Secrets behind Hotel Revenue Management Strategies Uncovered

Secrets behind Hotel Revenue Management Strategies UncoveredIn the early days of Xotels we used to do revenue management and distribution seminars, and we would always ask a trick question, ‘Who has Standard Rooms in their hotel’. Half the room would raise their hand (unfortunately). We would get into the discussion of how much they would pay for something Standard (or rather average). Room type names are an often-missed opportunity in hotels to commercially position the product more attractive and competitive.

Using Hotel Room Types for Strategic Positioning

Room type names are an often-missed opportunity in hotels to commercially position the product more attractive and competitive.Before we get to the commercial aspect of naming room types, we should get into the why we have room types  and how many a hotel should have. Room types are basically the different products a hotel offers to the market. Having a varied product offer allows hotels to offer various pricing levels catering to various budget levels as well as psychological needs of the consumers.

Yes pricing is a psychological game. Not everyone simply buys the cheapest product on offer. For those of you who went to hotel school, remember the restaurant management classes explaining why a wine list requires a selection? Many diners will buy up from the bottom price od the list towards the middle. And we had to ensure those wines were super profitable… This menu engineering technique has to be applied to hotel rooms as well. We need to offer a wide selection of rooms,  priced slightly up from your mist economical room category, and they should preferably not require extra cleaning cost.

Travelers will upsell themselves. Without any effort from your side! 

Well that is not entirely true. My dear hotelier colleagues. We need to get creative and open our minds …

It seems we are dealing with a legacy issue in the hotel industry based on technology inheritance and old-school indoctrination. In the early days of digital distribution, the GDS’s had system codes for rooms which included types like Standard, Deluxe, Superior, Junior Suite etc. It seems this level of standardization has flowed through into an erosion of creativity in our industry. Hoteliers have simply copied this rather boring unification continues to apply it even now when opening new hotels. It seems we have been brainwashed or indoctrinated by old-school thinking, and are challenged to think outside the box.

By the way another room type name that ticks me off is a Double Room. What does this tell me about the room you want me to book and pay for? Absolutely nothing … Just show it to me when I search for a room for 2 people …

Get Ready to Be Blown Away

Fortunately, there are still courageous cavaliers out there breaking this dogma. Take a look for instance at the room type names at W Hotels. Below an overview of the room-types at W Barcelona:

  • Cozy Room
  • Wonderful Room
  • Wonderful Sky Room
  • Fabulous Room
  • Fabulous Sky Room
  • Studio Suite
  • Cool Corner Suite
  • Marvelous Suite
  • Spectacular Suite
  • Wow Suite
  • Extreme Wow Suite

I mean, I am sold … aren’t you? Or would you rather stay in a Standard Room?

Hotel Revenue Management Secrets roomtypes 1

The Methodology

There are all sorts of ways to picking creative and appealing room type names, even with a more classical hotel. Always when we take on revenue management for a new hotel, we go through an exercise where we list all the room numbers with their individual features;

  • Floor level
  • View / Orientation
  • Size in m2
  • Bedding types and sizes
  • Seating
  • Normal and max occupancy level
  • Extra Beds / sofa bed
  • Facility details
  • Shower vs tub

Based on this we can group the rooms which are similar into categories, after which the creative process of naming them comes into play. Focus on different attributes of the rooms and link it to the concept of the property, and you can come up with some amazing room type names. An all-open-everything-goes-no-idea-is-bad brainstorming session with the team is highly recommended. You will be surprised what comes out of it. In my case a bottle of good wine always helps.

I always love this exercise as it always motivates the team in understanding that we are selling an experience, rather than a product. The room type names have to capture the essence of that experience and your concept, and communicate clearly what the people can expect.

How We Do It ...

Let me share with you some of the ideas we came up with for our hotels and resorts:

Zoku Amsterdam (new concept aparthotel)

  • Zoku Loft
  • Zoku Loft XL
  • Zoku Room
  • Zoku Bootstrap

Hotel Revenue Management Secrets roomtypes 2 

Ibiza Rocks (a party hotel)

  • Rocks Self Catering
  • Rocks Room
  • Chill Out Pool
  • Main Pool View
  • Stage View
  • Rock Star Apartment

Hotel Revenue Management Secrets roomtypes 3

Secret de Paris Design Hotel (a hotel themes after different landmarks in the city of lights)

  • Musée d’Orsay
  • Trocadero
  • Opera Garnier
  • Atelier d’Artiste
  • Moulin Rouge
  • Tour Eiffel

Hotel Revenue Management Secrets roomtypes 4

Mabi Maastricht (boutique hotel located in an old movie theater)

  • Basic Twin
  • Unrestricted Twin
  • Imagine King
  • Plush Twin
  • Plush King
  • Twisted Twin (with an amazing aperitive mini bar) 
  • Twisted King (with an amazing aperitive mini bar)
  • Plush Triple
  • Corbusier Family Room

Hotel Revenue Management Secrets roomtypes 5

San Domenico Palace (luxury 5 star hotel, part of Leading Hotels of the World)

  • Convent Cloister View
  • Convent Garden View
  • Convent Sea View
  • Convent Sea View Terrace
  • Convent Junior Suite with Sea View
  • Convent Garden Suite
  • Convent Garden Grand Suite
  • Grand Hotel Classic
  • Grand Hotel Sea View
  • Grand Hotel Sea View Terrace
  • Grand Hotel Deluxe - Sea View Terrace
  • Grand Hotel Large Sea View Terrace
  • Grand Hotel Junior Suite - Sea View
  • Grand Hotel Junior Suite - Sea View Terrace
  • Grand Hotel Terrace & Jacuzzi
  • Grand Hotel Suite - Terrace & Jacuzzi
  • Bougainville Suite
  • Taormina Bay Suite
  • San Domenico Palace Suite

Hotel Revenue Management Secrets roomtypes 6

And yes, sceptics are already reaching me by telepathic brainwaves. Way too many Room Types I hear them shouting.

Nope, not true!

By segmenting your product in a clear way, you are communicating clearly what differentiates them. Moreover, selling experience in this way will make it easier for people to upsell themselves. The feeling of getting a slightly better or upgraded model is worth extra money in the eye of the beholder.

People Upsell Themselves

Back to the wine menu class from our hotel school days. Putting 2 or 3 wines on the menu would make most people choosing the cheapest one. Adding more choice leads to people going up in the price category they choose.

Same goes for hotels. As we implement this choice of room types in both city hotels and resorts, we see the average booked rate increasing. People are upselling themselves. This works best if supplements are not too high. For instance, in city hotels we often use a €5 to €10 increment, and in resorts or luxury boutique hotels we drive premiums of €30 up to €100.

In medium size hotels of 50 to 60 rooms I would generally like to have about 6 rooms types. Of course it is different for each hotel,  but to drive revenue up you need yield tools, and room types are among the most effective.

It works like a charm, ADR and RevPAR increase every single time implementing this trick in hotels. I kid you not!

Hope this has been a helpful eyeopener. There is a lot of low hanging fruit out there for your hotel. Go back to the drawing board and look at tour property’s assets objectively. If you need help, don’t hesitate, reach out to us. We would be more than happy to help you to capitalize on your untapped revenue potential..

Cheers,

Patrick Landman @ Xotels  

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