sometimes just a little advice will do the trick. It doesnít have to be costly nor a permanent situation. .

The biggest difference between large hotels and smaller independent hotels are the numbers, themselves. Many smaller hotels would do well to utilize some of the techniques used in franchised properties to position and market their hotels. 

Although jobs are more consolidated in smaller hotels, they can still deal with the same sales and data collection issues as their big brothers by hiring an experienced coach for their business; someone to temporally guide their hotelís growth in the market. The rewards can be enormous. 

Copying someone is the sincerest form of flattery; it could be the key to success. Most franchises have healthy budgets for research and development; they can afford the very best people available; and have their finger on the pulse of the market. Independent hotels would do well do study and emulate some of those resources. 

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