Translating Inventory Needs Into Buyers' Tools

For a long time, meeting planners and travel managers shuddered at the thought of having to deal with hotel yield management.

The reality is that hotels are more closely managing their inventory of rooms via yield management. Eric Orkin, president and founder of Opus 2 Revenue Technologies, based in Portsmouth, N.H., is one of the pioneers of yield management in the hotel industry. He developed and markets a computerized yield management system called TopLine Prophet, and his company also recently developed a central reservations system for Outrigger Hotels with fully integrated yield management. Orkin defines yield management as "tools, techniques and business practices defined to get the maximum revenue per available room from a given level of demand."

The key word in Orkin's definition is demand. This is really the key to yield management--the familiar concept of supply and demand. When demand for rooms is strong, as is now the case in many commercial markets, hotels can sell rooms during prime periods to higher-paying transient guests. As a result, meeting planners are less likely to get a significant break on group rooms. On the flip side, in the very same markets, deals abound on rooms during weekends. This is the same reason meeting planners book summer conferences in places like Phoenix and Fort Lauderdale: Transient demand is low, so they can negotiate great deals on group rooms.

Whether the hotel utilizes a manual approach to yield management or a computerized system, the basic paradigm is the same: Focus on demand. According to David Sjolander, director of hotel systems for Carlson Hospitality Worldwide, Radisson has taught yield management to its properties for a long time. The company utilizes a manual approach to yield management, but over the years has experimented with various computer-based approaches, including a current pilot test of two systems. Its approach starts with forecasting of demand (as do most other chains and hotels) and then uses a series of rules and logic to allocate group rooms, set rates, and open and close packages.

According to Orkin, the increased usage of computerized yield management systems has allowed hotels to micromanage their room inventory and rates, allowing them to better adjust rates seasonally, and within specific periods.

In most markets experiencing high commercial demand, many hotels are booked from 90 to 100 percent on Tuesday through Thursday evenings, said Rick Swig, president of San Francisco-based RSBA & Associates and president of the International Society of Hospitality Consultants. As a result, there often are opportunities for planners to book group arrivals on shoulder days such as Sunday and Monday nights, and thereby negotiate better rates.

In addition, the average length of stay for meetings has dropped from 30 percent to 50 percent from 10 years ago, Swig said. As a result, the number of room nights booked is an important factor in the yield management process, and can be effectively utilized as a negotiating tool.

Many meeting and travel planners know that by understanding the yield management process, they can actually negotiate better rates at hotels.

Bunny Palazzo plans and manages meetings for Korn/Ferry International, an executive search firm, with offices in 15 cities in North America, and 64 cities worldwide. When a meeting has sufficient flexibility, she tries to identify the specific period of time where she can get the best rates in the specific market.

Mary Jo Driscoll, director of worldwide accounts for Radisson Hotels International, said that many meeting planners have backgrounds in the hotel industry and understand the concept of yield management. As a result, they are signing longer-term contracts, often geared toward helping the hotel increase occupancy during slow periods.

"The meeting planners that Radisson works with have become very savvy in working with hotels, as opposed to seeing it as a negative," she said.

It is possible to create a win-win situation in your own negotiations through an understanding of the yield management process. Some suggestions:

* Gain an understanding of each hotel's yield management approach. Determine how the hotel can give you better deals on room rates. For instance, how does the hotel weigh factors such as anticipated banquet revenues? These items can provide the hotel with greater profits and therefore allow the sales department greater flexibility in discounting room rates.

* Develop a database of historical information about your meetings. Include average number of guests per room, average length of stay, food and beverage expenditures, meeting room rentals, audiovisual equipment usage, early arrivals and stayovers, cancellations, pace of pickup, etc.

* Consider establishing long-term relationships with a couple of preferred hotel partners.

* Shop the area and be flexible on timing within several weeks on either side of your planned date; arriving even one day earlier can sometimes make a difference.

* Try to book meetings that are counter-cyclical. In other words, to negotiate a better deal, fill rooms in the hotel during periods of low demand.

Creating a win-win environment means there is no competition. What is good for the hotel is good for you. Looking at yield management in this way certainly opens up a whole realm of possibilities.


<I>Michael Speer is an accountant and a principal with CynterCon Group, a management consulting firm in Washington D.C., and Los Angeles that provides systems and technology consulting to the hospitality, food service, retail and healthcare industries.