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Article by Richard Evans

Spot Check your Vacation Rental Reservation Platforms

The Revenue Report Card ·10 September 2018
Perhaps me being from a different era, I never fully trust automation until I test and verify that the numbers placed in my vacation rental Property Management System and, in turn, that transfer through my Channel Management Program are actually what potential guests are seeing on my reservation platforms (Website, Booking.com, Expedia, Homeaway, AirBNB, etc.).As a consultant in revenue management one of the first things I do with a new client is to test these platforms. Sometime when you aren't producing reservations in certain revenue channels it's because of unaudited results that are ASSUMED to be providing parity to consumers between revenue channels.While the Property Management System and Channel Management Program for which results are shown below will remain nameless, the following illustrations are actual results I just pulled up on a current project. My client assumed that all channels were reporting the same amounts.This Vacation Rental Company was not seeing reservations coming through Homeaway or AirBNB. This could be one of the reasons why.TIP: You can see that in Illustration 4 AirBNB isn't pulling up the correct nightly rate resulting in Reservation Revenues being approximately $250 higher than the three other platforms! In Illustration 3 you can see that Homeaway Reservation Revenues are close to the PMS but that metrics, like sales taxes, are far off.Your Channel Management Program has to map which rates and multipliers are being pulled and/or applied from your Property Management System.TIP: Different states have different sales tax requirements. You'd like to think that your Channel Management Programmers know this information, but often it's up to you to alert them. They're often handling business, sometimes, from all over the world. The onus falls on you.Some states require that sales taxes are applied only to Reservation Revenues while others require that they also include housekeeping fees, service charges and other revenues.TIP: Check that your minimum length of stay restrictions are also being applied consistently.Every time you add a new reservation platform to your revenue mix you should immediately audit the results to insure parity with your other reservation channels or that the platform is presenting what you wish and that it is being calculated correctly.Vacation Rental Revenue Management - VRMA 2018 - http://bit.ly/2lxFZlr

Vacation Rentals turn to Smart Technology to Monitor Operations

The Revenue Report Card ·30 April 2018
As vacation rentals continue to boom, companies are turning to smart technologies to streamline and monitor their operations. As anyone that has been in the hotel business knows, at times even well run properties encounter difficulties with guests, entrance locks and staff. The close proximity of "rooms" in a hotel enable managers to deal with these problems quickly.But vacation rental companies don't enjoy the luxury of close quarters, security on hand and centralized staff. Companies frequently have homes spread out over large geographical areas. Instead of monitoring and navigating one hotel building, homes can be spread out in a town or city and, in turn, have to be strategically overseen. Unhappy neighbors having to deal with noisy guests, arrivals who encounter difficulties with entrance locks, fumbling for light switches in dark homes and entering freezing cold or uncomfortably hot climates all take away from the overall vacation rental experience. Technologies are now available to combat these shortfalls and issues. They allow vacation rental companies to take control and action before (1) police are called, (2) before neighbors are pushed to file complaints (and petitions to ban vacation rentals in their neighborhoods), (3) to intercede when a guest is outside fiddling with a lock or (4) to avoid an injury that can occur when an arriving guest arrives to a dark home and stumbles in trying to find a light switch. Smart homes, smart phone APPS, noise monitoring devices and staff tracking, to name a few, counter these and other problems before they become nightmares. Homeowners who turn to vacation rental companies absorb utility costs incurred in their homes. If a home is cleaned and then won't be occupied for a number of days, leaving lights, air conditioning and/or heat on creates wasted energy and high cost. Further, having to send staff to that home to "turn it on" before guests arrive is inefficient and costly. Not doing so contributes to brand erosion. Outfitting smart homes that can be controlled from headquarters or smart phone APPS enables lock codes to be changed, lights to be turned on and off, live TV monitoring (to view strategic areas outside the home), premium TV channels to be programed, burglar alarm monitoring and the ability to adjust climate timely and appropriately. Noise and unruly guests, as infrequent as they may be, are a nuisance to neighbors and a bad reflection on the industry as a whole. Devices are now available that monitor decibel levels and provide alerts that enable quick action to remedy these situations. Smart phones enable immediate photo documentation of damages from housekeepers and inspectors. Some of these interact with Property Management Systems that maintain a historic trail of events that bundle all photos and related notes appropriately. Tracking appropriate staff in order to logistically manage tasks and emergencies enable managers to find quick solutions to unexpected events. This is accomplished by using smartphone GDS tracking. What's more, APPS provide mileage and justify that roving staff is, or had been, where scheduled.See an article I wrote entitled "Your Boss can Track Your Every Move - a New Vacation Rental Industry Norm?"The list of technologies goes on and on, from tracking how long it takes to clean and inspect a home, whether in house staff is spending time on personal social sites and/or furnishing the accounting department with hours in order to calculate payroll. The vacation rental business is an industry onto itself and sizable operations are turning, more and more, to smart technologies to insure guest satisfaction and appropriate courtesy to neighbors. View www.tdsovr.com for more about technologies and APPS available.
Article by Richard Evans

What to look for in a Vacation Rental Property Management System

The Revenue Report Card ·17 April 2018
In doing in-depth research of over 25 systems I provide an illustration below of 4 highly trafficked and respected companies in the industry and the questions you may consider asking when seeking a new System for your operation. Vacation Rental Property Management Systems, unlike traditional hotel Property Management Systems, manage rental agreements, send and collect electronically executed contracts, manage roving staff, manage scheduling, manage staff hours, communicate with guests, communicate with roving staff, integrate with smart phone applications and offer a whole array of other unique functions to the industry.While no recommendations or evaluations are made in this article, I provide a chart showing respected and sought companies on the internet (used Alexa.com to identify several of the highly trafficked sites and word of mouth for another). In my book, "the Definitive Study of Vacation Rentals", I provide a list of 25 different Property Management Systems that are presented as the four are below.Disclaimer - website traffic is not always a good indicator of quality and so the companies and the order of those companies presented may be said to have the best website marketing campaigns. Still, numbers do tell a good part of the tale and cannot be discounted. Companies shown below can be said to be amongst the "cream of the crop" with many whistles and bells that are good for some and not needed by others. It's important to know what they are as you expand and grow.There are many other extraordinary systems. Like most sophisticated programs, one thing that is extremely important is its ability to grow and expand with your operation. An opened API system that enables Property Management System connections to independent 3rd party modules, provides the ability to "add-on" applications that include, but are not limited to, smart phone, revenue management, channel management, staff management and staff tracking applications and others. Here is a list of 4 busily trafficked Vacation Rental Property Management System websites and what they offer. I have no affiliation with any of them. For a more expansive description of each of the features/functions shown above, please see the detailed description list I've placed at "Consider asking these PMS Questions"http://bit.ly/2zykw1h (on LinkedIn Pulse). This is an Important Investment; Don't Shop by Price Alone The Property Management System is the backbone of any Vacation Rental operation. The investment is an important one and I can't emphasize enough that no system should be purchased based on price alone. This is a system you will have to live with for many years to come; so find the right features and expansion capability and consider spending a little bit more here if you're able. It will be well worth the cost in the long run. As your company grows, an inadequate or insufficient system will require you to replace it down the road. Conversions from one system to another can be a substantial, costly and time consuming undertaking. Exercise appropriate due diligence before acquiring a Property Management System. There are many great ones that can grow with you into the future! You may not need all the whistles and bells offered, but be aware of them before choosing the system that's the right fit for you. I have reviewed websites, interviewed staff and did email follow ups on the 4 companies presented in the illustrations above. There is always a possibility that I incorrectly understood whether a feature is offered or not. It's always best to double check directly with the company. The book will be available as a COMPLIMENTARY GIFT to all HospitalityNet.Org readers ON April 17, 2018! The Definitive Study of Vacation Rentals on Amazon... http://amzn.to/2AReAjSMore about the book at http://www.tdsovr.com/
Article by Richard Evans

Unique Revenue Types in the Vacation Rental Industry

The Revenue Report Card ·30 March 2018
The answer lies in the unique "revenue types" vacation rentals often charge.I'll discuss them below. Typical charges used in the industry include, but are not limited to:Housekeeping Fees from guestsDamage Insurance Fees from guestsCredit Card Fees from guestsMaintenance Fees & Profit from homeownersManagement Fees charged homeownersFor this analysis I'll use a fictitious 100 home vacation rental company that realizes a 72% occupancy, a $250 Average Daily Rate and an annual Average Length of Stay of 3.2 nights per reservation.Housekeeping FeesUnlike hotels, vacation rental companies typically do not provide daily housekeeping service for guests but instead charge guests a one-time housekeeping fee for those services that occur after departure. In addition, and for arguments sake, I'll estimate that 25% of all guests request additional housekeeping service during their stay.In south Florida, on a 3 bedroom 2 bathroom luxury home, a vacation rental company might charge guests $250 for housekeeping and, in turn, pay $85 to an independent to perform that service. Hence, for each reservation a $165 profit will be realized.Annually, the above metrics create 8,213 reservations earning a housekeeping profit of $1,355,063. Add housekeeping services provided during guest stays, at a reduced rate (and related cost), and you'll add $102,656 for a total profit on housekeeping of $1,457,719 (see Illustration #1).Damage Insurance FeesSecurity deposits typically taken by vacation rental companies from incoming guests, are burdensome, time consuming and frankly an accounting nightmare. Companies are beginning to move away from this in lieu of requiring guests to pay one-time damage insurance fees. This insurance can protect companies against uncollectable damages from $3,000 to $5,000 (sometimes higher) per incident; depending on the coverage purchased.What I see as more typical in south Florida is the vacation rental company charging guests $99 per reservation, instead of taking a security deposit, and in turn paying an insurance company (like CSA Travel Protection; Rhonda is National Account Executive; 858-810-2386 ) $19 per reservation. A profit per reservation therefore, of $80 provides an annual profit from damage insurance on the scenario presented above of $500,963 annually.Based on what I sometimes see, some vacation rental companies will charge guests a damage fee and self-insure. Needless to say, in this case, this would result in the full amount collected of $813,087 (minus any damages incurred) increasing both GOP and the bottom line.I provide Rhonda's phone number above because so many that I speak with have difficulty finding information on damage insurance; I have no affiliation.Credit Card FeesCredit Card fees provide a sizeable expense offset and sometimes a small profit. I see many vacation rental companies charging guests 3.0%. I'll assume here that vacation rental companies, with 100 homes or more, are able to secure credit card merchants who charge 2.7%. The overall reduction of credit card cost (assuming that 95% of all guests pay with credit cards) in this example would be $187,245 (see illustration #1); included in this cost savings is a profit of $18,725.Maintenance FeesInstead of charging homeowners for lightbulbs, batteries, remote controls, simple plumbing and paint touchups some vacation rental companies will charge homeowners a flat monthly fee of, let's say, $25 to cover these costs. In our example this would generate $30,000 annually with an estimated cost of $20,000 for a profit of $10,000. Larger vacation rental companies, with appropriately skilled maintenance staff, will mark up repairs & maintenance by 20% to 30% for jobs undertaken. Unlike traditional hotels, vacation rental company maintenance departments could be viewed as "profit centers". I show a net profit in Maintenance Jobs performed of $12,500 annually (although this could be quite a bit higher based on what is needed in homes). Even when adding 20% to 30% to labor and material cost the homeowner will usually be provided with a substantial cost savings to that offered by independent 3rd parties.Management FeesA number of vacation rental companies charge homeowners a management fee that is above and beyond the revenue split shared. Here I'll use a 3% management fee. On the above referenced this would generate annual management revenues of $197,100. All items mentioned above substantially increase vacation rental company GOP to levels described. With discussed additional revenue types, profit centers and cost offsets the vacation rental company can look to GOP to be at or around 70% (see illustration #2- a pro forma created for a previous article). Additional revenue types to those shown vary and are often predicated by what other vacation rental companies in different areas are charging guests. Revenue types can also include airport transportation, "resort fees", parking fees, refrigerator stocking fees, chef services, annual towel & Linen fees, deep cleaning fees and the like.Although Illustration #2 was not created from metrics described in this article, it highlights the many revenue types used and provides a full look at the components used in arriving at a 70%+ Gross Operating Profit in vacation rentals.
Article by Richard Evans

How USALI Rules affect Hotels that add a Vacation Rental Component

The Revenue Report Card ·23 March 2018
Metrics for the vacation rental/residential component have to be consolidated with hotel metrics to arrive at metrics for the entire property.This especially affects luxury brands who carry or plan to carry, sizable "home" inventories adjacent to their hotel properties. While luxury resort brands (or developers) are able to bring in high home sales prices, high-end homes are typically rented out at lower occupancies (and higher ADR's) compared to their adjacent hotels.Hotels that sell "economic achievement" over "home cost offset", via their rental program offering, could find themselves in contentious relationships with investors who are lead to believe that high returns will result from home purchases placed in the hotel rental program.Great care need be taken in home sale marketing. At best, vacation rentals in high-end luxury hotel marketplaces offsets some cost but do not produce homeowner profit. This is contrary to what homeowners expect in typical vacation rental scenarios.Most hotels that add a vacation rental/residential components include a "priority clause" in their rental management agreements that let homeowners know that priority will be given to the hotel over residences in taking reservations.Because limited marketing platforms exist in the luxury market for home rentals (they often will not use Airbnb, Homeaway, etc.) hotel and vacation rental reservations are often coming in through the same reservation sources as the hotel; the hotel website and hotel call centers to name a few. This simply means that, when the opportunity arises, hotels will prioritize hotel reservations over home rentals.Needless to say, with the hotel serving as the main profit center at properties, vacation rental/residential occupancy will suffer.The effect of USALI requirements, on overall results, can create an "altered" year-over-year view of property performance as a whole.This is especially true when the vacation rental/residential product is being rolled out and coming on line (usually over a number of years).In Illustration 1 & 2, I show side-by-side examples of hotel and vacation rental/residential metrics and the overall effect of consolidation. You can see, in these two scenarios, consolidated ADR's are higher than the hotel "standing-alone" and RevPAR and occupancies are significantly lower.In this example, while the hotel is performing adequately, the typical rental of sizable luxury homes shows a significantly lower occupancy. Needless to say, supplemental statements to the consolidated financial statement, would break these differences out. The consolidated statement, however, the one that is issued to stockholders and investors, at face value, is quite different. These consolidated results, without further investigation, would seem to indicate substantial differences in year-over-year performance.USALI Rules require that all Rental Management Agreements of one year or more be consolidated with hotel inventory. Hotels that add vacation rental/residential components typically place automatic renewal clauses in their annual Rental Management Agreements with homeowners. In some cases Rental Management Agreements have a substantially longer term.In the event that some residences are placed in hotel rental programs for only several months in a year, they would not be consolidated.This is something to consider when brands contemplate adding a residential program to their hotels.

Often Misunderstood - Vacation Rental & Condo-Hotel Homeowner Statement Deductions

The Revenue Report Card · 8 March 2018
In both Vacation Rentals and Condo-Hotels the "homeowner" could be thought of as a "partner" of the Rental Program Operator. If and when economic benefit justifies it, "homeowners" place their "homes" in rental programs in order to receive a distribution share of Gross Room Revenues.In Vacation Rentals the SPLIT is often 65/35* (benefiting the homeowner) and 50/50* in Condo-Hotels. With that said, this SPLIT can be said to be misleading. This is the result of what I call "above the line deductions" that are at times used by Vacation Rental companies and are used by Condo-Hotels.These deductions are almost always misunderstood and that is the premise of this article.Before I go on, however, allow me to present a "Homeowners Statement" - Illustrations 1 & 2. This is a statement "homeowners" in these programs receive either monthly or quarterly and that show the calculation of distributions afforded them from direct room nights rented in their "homes".I provide what might be typically afforded to "homeowners" in a Vacation Rental and Condo-Hotel program in a side by side presentation. The presentation is meant to provide information on the metrics of each and not necessarily the production. Production (ADR & Occupancy) will, of course, vary."Above the line" deductions on a Homeowner Statement are used to reduce the homeowners' distribution base. These line items DO NOT represent actual income or create cost reduction on the Profit and Loss statement other than to decrease distributions to homeowners. They are ordinarily seen in Condo-Hotel programs to camouflage a stated 50.0% rate, when the actual rate to "homeowners" after these deductions is often 40.0% to 46.0%.In the above illustration you can see that the Vacation Rental and Condo Hotel applies an aggregate of 8% and 28.0% (of Gross Room Revenues), in "above the line" deductions, respectively.Often, it is thought that "above the line deductions" offset the Vacation Renal or Condo Hotel Profit & Loss statement line items of the same description; but they do not.Since "above the line" deductions are than arbitrary in their description (i.e. - Travel Agent Commissions, Marketing & Advertising, Credit Card Commissions, etc.) the only thing that is important is what the aggregate amount of those deductions comes to as a percentage of Gross Room Revenues. To reiterate, "Above the line deductions" are a means to an end; to reduce the base on which the SPLIT is applied."Below the line deductions" on the other hand, are real deductions that come out of "homeowners" pocket. These deductions can be used to pay Reserves, Repairs, Maintenance, Fees, Dues and the like. They do have a Profit & Loss effect as either revenues or an offset to line item expenses.It's important to know the distinction between "above" and "below" the line deductions. They decrease "homeowner" and increase rental program economic benefit.With that said, here iare comparative views of 65/35, 50/50 and 100/0 Splits.The distribution SPLIT may vary from Vacation Rental to Condo Hotel programs.
Article by Richard B. Evans

Why Luxury Hotel Brands are getting into the Vacation Rental Business in 2018

The Revenue Report Card · 5 January 2018
No one can argue with "the numbers" and decreased market share.With Vacation Rentals continuing to be on rise, hotel executives are taking a long hard look at the Vacation Rental business. Traditional hotels are far from extinction, yet numbers drive executives and solutions need to be found to counter the erosion.Guests are seeking more privacy, space and themed getaways. The allure of private quarters, porches, gardens, private pools, fire places, having a chef come in or even a having a private fully stocked kitchen (with ingredients prepped and kitchen cleanup that follows) is powerful.What brands are finding is that private gated communities of Vacation Rental homes, placed adjacent to their hotels, can offer these highly sought after private residences that also provide access to popular hotel amenities and services.Needless to say, private Vacation Rental Companies and homeowners cannot provide this vast array of amenities at guest doorsteps.Traditional Hotels can provide ACCESS to Vacation Rental GuestsSpas, hair salons, tennis and pickle ball courts, restaurants, golf, clubs and the like can all be within a short walk or golf cart ride away from homes and guests can retreat to private quarters when they want to be by themselves and enjoy absolute seclusion or an added degree of tranquility.Home OwnershipOwnership at a luxury brand increases "home" market value. Those seeking an investment can stay at their properties several times a year with only the cost of a housekeeping fee to be paid and have the hotel rental program keep their residences busy and earning revenues the rest of the year.Luxury Brand hotels have dabbled in the Condo-Hotel arena in the past. Yet successes have been limited for a number of reasons. Poorly written condo docs and high fees have created a petri dish of lawsuits between condo owners and many developers (or hotel program owners). Distributions also pale in comparison to the Vacation Rental business at 42% to 48% where non-branded Vacation Rentals pay 65% to 75%.Locked closets or storage areas, in the home, allow homeowners to store nonperishable belongings at their properties and that, of course provides them with the ability to pick up, pack less and have personal belongings waiting for them when they arrive.Vacation Rental "exchange programs" within the Brand can also be established where if a homeowner wishes to exchange time away by providing their home, on a limited basis, to another homeowner anywhere in the world they can place several weeks in the exchange pool and do this, at a nominal transfer cost. This is a benefit of time sharing that became popular many years ago. Homeowners who prefer to stay at their specific Brands worldwide now have the ability to access these properties ('homes") on a global scale.Added Revenue TypesAdding Vacation Rental Communities is a win-win situation in taking back market share for hotels and selling homes. It addresses the Vacation Rental phenomenon and enables hotels to profit from a very unique stream of "Revenue Types" that hotels are not capturing. Housekeeping fees, refrigerator stocking fees, "resort" fees, credit card fees and the like bring in substantial revenues that are not shared with homeowners in rental programs.The "homeowner" receives distributions based on a percentage share of gross room revenues only.Revenue streams from movie rental, entertainment, games and stocking typical locked cabinets remain intact.Adding Groups, Meetings and Corporate business to the Vacation Rental Revenue MixNot only is the traditional hotel able to add the additional "Revenues Types" discussed above, but they can also add groups, corporate getaways and meeting space to the mix. Functions can be held at the main hotel where there is ample space.Group functions cannot be entertained by private Vacation Rental owners. It's another powerful inducement to adding "homes" to traditional hotel choices.Structuring the new EndeavorGreat care need be taken in structuring Vacation Rental add-ons. If hotel developers or management company's seek to allocate a heavy burden of traditional hotel costs to the Vacation Rental segment, the allure of vacation home ownership at a branded property can be lost.Needless to say, the hotel cost allocation discussed will certainly increase the traditional hotels bottom line, yet it takes away from homeowner distributions that are enjoyed in Vacation Rentals industry wide. A compromise has to be reached in which costs will be charged and at what amounts. By carefully structuring these add-ons, the allure of Vacation Rental home ownership stays intact.Less Reliance on Roving Staff and Prompter ServiceWhile Vacation Rental companies depend on roving agents to check in, out and to service guests, the traditional hotel has a staff on hand 24/7. Service or unexpected issues can be quickly handled without managing the logistics of where roving staff is located and how quickly they can get to a guest or a home. All is right there on the property and adjacent to the hotel in case of emergencies.A Business within a BusinessConsiderations to add a Vacation Rental community and setting up labor responsibilities also require careful thought. Shared staff with the hotel is often not wise, except perhaps in the wee hours of the night, and a separate management hierarchy should be considered. Vacation Rental management and staff could still report to the hotel properties general manager but it's important to remember that when adding Vacation Rentals, the hotel is operating "a business within a business". Like other divisions in traditional hotels (i.e. - restaurant, spa, etc.) duties and oversite of staffing should be assigned to a separate management team that is responsible for not only service but profitability.Being met at a hotel "home" by a private roving agent, instead of checking in, in a busy lobby offers business executives and "private guests" a hassle free entrance and exit. A private parking space in a garage or driveway means there is no dependence on valets. Still, concierge service, when needed, is furnished from the main property and is a phone call away.A separate Vacation Rental check-in office could also be a consideration.New Profit Centers and Reduced CostsAdded benefit from Vacation Rentals comes in additional profit centers and a vast reduction of traditional hotel costs. The Maintenance Department becomes a profit center, capable of reducing overall POM cost from 5% to 1% by having repair and maintenance jobs on homes performed in-house and adding a profit margin on them; 20% to 25% is customary.Adding profit margins of 20% - 25% still provides the homeowner with a substantial discount on services they can receive from outside 3rd parties.Homeowners pay property taxes, mortgages, insurance, utilities, Wi-Fi cable TV, the annual cost of towels and linens, pots, pans, kitchenware and for furniture, fixture & equipment replacement when necessary. These costs are absorbed solely by the traditional hotel but no longer exist in Vacation Rentals.Accounting & Financial Reporting ConsiderationsA new hotel division or separate business, using a slightly modified version of the Uniform System of Accounts, can be adapted so that the hotel can separate reporting and profitability into meaningful statements that assess the Vacation Rental operation on its own.In ConclusionWith the many added benefits hotels can provide, adding a Vacation Rental community would be a worthwhile consideration. Entrance further provides traditional hotels with the ability to compete in this "new" market place and add new Revenue Sources (i.e. Airbnb, VRBO, Homeaway, etc.) and Types that continue to grow exponentially.If you have any questions feel free to drop me a line atRichE1212@gmail.com or call me directly at (954) 290 - 3567.

Your Boss can Track Your Every Move - a New Vacation Rental Industry Norm?

The Revenue Report Card · 2 January 2018
LOCATION TRACKINGUnlike many industries the Vacation Rental business often covers large geographical areas that are serviced by "roving staff". In order to manage guest needs efficiently and effectively Vacation Rental Companies have to be able know where staff is, in order to quickly respond to a guest who is checking in, "needs a towel" or has a maintenance emergency.Smart phone technology allows us to do this and to see where roving staff is and when. Without it, administrative logistic management would be inefficient and complex.When a substantial number of guests are checking in on let's say a Friday night (between flight and perhaps car rental delays) "roving check-in agents" are stretched to meet and greet assigned guests arriving and simply can't be in two places at one time. Here, a quick view of a tracking map program, showing where "check-in roving agents" are, enables the administrator to quickly and efficiently reassign responsibility. If John in Maintenance is a mile away from a guest who is having toilet problems, assigning Jane in Maintenance who is 15 miles away is inefficient and costly. Here again, a quick tracking map program shot of where staff is located enables the administrator to identify and assign these situations. Maintenance and service requests are daily and numerous. Admittedly, in finally accepting "tracking" technology as relevant and necessary I have, on occasion found that "roving staff" who says they are (let's say) at "Home Depot" is instead elsewhere (i.e. home, etc.) and on the clock. That's always an eye opener but the reality of life in the trenches.The key here is that staff can turn this technology off when they are not on the clock.VOICE TRACKINGI remain opposed to indiscriminately monitoring staff conversations at will and frankly here in the USA I believe it's illegal.With that said, being able to monitor and critique reservationist recorded calls has been used in the hotel industry for many years. The technology has become more refined over time and "key word" alerts enable trainers to hone in on calls that could be "turned around" with the right training."I have to check with my husband", "I'll get back to you", "Is that the lowest rate you have?" are key words or phrases that can now be identified by software and that can be flagged for review. You can choose keywords and phrases to be flagged.Some reservationists convert 3 out of every 10 calls to reservations while others convert 6 out of every 10 calls. There is a rhyme and reason for these conversion differentials and often critique and training can turn average operators into superstars. It is more effectively and efficiently done by monitoring recordings.Good third party Call Centers, who take calls during off hours, use this technology and make it available to clients.The key here is that reservation staff knows that they are being recorded.TRACKING PERSONAL SOCIAL MEDIA AT THE OFFICEWe are in an era where personal social media is everywhere.Needless to say, office staff is always able to access their social media sites on their smart phones. But these sites should not accessed on company computers. Not only does it take away from productivity but it at times can render a company's computer system to be vulnerable to viruses and malware that can disable or compromise a business."Tracking" software monitors staff computer use. Some take screen shots in time intervals, while others alert administrators when mainstream social sites (and even adult sites) are connected.There will always be naysayers to "tracking" staff; any which way. It took me some time to come full circle, but having reached a new reality and understanding in my industry I can't see running a moderate sized Vacation Rental Company (over 20 homes) without it.To reiterate, I am adamantly opposed to indiscriminately "tracking" employees without their knowledge. This is far from what I am advocating here.I've devoted a chapter in "The Definitive Study of Vacation Rentals" (available on Amazon at http://amzn.to/2lb041k ) to APPS and Programs and provide a list of companies that provide tracking and other mechanisms that help companies streamline their operations.

In Vacation Rentals YOU declare what your Mortgage Payment Will Be

The Revenue Report Card ·27 December 2017
Unlike their hotel brethren, who require large outlays of cash and mortgage financing, Vacation Rental Companies typically carry very little debt on their balance sheets.Should expansion come about through the purchase of an existing Vacation Rental Company or if the Vacation Rental Company chooses to buy "homes" that they rent, this changes the debt dynamic. Know that, Vacation Rental businesses can often be purchased inexpensively because wary buyers often don't fully understand what they're buying nor the overall concept. The value of a Vacation Rental business is derived through their existing "Rental Management Agreements" that usually self-renew every year or two. What Vacation Rental Company purchasers are buying are existing and renewing Rental Management Agreements.The renewal clause is what often spooks the inexperienced buyer. "How can I be sure homeowners will renew?" For seasoned veterans, however, it is commonly known that if homeowners are kept happy and informed they are unlikely to leave a program.The result of that discussed above is that you can often buy a prospering Vacation Rental business using a lower than normal "times earnings" factor. In turn, it means that debt service compared to earnings is kept on the low end of the spectrum when adding an existing company to your operation.Renting what you own or buy often requires sizable debt, yet the return on those careful investments can increase the Vacation Rental Companies bottom line significantly.The lion's share of all Vacation Rental cost is dictated by "the Rental Management Agreement" in declaring the distribution percentage that will be paid to homeowners. These agreements dictate what your monthly "mortgage payment" or homeowner distributions will be. It is therefore, critical that before "leaping", the Vacation Rental operator understand his/her costs and, in turn, the ability to generate a 15% to 20% bottom line profit.Revenue types, labor practices and operational costs in different regions, of course, differ. So study's will vary and must focus on local markets and practices.Because Vacation Rental Company's require such a nominal capital outlay, they can afford to pay homeowners more than condo-hotels and even traditional realtors. The Vacation Rental norm in the industry is to pay a 65% to 75% distribution on Gross Reservation Revenues.The norm in the industry for condo-hotels falls within a 42% to 48% distribution range directly on Gross Reservation Revenues. The differential in that range occurs as a result of the diamond rating of properties.Condo hotel program owners purchase "space" in the condominium. This could include the front desk, back office, executive offices, the housekeeping department, engineering department, closets and so forth. They also must pay monthly commercial Association Fees and Special Assessments. This is why they are unable to match distributions of Vacation Rental Programs.Additional "revenue types" generate income for Vacation Rental Companies that ARE NOT shared. From housekeeping fees, to resort fees, parking fees, credit card fees, refrigerator stocking fees, transportation fees, concierge fees and the like, Vacation Rental Companies keep 100% of these ancillary revenues.Add that the homeowner, in most cases, pays their own utilities, Wi-Fi, cable TV, insurance, condo fees, towels, linens, semi-annual deep cleaning fees and replaces furniture, fixtures & equipment when needed and you can see why Vacation Rentals are able to afford to pay these higher distributions and still bring respectable profit to their bottom lines.A Vacation Rental Companies Gross Operating Profit can be as high as 70% compared to average hotel Gross Operating Profits of 32%.You can also view an example of bottom line profitability in the illustrations provided below at various distribution levels.Some Vacation Rental companies absorb some of the costs mentioned; but that would not be the norm in the industry. When this occurs, of course, it has a direct impact on Gross Operating Profit and ultimately the bottom line.The mix of revenues and variable costs described means that before the Vacation Rental Company decides what to declare as their distribution percentage to homeowners, they should do a careful study of all these considerations. Providing homeowners with sizable distributions always makes a strong case to entice homeowners into a Vacation Rental Program, however, like your mortgage, you must be able to sustain that "debt service" in order to succeed. For me, taking on debt in order to sustain cash flow should never be an option; nor need it be.At times I see clients who take bridge loans during off season, but careful planning and declaring the right distribution percentage avoids this.Vacation Rentals are very unique; how often are you able to declare what your mortgage cost will be and change it if you need too?! Declaring the right "mortgage" (distribution percentage) means you will insure success, maintain your cash flows and truly enjoy the Vacation Rental experience! Below, please find an example I provide in my book, "the Definitive Study of Vacation Rentals, of a fictitious 75 "home" vacation rental operation when distributions are (a) 75% and (b) 65%.You can purchase the book on Amazon at http://amzn.to/2D9IimEI am grateful to have been invited to speak at the upcoming "VRMA Xtravaganza Conference" on May 23, 2018. My segment will be entitled "Revenue, Metrics, Profit Margins & Establishing Vacation Rental Standards". I'd be delighted, if you're there, to meet you personally! Hope to see you. - Mail me if you'd like to meet RichE1212@gmail.comLink to VRMA Xtravaganza: http://bit.ly/2Bh9X3q
Article by Richard B. Evans

Vacation Rental Metrics & Margins Matter (Part 1)

The Revenue Report Card · 6 December 2017
Gross Operating ProfitGOP is a key metric that tells us how well we're performing operationally. Typically,Gross Operating Profit for Vacation Rental runs 68% - 72%Gross Operating Profit for Limited Service hotels runs 46% - 52%Gross Operating Profit for Full Service hotels runs 29% - 33%The leading question here is why there is such a large variance between Vacation Rental and Traditional Hotel Gross Operating Profits.Revenue TypesVacation Rentals and Condo Hotels have additional Revenue Types that come from (1) guests and (2) "homeowners" in rental programs. In the illustration above, 20.5% of revenues collected from guests came from Revenue Types not charged by hotels. To that, add another 4.6% of revenues collected from "homeowners" in rental programs. That's 25.1% in additional Revenue Type revenues.TIP: Revenue Types charged to guests often depend on what your competitors are charging. Please note that I have not used a number of Revenue Types that Vacation Rental Companies may be charging for (i.e. Resort Fees, Parking Fees, etc.) here.My observation on the top line on the financial statement "Gross Reservation Revenues", is that a revenue channel mix that includes Vacation Rental sites (i.e. AirBNB, VRBO, etc.) will typically bring in a lower Average Daily Rate and a higher Average Length of Stay. Hence the difference you see in that line above compared to hotels.In the illustration above, in the left column entitled "Vacation Rentals" I exclude (1) housekeeping and (2) towel & linen COSTS because (a) guests pay for them and (b) "homeowners" pay for them, respectively.TIP: Housekeeping labor and Towels & Linens are the highest line items on a hospitality financial statement.Administrative & General costs are reduced by credit card fees; because guests pay for them.What we refer to as "Sales & Marketing Division" costs in hotels, is largely non-existent in Vacation Rentals, since groups and corporate business cannot typically be entertained because there is no common meeting or banquet space. With that said, Vacation Rental businesses should spend on promotion and I've included those estimated expenditures here.Utility, Cable TV, Wi-Fi and such are costs typically paid for by the "homeowner".NOTE: Please note that I used one $1,600,000 line item under "Traditional Hotels" to account for all the different divisions in a hotel that have no relevance to Vacation Rental operations.Profit CenterVacation Rentals have a number of Profit Centers that traditional hotels DON'T.They include, but aren't limited to (1) housekeeping service, (2) selling damage insurance in lieu of taking security deposits, (3) collecting credit card fees from guests, (4) stocking refrigerators, (5) arranging transport from the airport, (6) collecting maintenance fees from "homeowners" and (6) taking on maintenance jobs for "homeowners" on interiors.Traditional On-Line Travel AgentsOne area in which the Vacation Rental industry has significant benefits over the hotel industry is in cost savings on on-line travel agents. Whereas hotels have traditionally paid 15%-21% to advertise here, Vacation Rental sites are charging 3%-7% and, the guest pays for an additional portion. As you can see, this is a vast savings from Vacation Rentals to hotels.In the next 2 features on Vacation Rental Metrics & Margins I'll discuss (1) remaining costs from Gross Operating Profit to Profit and (2) the most important Vacation Rental Metrics and how to use them."The Definitive Study of Vacation Rentals" By Richard B Evans has been published and is available on Amazon books at http://amzn.to/2iILtcg for $39.95.

Innkeepers Law - Should Vacation Rentals be Included?

The Revenue Report Card ·27 November 2017
Allow me to begin this article with a true story.In 1994 I took over a hotel as General Manager and immediately was called upon to attend a jury trial where a jewelry designer was suing the hotel because of a $500,000 jewelry theft from his room.Without going into details of the case, the suit became a "he said, she said" battle of whether "Innkeepers Law" was posted on the back of the entrance door. The jury found the hotel to be 30% negligent.We proved that Innkeepers Law was on the back of the door (despite that the plaintiff swore it wasn't) and the reward was $300 ($1,000 x 30%) instead of $150,000 ($500,000 x 30%).NOTE: "Public lodging facilities" cannot be found liable, beyond $1,000, for cash or valuables stolen from a "room" if Innkeepers Law is posted in a conspicuous place.Innkeepers Law also....Provides legal mechanisms for the manager of a "public lodging facility" to set short term vacation terms without entering into formal real estate leases and allows guests to be immediately evicted without going through formal eviction proceedings.Obligates "public lodging facilities" with a duty to protect their guests by providing secure safe quarters and covers other areas such as overbooking, in-room safes, and guest discrimination.Do Vacation Rental "homes" qualify as "Public Lodging Facilities"?After thoroughly searching the web, calling a few lawyers and making a few calls to "those in the know"; some said YES and some said MAYBE; but no one gave me a DEFINITIVE NO. The question seems to have even temporarily stumped my home state Lodging Association expert on Innkeepers Law!Rather than go into a desecration about interpretations of the law, my discussion today is much simplifier; should Vacation Rental "homeowners" and Operators be protected?The earliest laws regarding guest rights, dates back to ancient Babylon, around 1700 B.C., when Hammurabi ordered death for Innkeepers whose negligence caused inconvenience or injury to guests! - Thank you Travel Tips; "Innkeepers laws: What are they? By Amy Bradley-Hole".Innkeepers Law today, although less severe (!), protects both guest and lodge. Why then shouldn't it apply to Vacation Rentals?In addition to the aforementioned, in some states the law requires that the Innkeeper (1) provide reasonable alternative accommodations in case of overbookings and (2) the duty "to protect" inclusive of the responsibility to provide safe, properly maintained quarters.Based on that described, it would seem that these protections should be afforded to both guests of and Operators of Vacation Rental businesses.One of the hurdles would seem to be that Vacation Rental Companies are using a formal real estate lease to engage each guest. Needless to say, hotels and bed & breakfasts don't need to do this.NOTE: Did you know that if a Vacation Rental Company is renting transient units in a condo-hotel, they must post an eviction notice on the unit door and then go to court in order to evict an unruly guest! In that same condo-hotel, the hotel program can evict unruly guests legally without going to court. Despite the ambiguity of the law, I always posted Innkeepers Law on the back of the front entrance door of Vacation Rental homes I owned. Further, I had guests (in addition to Rental Agreements) sign a Registration Card at check-in with language that supported Innkeepers Law.My view is that it's "better to attempt to stay safe than to be sorry later" and until a legal precedent is set, this seems to be the safe and prudent way to go.TIP: If a burglary occurred at one of your "homes"; at an appropriate moment, pull the police officer aside and ask him/her to include in police report that the Innkeepers Law is in place in the back of the front door.Rhetorical QuestionWhy should any Vacation Rental operator be held responsible because a jewelry salesman decides he/she is NOT GOING TO:place $500k of jewelry into a convention center safe provided place $500k of jewelry in a front desk safe box provided, place $500k of jewelry in a room safe provided.....and instead, wrap a towel around a bag (holding $500k in jewelry!), slide it under the TV and go to dinner?With the lack of clarity on the application of today's Innkeeper Laws, hotels are protected, vacation rental homes are not.
Article by Richard Evans

I have my Exit Survey Results...now what?

The Revenue Report Card ·18 October 2017
Exit Survey used in 1985.In 1985 I was fortunate to sit next to the general manager of the Waldorf Astoria at Cornell's general manager program. His presentation on exit surveying affected my hospitality life for the next 30 years! When I returned home I put what I had learned into play. I started a small exit survey business on the side and put a program into over 20 hotels. By following the exact "Waldorf" model, these hotels received a 63% average response from every guest that stayed with them. Who could argue? This was an amazing result. I'll share one of the tallied feedback reports with you below.What you see above is the exact exit survey used. It was simple, limited in scope and guests filled them out when presented at check-out at the front desk. I'll share the exact sequence of that presentation. It is why we received such high feed back.NOTE: Times, of course have changed and so too has exit surveying. The surveys today are emailed and more elaborate. They are sent after the guest leaves, and my understanding is that an average return is about 32%. It, however uncovered so many more aspects of guests' experiences, staff performance and an overall outlook of properties then what I was getting. Which is better? For detail, clearly today's model.I had the opportunity to recently discuss exit surveying with Kyle Buchner, the CEO of Navis (the Navis Way) who have taken exit surveying to the next level. They send 2 surveys, one while the guest is still in house (or mid-stay), and the extended version after check out. It allows management to quickly respond to in-house guest needs.Before I make this presentation, let me reiterate the theme:I have my Exit Survey Results...now what?In 1985 when a guest came to the desk to check-out the agent would say, "Mr. Smith, while I prepare your folio, would you take a moment to fill out this brief survey? It will help us improve." The agent would turn away and the guest would be left with the survey, an envelope and pen. The envelope would be sealed and dropped in a lock box. Again, 63% responded.TIP: A big part of collecting such a high number of surveys was in allowing the guest ample space and privacy while the folio was being prepared. TIP: In Vacation Rentals, during the check-out visit, the guest is asked if he/she would fill out a survey during the final walk through by the VR agent. This is also highly affective.Results should always be tallied within 2 days and the "Waldorf Plan" was put into playEach week a Task Force chaired by a senior manager and eight hourly staff members (hourly staff changed every month) met. Each would be provided with the tallied results and all guest comments. A real life example, without comments, is shown below.Since surveys then were tallied by an assistant administrator on excel, he/she would immediately create a requisition for housekeeping or maintenance regarding reported problems.NOTE: A dripping faucet irritating a guest at night might not have been uncovered for weeks. Now it could be identified and dealt with immediately. NOTE: Exit Surveys today are tallied digitally with a quicker turnaround time.The "task force" reviewed the feedback received:Exceeded ExpectationsMet ExpectationsFell Short of ExpectationsThe questions on the survey received the following scores on "Met and Exceeded Expectation" above:Hotel Overall 85.4%Check-in Experience 97.8%Comfort of Bedding 86.1%Quality of Housekeeping 89.8%Restaurant 82.6%These results were also posted in each department each weekHourly staff inevitably would go back to their peers and discuss results. As weeks went by staff would excitedly gather around the bulletin board to check the "scores" and discuss them. Guess what? Results improved. As scores rose the staff would congratulate one another. Recognition and reward became an important part of property improvement.TIP: We would present the most recognized staff members with a $100 check at the properties monthly luncheon.Would you consider staying with us again? A valuable question. The 90.6% affirmative response above meant that these guests were immediately placed on the email list. With all we spend in bringing guests to our properties, the Repeat Guest revenue channel, with an average channel cost of 3%, has the majority of revenue earned going directly to the bottom line.Staff recognition is also a powerful tool. It became a competition of sorts and everyone was proudly wearing their name tags!TIP: In over 8 years we would see the same winners time after time. (The concierge was always a shoe in!) So we changed the reward system so that each department would recognize their leader. The comment section is also extremely valuable. The question what did you enjoy the most was almost always the same. Most hotels I dealt with were oceanfront properties and the standard answer was "the beach", the ocean", "the beach", "the ocean"... So not much to be learned there most of the time.The question, what did you enjoy least about your stay is very valuable. It would bring things that needed to be dealt with, to our immediate attention and that brought about a great deal of task force discussion, problem solving and ultimately resolution.Example: Food arriving late or cold from room service, housekeepers speaking loudly in corridors before their shift, uncomfortable mattresses, requested towels never delivered and the like. TIP: The Navis mid -stay survey uncovers issues as the guest is experiencing them and allows management to recognize, correct and make amends with guests; and in close to real time!Each problem was solvable. The "task forces" duty is to discuss and find solutions and then to formally pass them on to the general manager. The GM would make an assessment of Page 5 recommendations and when appropriate, create Standard Operating Procedures to resolve issues.Staff looked forward to the "task force' meetings and their involvement gave them a sense of pride and feeling of "ownership" in contributing to the company's success.Finally, we would change the opening five questions on the survey periodically if conventions were in town, groups were in house or we wanted to test different areas our guests' stay and experience.Exit surveying, is one of the most powerful tools I have every used in operating hotels and vacation rentals.Thank you Waldorf Astoria!The "Definitive Study of Vacation Rentals" can be purchased by contacting me atRichE1212@gmail.com. It will be available on Amazon.
Article by Richard B. Evans

Vacation Rental vs Condo-Hotel vs Hotel Financial Models

The Revenue Report Card · 9 October 2017
That time is upon us. Below please note four pro formas and how they differ.Vacation Rentals financial models, in some cases, aren't so different from traditional hotels. In other cases they break with traditional revenue and expenditure norms by adding different revenue opportunities, hybrid housekeeping options, maintenance departments that earn revenues and "homeowners" who absorb certain substantial costs instead of the vacation rental company.Kindly look at the 4 pro formas below that represent (1) Vacation Rental Companies that deal in condominium space, (2) Vacation Rental Companies that deal in homes, (3) Condo Hotel Programs and (4) Hotels.Exhibit "A" represents 4 diamond properties in which occupancy, average daily rate and length of stay show variations. In essence it shows a more realistic view of how businesses of this size and caliber (75 units and 4 diamond) and typically flow through to the bottom line.Exhibit "B" represents 4 diamond properties in which metrics mentioned are all the same. In essence it tests their flow through to the bottom line with typical metrics and expenditures in each financial model.Exhibit "A" - Occupancy and ADR VaryExhibit "A" shows occupancies of 67.9%, 67.9%, 72% and 76%, average daily rates of $300, $400, $350 and $370 and average lengths of stay of 4.1, 4.8, 3.1 and 2.3 on VR condos, VR homes, Condo Hotels and Hotels, respectively.Average Length of Stay is the "driver" on some revenues and costs that are based on reservations and not room nights occupied.We can see that vacation rental companies can pay a 65% distribution to "unit" owners while condo hotels are distributing 45%. This can vary based on profitability.Condo Hotels in this model earn higher Gross Reservation Revenues than VR Condos. VR Homes in many cases are big ticket "items" earning higher average daily rates.As is typical to hotels the "Rooms Division" has a 24% cost (limited service) when comparing Cost to Sales.Above, VR condos and homeowners are paying for towels & linens and since housekeeping cost is a profit center, it is broken out and shown separately. The Rooms Division cost, therefore is reduced by these amounts and savings from hybrid housekeeping methods.Administrative & General is also reduced by merchant fees (credit card) because many vacation rental companies charge their guests for merchant fees.The bottom line flow through, after distributions and other cost variations, shows vacation rentals bringing 16.5% and 14.1% to the bottom line. Condo hotels are bringing 14.9% and hotels 32.5%, all before Debt Service and Other Fixed Charges.Exhibit "B" - Occupancy and ADR are the sameExhibit "B" shows occupancies of 72%, average daily rates of $300 and average lengths of stay of 4.1, 4.8, 3.1 and 2.3 on vacation rental condos, vacation rental homes, Condo Hotels and Hotels, respectively.We can see that vacation rental companies can pay a 65% distribution to "unit" owners while condo hotels are distributing 45%. This can vary based on profitability.Hotels in this model, despite sharing the same occupancy and ADR, earn higher Gross Reservation Revenues because they have no Owner Occupancy (when an owner in a vacation rental or condo hotel stays in his home or condo).The bottom line flow through, after distributions and other variations, shows vacation rentals bringing 16.0% and 15.8% to the bottom line. Condo hotels are bringing 14.6% and hotels 31.7%, all before Debt Service and Other Fixed Charges.Final ObservationHotels and Condo Hotels typically invest more in revenue management and as a result earn higher Gross Reservation Revenues. If that gap narrows than the 65% distribution by vacation rentals compared to the 45% distribution paid by condo hotels will have even more impact.In both cases, unit owner distributions are calculated on Gross Reservation Revenues.Vacation rental companies do not have the burden that condo hotel programs have of buying space in the condo. Those additional costs mean that the maximum they can pay and also make a reasonable profit (4 diamond) is 45%.Hotels bring more to the bottom line but they also carry substantially higher debt because of the initial cost of the hotel and having the burden of maintenance and refurbishment of the hotel.Which is best? You decide!The Definitive Study of Vacation Rentals is being finalized before being published. It will be available on Amazon shortly. If you would like a copy of some great chapters write me a note and I'll be pleased to get it out to you. Simply email me atRichE1212@gmail.com.

Conventional Theory vs Person Wisdom vs Hotel Software

The Revenue Report Card · 8 May 2017
There are times when words cannot sufficiently convey what numbers can.Today's article is a true life narrative on how my thinking as a revenue manager evolved over 22 years. After 4 Super Bowls, 20 Boat Shows and 12 Ultra Music Festivals I tested and teased markets and found that in certain events wisdom, or "my gut instinct", prevailed over software and conventional theory.The "Super Bowl", as described here today can be used metaphorically and replaced by any abnormally popular city wide event in which last minute demand is high. These can include the Kentucky Derby, heavy weight championship bouts, running with the bulls, Daytona or Indy 500's, regattas, marathons, soccer championships, conventions, NCAA finals, the World Series, NBA finals and many more. Despite the wisdom RM's and DOS's gain over the years, alternative strategies will at times bring confrontation from detractors who will question theory, make disparaging remarks and in some cases go on attack. The intellectuals confront you; the cowards whisper from behind.When you've lived through certain events, you use those lessons with confidence. And that confidence gains momentum over the years. Above all, you must have the courage and conviction to stay the course. Risk only exists when you don't have the history of experiences that insures optimal results from your decision making. Your wisdom enables you to steer the ship with confidence. And in these circumstances...YOU hopefully are given the reins to steer the ship.The following metrics are real. I sometimes joke with peers and say that "out of 4 Super Bowls I won 2... decisively!" In an attempt to be as accurate as possible, I went back to old financial data from each of those four Super Bowls and used the first 2 to arrive at the metrics I call a "Typical Hotel Super Bowl" in blue, below. During those first 2 Super Bowls I feel that I followed the conventional wisdom that most hotels do in creating Super Bowl strategy.First of all, a $1,280,800 week in a 3.5 diamond hotel, in its own right, needs no amplification. Add to that, that we out performed typical hotels who followed conventional revenue wisdom by $491,425 and it is equally as difficult to absorb. Yet the reality is that we stayed the course despite many distractions and detractors. My hotel principles were absentee owners and I shared what I was doing toward Super Bowls with them and was always grateful for their support. With other executives questioning my actions, I was thankful for the backing and trust, but despite this these can still be difficult roads to manage psychologically.You know I sometimes thought, why not just go with the conventional wisdom everyone else did and save myself a great deal of anguish! After all, all properties sold out during Super Bowls. Everyone did well and frankly, at the end of the day some owners never realize how much additional wealth, stellar revenue management provides to them on such occasions! This is the hard sad truth for many RM's and DOS's.But with that said, I like to think that I have always had the same fire in my belly that most revenue managers do. As critical thinkers we could never be satisfied just to succeed. When opportunity knocks, critical thinkers answer. Events like Super Bowls create special opportunities to create vast wealth and roll up the score.I've had the great honor to get to know so many revenue executives over the years and in discussion have come to know that the vast majority simply can't, in good conscious, retire at night believing that revenues are ever left "on the table". Yes, the mental toll can be exhausting and yet we all know that to achieve greatness and leave our mark we must test all possible considerations and exploit what we've grown to know ~ wisdom after all is part of what makes us great and unique. We add to that revenue wisdom each and every day!Super BowlsA day after the semi-final games I opened all 495 units up for sale. For 24 hours we tested a 7 night minimum length of stay restriction and then pulled back to 6 nights. We maintained a very healthy rate and navigated our way, at times going a little higher in order to control the pace of reservations. We wanted to be able to wait for possible 7, 8 or 9 nighters without selling out to quickly at 6 nights! We succeeded and sold out the day before game day. Yes I can say looking back that we USED TIME WISELY (http://www.hospitalitynet.org/news/4082294.html ) and achieved optimal results!We gave Expedia 5 reservations and Wholesaler / Receptive Operators took another 30. That was it and we held tight from there.Our market manager from Expedia called 3 weeks out to see if we had any rooms we could spare. I said sure, I have 495! Some responses you just can never forget. She said, Richard.... "Are you crazy?" "You're going to get stuck with rooms". I gave her 5 reservations. I never faltered.My hotel owner stopped in town for a night and during dinner said, "by the way how are you doing with your Super Bowl reservations?" As before, I said I haven't sold anything because I was holding out until after the semi-finals. Like with Expedia the response first brought an awkward silence followed by.... "Ok Richard, are you sure?" I was. The principles were rewarded amply.There are times when writers describe what true loneliness feels like. It's something that resonates deep in your sole. I must tell you that one month prior to my Super Bowl #3 in 2007, felt like one of the loneliest periods of my life. I truly felt the weight of my decisions on my shoulders. And as I've already said, that burden is always amplified by colleagues who are constantly questioning and challenging your reasoning. But prevailing confidence won those days.I'm glad to report that in 2010, for my Super Bowl #4, no such anxiety existed. Finally, I had nothing but confidence because I had lived through and knew exactly what to expect. Detractors, that 4th Super Bowl year no longer existed. They had all learned the value of wisdom and became believers.Yes I won my last two Super Bowls. But only truly enjoyed the last one!To reiterate, it would always have been so easy to have gone with conventional wisdom in filling hotels over the years during special events. But the internal consequences would have been severe and left me with little joy. Critical thinkers love to be challenged and win! Bucking Super Bowl Conventional Wisdom.Super Bowl demand in warm weather climates is un-paralleled, no matter the teams, the weather, the distance or even when catastrophe strikes demand is unwavering.Hotels within a 10 mile radius of stadiums typically have the ability to sell out (our unconstrained demand study showed that we turned away enough reservations to have filled our hotels 3x if we had used a 5 night MLOS restriction) within the 2 week period immediately preceding game day with high length of stay restrictions and strong rates.Hurricane Ida moved through New Orleans in November, 2009 and the Saints played the Super Bowl in Miami in February, 2010. I hesitated for a moment, thinking that the after math of the devastation in New Orleans might have an impact on the turn out. But I stayed the course and there was no discernable change from other Super Bowl years that was noteworthy.Cities that host the Super Bowl seem to breathe a collective sigh of relief when New York, Los Angeles, Chicago and/or other large city teams make it to the final game. Despite this conventional wisdom, my 4 experiences showed that the city from which teams came barely mattered! The following teams played in Miami from 1995 to 2010; San Francisco, San Diego, Denver, Atlanta, Indianapolis (2x), Chicago and New Orleans. Hotel demand never wavered and was equally as strong each and every year.Be warned, many attendees will try to entice you to provide lower prices and stay restrictions early on. The NFL, your Convention Bureau, NFL Alumni, NFL Hall of Fame, Networks, Executives and the like will all come out of the wood work early on requesting 2 to 4 night reservations and wanting low rates for large blocks. Resist the temptation. After testing the market you will find your "sweet spot" and I believe like me you will find that to be close to 6 nights!Be warned, many will attempt to put fear in your heart by telling you that your methodology is not sound. Many will tell you that you need to fill your hotel in a similar manner to which you normally approach sell outs; in tiers, at different rates, at different thresholds. But wisdom tells you that there are few events like a Super Bowl and there is nothing normal about your approach to it. Resist. Don't waiver. Stay the course. In this case the end result was a gain of $491,425 over competitors.As one who relies on revenue management tools, history and current market conditions and trends to make decisions I rarely deviate in my methodology. In many cases conventional revenue wisdom is close to the truth. But in certain cases (cases in which you've suffered the blood, sweat and tears of experience) old time wisdom prevails. Don't fear it; embrace it. Don't let others dissuade you; follow "your gut instinct"~ let wisdom prevail!

Time is on your side in Optimizing Revenues

The Revenue Report Card ·21 April 2017
"Time is on Your Side" to baby boomers is a famous song title and lyric by the Rolling Stones. It also should be the rallying cry of today's Revenue Manager.Ten years ago I had just taken the "revenue reins" at a new hotel and was getting to know everyone. Beginning days are often filled with pleasant hellos and polite conversations and I stayed the course! The Director of Sales at some point moseyed into my office and I could see right away that he was very excited to show me something.After some small talk Juan took out his "reservation control report". With great pride he showed me a sold out Saturday that was 2 months away that he explained, happened primarily because of a group he brought in for this one night.It was a proud moment for him. It was an eye opening event for me! I simply didn't have the heart to tell him. But I knew at some point I would have to pick that moment carefully and discuss TIME and REVENUE STRATEGY with him in a positive way.With 50+ and 40+ units left to sell on the Thursday and Friday immediately preceding that sold out date and 60+ on the Sunday following (Exhibit "A")..... it was as close to a revenue management catastrophe as you could get!In that 2 month lead-in TIME we could have managed our "unsold unit parity" from that Wednesday through Saturday and more than likely filled 3 nights and moved the mark on that Wednesday as well.. That result, of course, would have been that we better maximize our revenues and profitability.In managing revenues when time is plentiful and before assured sell out dates that "TIME" is the equivalent of money in the bank. Those precious minutes, hours, days and weeks before sell-out dates must be guarded and "SPENT" with great care. "Over spending" in advance often equates to wasted opportunities, deficient optimization and "money left on the table".How are you "spending" your time?!"Spending" Options!We have two options in "spending" our time.Holding all or most of our inventory to wait for a late expected surge to release units.Release inventory slowly and methodically over time.Every week is unique. DEMAND is our father clock.1) Holding all or most of our inventory to wait for a late expected surge to release units would better serve hotels during guaranteed high demand periods like special events. In south Florida the Super Bowl, the Ultra Music Festival and the Boat Show allow those in the know to use 6, 5 and 5 night minimum length of stay restrictions with solid rates from early on.The best use of TIME involving these 3 south Florida special events would be to place the higher rate and restriction on appropriate dates one year in advance and stay the course. Some might argue this philosophy but there are times when old timer wisdom wins out over scientific equation!2) Releasing inventory slowly and methodically over time serves weekend resorts who sell out consistently.Here perhaps setting your "minimum length of stay" restriction one year out a little more aggressively than your "average length of stay" on that same weekend in the prior year, could serve you well. Needless to say, it's a little more complex than that, but it's good to be on offense and to set the stage early. Selling low and short early, leaves money on the table later.I have always felt that the beauty of revenue management is that we almost can't make a mistake if we're paying attention every day. Let me explain.For most of us it's a constant challenge "test and pull back", "test and pull back". If I'm always monitoring my demand and how I'm filling compared to prior years I can react quickly if my rates and/or restrictions are too aggressive and create resistance. But let's not forget that sometimes resistance is ok... if TIME allows the optimal to surface.Eventually we all find our sell-out "sweet spots" for each and every weekend; the perfect blend of rate and restriction.Unsold Unit ParityI manage my unsold unit parity from Wednesday through Saturday and keep those dates as tight as possible. I'm applying restrictions and manipulating rates as inventory on each day rises and falls, but is kept in check by the decisions and tweaks made.An interesting Study of time management philosophyI've studied the metrics of some of the hotels I've had the pleasure to serve and decided to put pencil to paper to show what TIME management can mean to Gross Reservation Revenues and profitability.In Exhibit "A.1" and "A.2" below, the hotel sells out two weeks in advance of the arrival date.In Exhibit "B.1" and "B.2"the hotel holds back and doesn't sell out until the Friday of that weekend; using those 2 extra weeks to (in "B.1" and "B.2") wait for optimal reservations of 3 or more nights.We know that weekends in both cases will sell out and so in both Exhibit "A" and Exhibit "B" Fridays and Saturdays are full.Using TIME wisely allows the property in Exhibit "B" to increase sales on Wednesday and Thursday, in my estimation by 3% and 11% respectively. At the same time I show a $5, $5, $10 and $10 increase on Wednesday, Thursday, Friday and Saturday in ADR. The philosophy as we get "closer-in" to those sell out dates, and as demand creates more compression, is that both these factors rise as demand increases.So let's take a conservative peak at these assumptions and what they could do in terms of our annual Gross Reservation Revenues and profitability.As always I use southeast Florida as an example and here we have 13 weeks that are in-season and 39 weeks that are off-season. The hotel in the example is 125 units.Simple Hotel in Exhibit "A" is not using good time management strategy. They have an 80.4% occupancy percentage and a $196.21 ADR.Simple Hotel in Exhibit "B" uses better time management strategy. They have an 82.9% occupancy percentage and a $201.14 ADR.Gross Reservation Revenue in Exhibit "A" is $7,180,225 and in Exhibit "B" $7,582,900.This produces a $402,675 increase in Gross Reservation Revenues annually. That's a 6% increase in Gross Reservation Revenues! And if the hotel is bringing 19% to the bottom line it's $76,508 more in Net Profit! Not bad for a 125 unit hotel!More Benefits from Time Management - Channel MixSo far my examination of Simple Hotel is.... simple! But here's where it gets a little bit more exhilarating!During the aforementioned 2 week TIME period (Exhibit "A" & "B"), I usually take the PACE of each revenue channel (shown in Exhibit "C" below) to determine whether they are ahead of last year's sellout PACE.If I'm a good deal ahead in, let's say, the Website and Repeat Guest channels, I see if I can become mathematically comfortable that we can reach the sell out if I close or restrict some of the less profitable channels. I don't like shutting down channels altogether but this is always an option.Needless to say, the earlier I can become comfortable and make this decision, the more profitable the hotel will be.I'm bringing more to the bottom line by carefully displacing business in sellouts by pushing more business through my most profitable channels.Channel Mix actions can push that 19% profit margin higher; 20% - 21%!?Do you know the peeking order of channels, from lowest cost to highest at your property? These change every month!!Hoping you "spend" your TIME wisely!!

The Merchant Model Effect on ADR, RevPAR & Profitability

The Revenue Report Card · 4 April 2017
Is stating that the industry standard of ADR and RevPAR "is an imperfect science" a provocative statement?Two ocean front hotels (Exhibit "A") sit side by side; each has the exact same ADR, Occupancy, Number of Units and RevPAR. Yet "Your Hotel" deposits and shows a net profit of $700,000 more than 'Your Neighbors Hotel" because of "channel mix" and the "merchant model effect".The "merchant model" of payment has been used by wholesalers, receptive-operators and until recently, most on-line travel agents (hereafter "OTA's"). The merchant model effect is a game changer in analytics.The ProblemThe industry currently calculates Average Daily Rate (hereafter "ADR") and RevPAR by combining the revenues of two uniquely different payment-sources. The first has their customers pay the hotel in full at check-in (they are paid their commissions at a later date by hotel check, credit card or ACH) and the second, a third party, accepts full payment directly from the customer and then removes their commission before paying the hotel (this is called paying the hotel in NET / or is a company that has a Merchant Model relationship with the hotel).It's easy to see the flaw here; we're combing two totally different payment methods and treating them as if they were the same when we calculate hotel Gross Reservation Revenue. But in doing this we are mixing apples and oranges!The case is best shown when one guest pays the Receptive Operator $250 for a one night stay at your hotel (using the merchant model in paying the hotel) and another guest pays "Your Hotel" $250 in the full amount (without the commission removed). Exhibit "B".For simplicity's sake, let's assume the hotel is paying (1) direct pay and (2) merchant model reservation sources a 25% commission.The Receptive Operator sends a payment to the hotel for that night for $187.50 ($250 - $62.50 commission).The OTA, on the other hand, has the client pay the hotel $250 at check-in in the full amount for that night.The hotel, on that evening, accrues/collects a total of $437.50 from both transactions ($250.00 + $187.50).The industry standard ADR calculation takes total Gross Reservation Revenues of $437.50 and divides that amount by the 2 room nights occupied for an ADR of $218.75. The reality however is that both guests paid the same $250 to stay at the hotel and so doesn't that mean that the real ADR should be $250 ($500 / 2 units occupied)?Further, the industry standard RevPAR calculation also uses total Gross Reservation Revenues of $437.50 and divides that amount by the total units available to sell that night. To simplify the example, let's assume here that hotel occupancy, on this night was 50%, and that the hotel had a total number of 4 units available for sale. The RevPAR calculated by industry standard would be $109.38. But as before, the dilemma is that the real RevPAR should be $125 ($500 / 4 units available for sale that night).The hotel financial statement (shown on Exhibit "C in the left column) shows total Gross Reservation Revenues of $437.50 ($500 less merchant model commissions of $62.50 for the merchant model transaction). The "Commission Expense" line item below Gross Reservation Revenues is from the other, non-merchant model transaction, in the amount of $62.50. You can see the inconsistency here.The Net Income in both cases is $375.00. Yet the merchant model business commission "is hidden" within the Gross Reservation Revenue line (circled in red above).The outcome is that the hotel executive never sees or is able to visually quantify this part of the cost equation; Gross Reservation Revenue is reduced with no explanation and, in turn, ADR and RevPAR are also reduced.One can only draw the conclusion then, when comparing "Your Hotel" to your competitive set, that the standard industry calculation of ADR and RevPAR is an imperfect science; unless all hotels in your Competitive Set have exactly the same Channel Mix.The Calculation: How did we get to the $700k differential?Let me show you how, in this case, "channel mix" coupled with "merchant model" contribution allowed "Your Hotel" to outperform "Your Neighbors Hotel" by $700,000 despite all industry standard metric evidence to the contrary.Exhibit D above, entitled "Channel Mix & Merchant Model Effect" shows "Your Hotel" and "Your Neighbors Hotel" are each using four revenue channels in your revenue channel mix. Two sources are full payment straight to the hotel and two sources are net payment via the merchant model arrangement.OTA merchant model,OTA guest pays full amount at check-in,Hotel - Vanity Web Site guest pays full amount at check-in,Wholesale merchant model.Each hotel shows Gross Reservations Revenues of $10,000,000.Each hotel has 118 rooms available for sale and uses industry standard calculations that show ADR of $330, Occupancy Percentage of 70 1/2 % and RevPAR of $232.The only difference that separates "Your Hotel" from "Your Neighbors Hotel" is Channel Mix.Here's where the two hotel performances part ways. If you take a specific look at the two merchant model channels I identified above ((1)OTA Merchant Model and (2) Wholesale Merchant Model) you can see the large hidden differentials between the columns that show what the "Guest Pays" and what the "Hotel Receives" (below). As I've said the hotel executive can not see this differential on a financial statement.Let's look at the "OTA - Merchant Model" line item, specifically to see that the OTA using the merchant model method in collecting $3,888,888 directly from the guest and then they turn around and pay "Your Hotel" $2,800,000 for that business. As already stated the $1,088,888 that was the OTA commissions are not seen by anyone. Secondly, both (1) your financial statement and (2) your industry calculated ADR & RevPAR uses that $2,800,000 in Gross Reservation Revenues when they calculate your ADR and RevPAR.Now please go to upper portion of Exhibit "D" and look at the line entitled "Average Daily Rate" and the line entitled "Annual RevPAR" and you will see that despite that your industry calculated ADR and RevPAR shows $330 and $232, respectively... the actual ADR and RevPAR should be $424 and $299 after placing all channels on an equal playing field (here we simply add back the commissions that were withheld in merchant market arrangements). The substantial differences of $94 and $67 tell the true tale of the tape regarding real ADR & RevPAR when all channels are placed on an equal playing field.As important, you can now compare your actual ADR & RevPAR of $424 and $299 to that of your neighbor's hotel (or your competitive set) who's earned an actual ADR & RevPAR of $362 and $255. The true score/ comparison then is that "Your Hotel" earned a $62 and $44 higher ADR and RevPAR then your neighbor. This is why you have deposited $700,000 more in your bank then he/she has!Viewing your industry metrics would make you believe that "Your Hotel" and "Your Neighbors Hotel" were both performing at the same level. As an owner, a manager or a management company you would falsely be led to believe that you were taking market share here and at least performing at the same level as your direct competitor. Industry metrics does not show you that "Your Hotels" channel mix was far superior to "Your Neighbors Hotel" channel mix and that, that enabled "Your Hotel" to deposit $700,000 more into the bank and also show $700,000 more in profit then your neighbor! That's the true tail of the tape!The Optimization ScoreThe Optimization Scores shown (see Exhibit "A") are 88.9 and 83.1 for "Your Hotel" and "Your Neighbors Hotel", respectively. In the calculation used to arrive at SCORES we "grosses up" all merchant model channels by the commission withheld by the vendors. Once done, we can then add those results directly to other revenue channel cost. All channels are then on a level playing field of comparison.Occupancy countsFinally, since Optimization Scores must take occupancy success into consideration I've used a factor that corrects the total SCORE by your success level indicated by your occupancy. Having an extremely high ADR of $1,000, at face value, would seem to be great, but if on further examination your occupancy is at 33%...well that's not so good!!The benchmark score of 88.9 above came from (1) your hotel overall combined revenue channel cost of 19.4% (2) in subtracting that cost from 100.0% (100.0% - 19.4%) we arrive at 80.6%, and then (3) multiplying that "revenue profit after channel cost percentage" by a factor that places a 70.5% occupancy achievement in a scoring range (see below) that is common. In this case 70.5% is multiplied by 1.103 to arrive at 88.9%.100.0% less 19.4% - 80.6 multiplied by 1.103 = 88.9The final step would be to use that 88.9 score as a benchmark and then compare it to your subsequent achievement scores. This would allow revenue managers to identify and improve hotel profitability by optimizing channel mix and the amount of merchant model business entertained. It also gives the Revenue Manager a way to show executive management the level to which his/her actions have contributed the the hotels bottom line!If you wished to take this one step further, you could make this calculation monthly and examine month over month inroads to higher profitability.Scoring Range90%-100% elite!80%-89% excellent70%-79% good60%-69% fair 50%-59% requires attention.

Thou Shalt Not Steal...Hotel / Vacation Rental Towels!

The Revenue Report Card ·25 January 2017
I was reviewing our hotel financial statement with the owner and as usual the second highest expense line item was "towels & linens".The owner was incensed and turned to me and said "I've had enough of this. Guests are killing us by stealing our towels! I want to put a device at the front door that sets off an alarm when someone tries to leave with our towels".I calmed him down but really didn't know what to say. Yes "towel cost" is always high. But this has been the case at every hotel I've ever worked at. I told him that "some of our best customers were probably taking a towel or two" and we'd be better off to just absorb it as a cost of doing business and not embarrass good repeat guests.But I left that discussion really wanting to understand the metric. Were a vast amount of our guests really packing up our towels!? You've seen the cartoons and heard the jokes about stealing hotel towels. Haven't you?! You can see a few in Exhibits "B", at article end.I went to work and completed the following metric study (Exhibit "A").First question, did the study cause you to look and think twice?! Does it in any way make you rethink the age old adage - that "guests are stealing a huge number of towels?!77.6% (above) of annual "towel and linen" purchases comes from bed linens! At $108, $114 and $111 (3.5 diamond) per dozen being paid for various linen types it's evident that the lion's share of the "towel & linen" expense line comes from bed linens; not towels! Are bed linen being stolen?!I called my friend Dennis Greenwald whose family has been in the towel and linen business for 3 generations (Hurricane Towels and Linens provided me with the prices above) and I really drilled into the metrics with him.Here is what I learned; towels and linens typically have a different mixtures of cotton and polyester. Both towels & linens typically can be washed 50 times before almost all of the cotton is washed out of the item and at that point should be retired. At that point, if you hold a sheet up to the light, you can see through it in certain spots. The polyester is holding the item together.Still, if no one is looking over the executive housekeepers shoulder, he or she may continue to use towels & linens for up to 80 washes or more before retiring them. If you look at Exhibit "A" you can see that I was very liberal and used more than 50 washes in the metric study (before retiring items).Next comes towel loss through damage and theft. It could be lipstick, grease, a kitchen spill, a guests need to clean his/her bicycle, motorcycle or car and other situations that arise. All of these things contribute to "towel loss" and cause towels to be retired well before useful lives are over.Finally, there is "theft". This can come in the form of "guests taking" or "staff stealing". Sometimes guests go to the beach with what they feel are disposable towels. Or joggers take wash cloths to dab sweat from their brows. I sometimes wonder if I went to housekeeper's homes if I'd find their bathrooms fully stocked with hotel towels & linens (it's not a malicious thought, I've become less trusting over the years through life experiences)! And I once was sitting in my office, later than anyone expected, and watched a large box of towels going over the top of wall! These occurrences are why we hotel and vacation rental operators believe we're taking a big "towel" hit on our financials.To reiterate, however, the vast majority of what we're spending is tied up in linens (i.e. - fitted sheets, flat sheets & short flat sheets) and they are the most expensive components of our "towel & linen" purchases. So a flaw seems to exist in our theory.My "logical" beliefs, still tell me that most of what is walking out of our "front doors" are hand towels (at $16 a dozen) and wash cloths (at $6.50 a dozen)! Hardly substantial costs. I'd also like to think that bath towels, at $55.57 per dozen, are NOT making a mass exodus through theft!? Am I wrong?Sheets costing $108 to $150 a dozen, I believe are less likely to be stolen then bath towels. But again, this is my assumption.So in summary, whatever "towels" ARE walking out of "front doors" simply can't seem to be "material" (so to speak!) items. :)Maybe it's time to reassess and dispel old beliefs in order to better understand our second highest line item in the Rooms Division department.Faith in humanity, partially restored!!

Mega Vacation Rental Companies vs Hotel Brands

The Revenue Report Card ·20 January 2017
A study of the "Mega Vacation Rental" business model (companies with a minimum of fifty and often hundreds of rental units) shows some significant differences when comparing their operations and metrics to their established hotel industry brethren.While the Vacation Rental industry, in this new P2P environment, is young and continues to evolve, it's important that certain comparisons be made to its older transient-rental relative (hotels). After all, traditional hotel metrics have been established over many decades of perfecting that business model and many of those metrics are comparable to the Mega Vacation Rental business.The Mega Vacation Rental business, driven on the whole by a younger generation, has in many ways brought several new and fresh approaches to the transient-rental equation. One of these has been to turn over the complete housekeeping responsibility (including the purchase of all related supplies) to new hybrid housekeeping businesses. This new housekeeping model creates a simpler and more cost efficient solution to Mega Vacation Rental Companies.This new hybrid housekeeping businesses, are no longer being hired to solely provide labor. Instead, in exchange for a set fee (see Exhibit "A", below) these companies take full responsibility for every aspect of unit turnover.For a set fee per cleaning, they become responsible for purchasing towels, linens, shampoos, conditioners, lotions soaps, toilet paper, facial tissue and of course for cleaning the apartments and readying them for the next occupant.This "simplification" in combining all housekeeping costs into that one fee provides Vacation Rental accounting departments' with a clear and simple advantage. Bookkeeping and budgeting becomes simple and there is no longer a need to account for housekeeping inventories, order supplies and/or purchase equipment (i.e. vacuums).Essentially, placing burdens that were once the responsibility of the Vacation Rental Company onto the independent, reduces a number of "the moving parts" that can make the Vacation Rental businesses difficult to manage.Here, as in any new business consideration, "the devil is in the details" and a good solid contract must outline responsibilities and expectations. It is essential that this company perform background checks, establish a code of conduct, and adhere to a reporting system that quickly relays unit conditions, provides workman's compensation and enforces personal hygiene rules, to name a few things.Maintenance departments in Vacation Rental businesses also differ from "hotel models" in that they become "profit centers" (and act as businesses within businesses). That is not to say that they necessarily will earn a profit, but revenues generated in that department can greatly offset overall maintenance cost.The following is a screen cast I narrated on Condo-Hotels many years ago. It is very relevant to this discussion since Vacation Rentals and Condo Hotels both have the ability to earn revenues in their Maintenance Departments.Work performed for rental apartment owners, is typically billed with a 20% - 25% markup (this is still provides the apartment owner with substantial savings over having the work performed by an independent outside contractor) so there is a benefit to the owner combined with the revenue opportunity to the VRC. The hurdle is in managing the logistics of staff, and materials.I've now discussed two of the three Roving Service Agent positions, (1) housekeeping and (2) maintenance and the last and perhaps the most challenging is the (3) Roving Service Agent "in the field" and who is responsible for guests.Whereas a hotel operates within the set boundaries of a property, Vacation Rental homes/apartments are often spread out over large areas. Managing the logistics of the "in the field" staff is often the greatest challenge in the Mega Vacation Rental business. Roving Service Agent's that are responsible for "guests" have a lot of responsibility placed on their shoulders and are often not appropriately supported, When this occurs the position will see a lot of turn-over (in fact burn out). A six day work week is OK, but based on my experience no more than 55 hours (that includes "on-call time") should be asked of any agent. Please also keep in mind that Vacation Rental businesses that insist that their Roving Service Agent's, work as independent contractors, when over 40 hours a week are required, and contributes to the high turnover mentioned.While smart phones and related APPS are (i) used to monitor flights, (ii) text message and/or (iii) call incoming guests, Roving Service Agents still find themselves with a great deal of "wait time". This is why consideration must be given when hiring to finding "local" RSA's. It lightens this burden considerably. Flights that are delayed still have guests that have to be checked-in. I offer some "best practices" in the book to remedy this situation.Mega Vacation Rental Companies are well served in having a centrally located check-in office (that can also double as a housekeeping and maintenance departments). Real Estate Agents who are involved in Vacation Rentals enjoy the benefit of having their offices serve them in this way.After many years I've come to the conclusion that the KEY TO THE SUCCESS of any Mega Vacation Rental Company will always be in mastering the logistics process of their Roving Service Agents.Replacing Furniture, Fixtures and Equipment (FF&E packages) in rental apartments is, like in hotels, just part of the equation. It must be done every 5 to 6 years.Here we see another unique solution on the horizon that is to be made available through Vacation Rental programs to apartment owners. An independent company is offering different caliber "FF&E packages" to rental programs via operating leases. They require limited upfront cash and are paid from Vacation Rental proceeds.An example of this could be that a $9,000 "FF&E Package" would be provided to unit owners at a cost of $225 a month with no money down. That lease payment is made by the Vacation Rental Company from apartment rental proceeds. If during the lease, a television or a dining room seat needs to be replaced, new items are simply placed into the unit and the monthly lease payment of $225 remains the same.In summary, the Mega Vacation Rental business sees a lot of smart "out of the box" thinking that, in many cases, saves time and money. Challenges in this space are often unique to it and the result of the "off-site" nature of Vacation Rentals. But a great deal of the things Vacation Rental Companies do and money they spend is exactly the same as that experienced by hotels (i.e. - guest supplies, cleaning supplies, towel & linen useful life, staffing, etc.). It is why using hotel metrics and modifying them where necessary provides accurate results.I use the annual Host Report (by Smith Travel) and modify it to arrive at potential profitability. If you making a commitment to being "MEGA" in size and nature these studies are mandatory and should be considered.I've been an executive in the Vacation Rental, Hotel and Condo Hotel business for over 25 years and served over 4 million guests. I just completed a book entitled "The Definitive Study of Vacation Rentals" and I'd be very pleased to share, "Chapter 6 - the Roving Service Manager" with you as a gift. Just drop me a line at RichE1212@gmail.com.My VR Blog can be found at http://vacationrentalanswers.simplesite.com/

The new Hollywood Beach in south Florida

The Revenue Report Card · 6 June 2016
Having been part of the revival in south beach, Florida in the late 1980's and early 1990's I'm seeing things in Hollywood Beach Florida that are reminiscent of that time and place; blighted areas, local tourist traffic, structures in need of repair and "the arrival of new owners, builders, hotels, patrons and guests"; all of which make for an interesting comparison, from here to there, now to then.I can't help but sense the same optimism, cynicism in the air accompanied by changes to tourist mix and the flow of booking patterns. I had lived through this once before a long time ago!At the Avalon, Majestic, Penguin and National Hotels on South Beach we painted old art deco furniture, left the rooms sparse and called it "minimalistic design"... and tourists came in droves. They couldn't get enough of it! Fast forward 25 years and South Beach has matured and is now referred to as one of the top tourist destinations in the world. I certainly am not saying that Hollywood Beach has the same type of appeal that south beach does; nor will or should it. But Hollywood Beach certainly does have their own laid back charm and appeal that makes it a unique destination in their own right.Upon the completion of Margaritaville this past year, Hollywood Beach, saw a slight uptick in reservations, busy weekends, higher occupancies and higher daily rates. In south beach, when comparing our initial "rebirth year" to those immediately preceding it, you could say that it could best be described as a quantum leap! With the way things are unfolding on Hollywood Beach one could project that 2017 and 2018 will be those quantum leap years.On Ocean Drive our front porch/curbside restaurants began to thrive. We introduced live music for our patrons to enjoy as they dined. We placed a model, a food display and a menu board on the side walk to entice those strolling down the heavily trafficked sidewalk to join us for lunch or dinner. Walking down the Hollywood Beach Broadwalk is more casual affair and while I don't see the models of SOBE (!), I do note that the foot traffic is heavy and that waitresses are calling out to potential patrons from the cafe's and both they and the bars are busier than I ever remembered!In South Beach in our initial winter we saw a substantial increase in occupancy and rate; with the occupancy topping out at 75% annually. Not bad, compared to the year prior, where the hotels were running annually in the low to mid 60% range annually. (Jumping ahead to today, you will frequently find occupancies in the mid to high 80% range!) Summers in south beach then were "ghost town like" and that can be seen here in Hollywood Beach today.The Historic Perspective of Hollywood BeachIt is interesting to note that Hollywood Beach has historically been a difficult destination to market and one could say "with a bit of an identity problem". With Fort Lauderdale immediately to the north and taking the lion's share of attention and Miami Beach to the south, it has been difficult to market Hollywood Beach. While on the west coast of the USA Hollywood CA thrived, Hollywood FL did not. If anything, Hollywood Beach's "claim to fame" was that it was described as a "blue collar" destination. No frills, easy and casual. If that was indeed true, then some might say that the addition of Jimmy Buffet's Margaritaville was a good fit to that local genre.Margaritaville arrived this past year and joined the Marriott Beach Resort (to the north) as the only other respectable large resort on the beach. To the south sat and sits the old behemoth "castle" known as Hollywood Beach Resort. This magnificent structure, with its rich history should in its own right be the southern pearl of Hollywood Beach. Yet for decades it has been a challenged property that has always had incredible potential.As one drives down Hollywood Blvd., past the tall palm trees situated on each side of the road, this amazing structure comes into view. It serves as both the gateway to Hollywood Beach and a well-known landmark that one can never forget. It is both appealing and majestic.Like the Versace Mansion located on Ocean Drive, it too was in dilapidated condition then. It became one of the anchor properties on Ocean Drive once renovated and likewise everyone on Hollywood Beach believes that a remedy will ultimately come to the Hollywood Beach Resort. That said, this properties restoration, relaunch and repositioning will be key to completing the Hollywood Beach landscape. With three large thriving properties along the Broadwalk, each with its own brand and appeal, Hollywood Beach will be well on its way.Other comparisons and similarities to the revival of south beach.Hotels on Ocean Drive in South Beach, and those that sit on the Broadwalk in Hollywood Beach, both sit immediately across from sandy beaches of the Atlantic Ocean; each provides an international assortment of cafe's and eateries. South Beach has become much more sophisticated over the years but believe me, we started out very simply back then. Much the same as in south beach, the broadwalk cafe's and bars provide live music and the atmosphere in both locations while different, is vibrant and fun.Perhaps one of the biggest differences in comparing the rise of South Beach and what is occurring in Hollywood Beach is the introduction of the large anchor hotel properties in each of the areas and the role they each play(ed). In South Beach it was, Loews Resort and in Hollywood Beach it is Margaritaville Resort. Loew's was added to an established maturing market, while Margaritaville is helping to define the Hollywood Beach market. Loew's was built to provide their guests with privacy, while Margaritaville has in many ways opened its doors to be "the main event and attraction on the beach". If surrounding hotels embrace this, they can provide an add-on benefit to what they provide to their guests. Live entertainment each night in the Margaritaville band shell, adjacent to the property and on the ocean, provides an open outdoor music venue with a variety of performers from 7pm to 9pm Wednesdays to Sundays. What's more, the band shell is an easy walk from anywhere on the island and creates instant energy to all locations within a quarter mile of it.Lumus Park is located in South Beach and is situated between the row of hotels on Ocean Drive and the beach. This area is primarily used for skating, cycling and ball playing. Hollywood Beach has, what is referred to as, a Broadwalk. This is a wide path, with a section devoted exclusively to jogging, bicycles, roller blades, and other exercise related vehicles. There is no shortage of bicycle rental availability in either location and like South Beach, Hollywood Beach has well defined bicycle lanes on public roads.From volley ball tournaments to triathlons, concerts to organized sightseeing tours, like south beach the city of Hollywood has a multitude of well attended events.Hotels, Motels, Inns & HostelsThe island consists of a number of small (some historic) hotels, motels and inns. Although they don't offer the same appeal from a historic perspective as that of their art deco counterparts in South Beach, a number have been renovated and are quite charming."Casa Pellegrino Hotel" is one of those small charming luxury properties. In the same immediate area, the Dolphin Hotel has recently drawn renderings for an upscale property that should break ground soon. Another property worthy of mention, and that is both sizable and nearing completion, is "the Melia Costa Hollywood Beach Resort". This is a formidable luxury condo-resort.Needless to say, combining acreage or building on existing vacant parcels (a number are available) would allow for larger projects.As is the case on south beach, parking and traffic is a problem. While several smaller roads allow limited travel, Ocean Drive on Hollywood Beach is the main thoroughfare that is fed by 3 roads onto the island. The expansion of the Fort Lauderdale airport is worthy of mention as new international flights are on the rise and more area traffic is anticipated. The cruise industry is also a good feeder to this area and the port of Fort Lauderdale is only miles away.In conclusionThe early and mid-1980's, saw the beginning of acquisitions that lead to the rebirth of South Beach. This occurred in the late 1980's. That initial "changing of the guard" saw some exceptional buying opportunities. While it may be getting later in the Hollywood Beach "changing of the guard" there are still a number of properties available for sale and at reasonable prices. Beauty, of course is in the eye of the beholder! I'm not a realtor, just an observer.The vibe of Hollywood Beach is a reality and there are nights that I walk down the Broadwalk and something will cause me to flash back to those early south beach days. This small "sleepy beach front town", appears to have many of the ingredients that South Beach once did that could make it thrive!

The Channel Mix Effect on Profitability

The Revenue Report Card ·27 May 2016
The following presentation is that of a real hotel. The name of the property has been changed.The properties Channel Mix for the first quarter ended March 31, 2016 is shown on the left side of the chart below. Each 'revenue channel' groups reservation-vendors who share a common Key Performance Indicator together. The "KPI" is mentioned in the title of the revenue channel.The amount of the gross reservation revenues in each channel is its contribution to overall gross reservation revenues. This is shown as a percentage in column 2 below. (I.e. the Wholesaler Receptive Operator on the chart below has contributed 32.4% of the properties gross reservation revenues.Each channel offers units for sale at an Average Daily Rate (ADR). The ADR is shown in column 3 below. In cases where a reservation vendor, such as Wholesaler Receptive Operator, pays the hotel after commissions are deducted, the rate is GROSSED UP so to place it on an equal footing with all other channels in comparison. (I.e. the Wholesaler Receptive Operator actually paid this hotel a NET RATE of $196; this was adjusted to $269).It's a given that each revenue channel has three cost components (1) Commissions, (2) Sales & Marketing Labor and (3) Promotion. The combined costs are divided by each channels gross reservation revenues to arrive at the COST PERCENTAGE of that channel. Each line below shows a COST.The last column provides the "change in profitability" that results when Channel Mix, Channel Rate and Channel Cost is changed.The left side of each column shows the actual channel mix, rate and cost tht M Hotel experienced in the first quarter ended March 31, 2016. The right side of each column shows the suggested channel mix, rate and cost goal, in order to achieve optimal profitability.Results shown below are drastic, showing additional REVENUE PROFIT earned in the 1st quarter of $284,054.The properties Competitive Set suggests that changes shown below are achievable and demand adequate in each revenue channel. For some properties this will not be possible to achieve in one year. Instead it should be possible to achieve over the course of two. An ambitious hotel could turn the full profit around, however, in one year.The key here is a new Website, content and photographs combined with the analysis of traffic flow through Google Analytics. Careful keyword selection, targeted high performance geographical areas and appropriate landing pages will begin the displacement in moving revenues from more costly channels to the website channel. Carefully track your PACE because that becomes an exceptional indicator of what is to come and how channels can be used.The area indicates that the hotel website should be easily capable of performing within a range of 18% to 28% of gross reservation revenues.The high occupancy achieved in the first quarter was exceptional and was the result of the extremely low rates offered in all other channels. The hotel needs to bring the majority of Revenue Channels (Website, Call in, OTA, GDS and Independent Travel Agent) up to meet that which is being successfully sold by the Wholesaler / Receptive Operators. The result will be that occupancy will appropriately decline. But as is seen, the profitability will be vast and material.What you have viewed is a SNAP SHOT of this hotels Channel Mix and, in turn, optimization for the first quarter. It can be used as a benchmark to compare future quarters too to judge effectiveness. It's a powerful tool!
Article by Richard B. Evans

Turning on and off the OTA Faucet

The Revenue Report Card ·18 March 2016
Every component of hotel revenue can be measured and evaluated.By mastering each component, the revenue manager influences the hotels destiny by understanding how to stimulate hotel demand.Today I'd like to discuss On-line Travel Agent, Meta Sites and Opinion Sites. The latter two, of course feed into OTA sites.Let us assume that price, restrictions, content, pictures and amenities have been input satisfactorily and are conducive to potential guests looking for a hotel.The only thing that remains then is being able to place "Your Hotel" in front of potential guests for consideration. Your consistent presence on the first page along with higher placement on that page carries great influence.The model used below is that of a real hotel, data for which was taken yesterday.Results can be viewed in different ways. No two hotels would view these the same way. If Your Hotel is bringing in a satisfactory contribution of OTA business, while having maintained the positions below, they would be considered satisfactory. If, however, additional OTA business is desired, than interaction with certain site market managers could influence your position.It is always good to touch base and maintain good relations with each sites market manager. Visiting local offices, and perhaps even bringing in lunch for all those that are working so hard toward your success is a nice consideration! Don't overlook or underestimate it!The results that follow are the positions Your Hotel achieved yesterday.The column labeled "Average Position" is the combined result of polling that took place, first at 11am and then at 8pm.The full report included 3 additional OTA's that are not shown on the above report. Certain anomalies are adjusted by Revenue Report Card. It is important to remember that 90% of all hotel bookings come from the sites first page. Needless to say, the higher the position, the better.Each of the Opinion and Meta Sites, shown above, have attributes that make them more or less conducive to "Your Hotel". Global Rank, United States rank (for USA hotels), average page views and time engaged on the site are critical factors showing popularity and each sites ability to engage your potential guests.If your hotel typically entertains guests from countries shown above, those specific sites above should be in your focus and "Your Hotels" presence and position noted."Education" (as a pinpointing factor) could be viewed as an economic indicator. You can see that certain sites show high engagement of those completing graduate studies and undergraduate studies. Others have higher concentrations of No College or Some College. If you believe that this information has value in identifying the type of guest that is best suited for "Your Hotel", focus should be given to presence and position on those sites.High volume On-line Travel Agents shown above, also have characteristics that may be well suited to "Your Hotel".Needless to say, commission cost is a Key Performance Indicator that should be added to the study above. The majority of OTA sites use the Merchant Model form of payment, although several have adapted the "Direct Pay" method. Commission in both "direct pay" and "merchant model" typically run in a range of 15% to 31%. The NORM would fall between 15% and 22%.Labor/effort is another component that should be taken into consideration when evaluating OTA Channel Cost. This variable can be effected if "Your Hotel" provides OTA's with a direct connection to inventory. Blocking rooms can be done automatically or with human intervention. Required documentation at check in for international as apposed domestic guests is another factor. Any and all labor right up until the guest checks in creates OTA channel cost.Please keep in mind that what you've viewed above is merely a picture in time of ONE DAY. The study gains more value when monitored over time and you will obtain a better understanding of the generation of reservations from each site.Site algorithms react positively or negatively to certain occurring stimuli. If you've recently fallen off in position, you might look at rate parity or availability.Further advance your position through priority offerings or specials. Keep in mind, however, that specials usually bring a hidden additional charge by the OTA. Unsuspecting DOS's and/or Revenue Managers can be caught off guard believing that the same commission is being charged when a special is turned on. The mathematics change. Have your accounting department do a quick check the next time your OTA is pushing you hard to engage in a special. Perhaps you will gain a different understanding of why the big push! Surely surprises will follow!You can view the summary, shown below, on notes to this specific hotel.Whether you desire more or less business from OTA's is a hotel-by-hotel decision. Position that creates exposure is simply a matter of knowing how to turn on and off the facet! If you know how.... You can navigate the flow!If you would like Revenue Report Card to forward you an E Book we prepared on "Channel-by-Channel Revenue Attributes" kindly send your email address directly to me at RichE@RevenueReportCard.com and I'll immediately forward it. Through the study of many hotels and their channels we have become "experts" in typical channel-by-channel cost, actions and reactions. This study provides a simple, yet thorough overview of each channel and the contributing factors. I think you'll find it interesting and might add something to your revenue effort! RichEAlways remember - Channel Mix Matters! - #ChannelMixMatters
Article by Richard B Evans

Are Hotel Management Companies Getting Short Changed in Fees?

The Revenue Report Card ·11 March 2016
The two chief "compensation" components in any Hotel Management Agreement are the calculation of (1) base fees and (2) incentive fees. Typically base fees are calculated by multiplying a contracted percentage by Hotel Gross Revenues. Incentive fees, are typically calculated by multiplying a contracted percentage by the properties Gross Operating Profit. The discussion in today's narrative will focus on base fee. Incentive fees will be discussed in series article #2.Channel Mix, and the related Merchant Model Effect, have far reaching consequences to revenue production and profitability. As I've pointed out in previous narratives, the Merchant Model Effect paints a scientifically flawed view of performance. That is because hotel industry has always grouped these two fundamentally dissimilar revenue-sources (direct pay and merchant model) into the Gross Reservation Revenue line together. When the hotel is paid directly by guests, management base fees are calculated on the full amount paid. When the hotel is paid "NET", by a third party vendor, management base fees are calculated on the amount paid to the hotel AFTER the commission is deducted. See the illustration labeled page 3 of 8 below.The NET collection of fees can have significant implications on the base fee reward. Management companies overseeing resorts who have a moderate to high number of reservations from (merchant model) On-Line Travel Agents, Wholesalers, Receptives and Tour Operators are not receiving their just fee.Merchant model fees / commissions will typically range from 23% to 37%. You can see the impact these can have on management company base fees. Management companies are being short changed in the calculation of base fees.The following is a step-by-step view of how the base fee calculation is computed today and 4 different channel mix scenarios in which fees are calculated. The impact to the management company is of greater significance when consideration is given to the number of properties overseen.In the following simplified illustrations I break revenues into four revenue components; (1) Non-commission direct pay guests, (2) commission direct pay guests, merchant model indirect pay guests (vendors) and other hotel revenue outlet revenues. Please see the illustration below entitled, page 1 of 8.I elude to the channel mix on page 1 of 8 as "typical" for an oceanfront full service weekend resort. Needless to say yours can be different. Hence, the following 4 differing scenarios.As a source of reference for "factors" used in this and the next article, please see the illustration entitled page 2 of 8.I will be using a 3.0% base fee (and in the next piece 9% for incentive fees). The GOP I use is 30.4%.Page 3 of 8 highlights the aforementioned merchant model effect discussed above. In this case we observe a $62 per room night on what the management company "should be entitled to". That would be $2 per reservation. Multiply that by the number of merchant model room nights in a hotel annually.The channel mix in scenario 1 was discussed earlier.Kindly note that without taking the merchant model effect into consideration, the management company today and for any and all channel mixes here, will receive $476,190.A merchant model ADJUSTMENT would create an entitlement, however, of $490,981 on this particular mix. See the illustration entitled page 4 of 8 below.Channel mix - scenario 2, illustrated below, shows higher non-commissioned direct pay guests, less commissioned direct pay guests and higher merchant model indirect paying guests. The results and differential are below on the illustration entitled page 5 of 8.Page 5 of 8 shows the commission differential of what is paid and what, should be paid, to be $29,400.Channel mix - scenario 3, illustrated below on page 6 of 8, shows a "typical" non-commission direct pay contribution of 22.0%, a slightly lower (53% compared to 61%) contribution of "commission - direct pay guests" to "typical" and a slightly higher contribution from the "merchant model indirect paying guest" (from 17.0% to 25.0%). The results are below on the illustration entitled page 6 of 8.Finally, the channel mix in scenario 4, illustrated below, shows a "typical" "non-commission direct pay contribution" of 22.0%. The "commission direct pay guests" contribute 33.0% compared to 61.0% that is considered "typical" (a significant difference). Also, the contribution from the "merchant model indirectly paying guests" also shows a significant difference (45.0% compared to "typical" 17.0 %.) Results below, on the illustration entitled page 7 of 8, show a $38,475 fee differential on what is collected compared to what is entitled.A summary of all pages presented can be viewed below in the illustration entitled page 8 of 8.Channel mix, as it relates to management incentive fees, are equally as interesting and the implications also a good consideration. Here too, the management company is not recognized rewarded on channel optimization.I'm not sure if the industry is ready to change toward channel mix changes. Still, as revenue management continues to offer significant advances and produce significantly higher profitability, perhaps this may one day be a contractual consideration! The investment that each management company make toward perfecting channel mix and, in turn, the revenue management discipline, would seem to indicate that reward should reflect success in optimization; in turn, it should be recognized in duly earned management base fees (and incentive fees).

"Optimization Treasures" Flow to Savvy Hotel Buyers

The Revenue Report Card · 2 March 2016
The ability to find measurable hidden value in a hotel, before acquisition, provides hotel buyers with foresight to confidently negotiate and recognize undetected long term benefits. The Optimization Scoring Metric, calculated in the due diligence phase of acquisition, uncovers treasures that could never be seen before.The missing metric, in hotel industry analytics, is the Revenue Optimization Metric. "The Metric" allows prospective hotel buyers to identify unremarkable performance in revenue generation. The substitution of unremarkable with remarkable is the space in which value is created. The metric/score quantifies the shortfall and then projects potential profitability based on a typical scoring range (see Exhibit "C", below).What is the Optimization Metric?The Optimization Metric provides hotels with an evaluation of the effects that (1) complete channel cost, (2) channel mix and (3) the merchant model, have on profit and cash deposits (I refer to these as the "critical factors").The calculations involved in determining the Optimization Score place all reservation-vendors on an equal platform in measuring production and removes the flawed inaccuracies created by the Merchant Model. Needless to say, in a data driven society flawed metrics present big problems. These flaws, are present in the traditional calculation of hotel metrics. Follow the link, in the paragraph below, for more on "the optimization metric and flawed industry metrics".The "Optimization Metric" was the highlight of an article recently published in HospitalityNet.org that, showed two hotels sitting side by side, both with $10 million dollars of gross reservation revenues and both with exactly the same industry metrics. Despite this, your neighbors' property deposited and reported $700,000 (7%) more to the bank and on their financial statement then you did. Only the Optimization Score metric is able to identify and quantify this material variance and the road to take to overcome it.I described the Optimization Metric/Score as a "game changer" in industry analytics and it truly is. To reiterate, unless the "critical factors" mentioned above are taken into consideration, industry analytics are scientifically flawed and inaccurate.At the core of the optimization metric, is reservation related cost (actual sales & marketing labor and promotional costs). These costs are allocated into revenue channels. Each revenue manager selects a channel mix. We then address the effects created by the channel mix, place the merchant model vendors on a level playing field with "direct-pay" guests, and allocate all promotional costs. The aggregate total is then applied to an adjustment factor (algorithm) we use to recognize "annual hotel benefit". On the whole, the Optimization Metric/Score provides us with a new and accurate reality of hotel performance.The Optimization Metric Formula is as follows:Exhibit "A", aboveThe inclusion of the aforementioned "critical factors" also means that for the first time, true revenue optimization can be achieved. I do not say this with any disrespect intended to revenue tacticians. Revenue tacticians are limited when considering revenue strategies, to making decisions that are based on the relevant data they have on hand. Accurate, complete and real-time channel cost has been hard to come by (and is an accounting task). The Revenue Report Card System provides fully-diluted reservation related labor, benefit & promotional channel cost at the touch of a button. Our algorithm (or accountant provided data) applies the aforementioned "critical factors", by selecting specific items from the hotel financial statement and the same from the property management system. The result is that the revenue tactician now has complete and accurate channel-by-channel cost / profitability information that is at his/her fingertips in real time. The road map to flawless strategies begins here.It is imperative to understand, at this stage of the discussion that ESTIMATES OF ANY OF THE COSTS WILL NOT ENABLE HOTELS TO ARRIVE AT TRUE OPTIMIZATION. Exact fully-diluted, Sales, Marketing, Front Desk and Sales Assistant wages are a must! The allocation of actual promotional costs are also imperative.The Use of the Optimization Metric to Influence your Property Acquisition DecisionOptimization Scoring is a versatile metric that has far reaching applications. Today I'd like to discuss how this metric, calculated during the due diligence period, can disclose hidden value in properties.For many years the "times earnings" equation has been used as a "loose barometer" in arriving at the sales value of a hotel. Needless to say, there are times when the value of land, a busy location or some other attribute might supersede a "times earnings" calculation, however, even in those circumstance the method is still used as a determining factor of selling value.The "times earning" multiplier is created based on (1) the current state of the economy, (2) the geographic area and/or (3) how hotels are generally performing in an area. At any given point in time the multiplier can change.Where 7 times earnings may once have been the factor used, 9 times earnings may be appropriate at another time. In every sense of the phrase, it depends on "what the market will bear" and the expected return on property investment at a given time.Exhibit "B.1" below shows a diagram in which a hotel with Gross Reservation Revenues of $10 million dollars and a Net Income of $1,920,000 is applied to 3 different "times earnings" factors; Scenario 1 -7x earnings, Scenario 2 - 8x earnings, and Scenario 3 -9x time's earnings.Exhibit "B.1" - using "Times Earnings" as a barometer in determining the selling price of your hotel. For simplicities sake, I have limited the complexity in the calculation presented.Exhibit "B.2" below provides supporting narratives to the 3 scenarios presented above (in Exhibit "B.1)...Exhibit "B.2", aboveIn Scenario 1 above, the hotels Gross Reservation Revenues are $10 million dollars and shows a bottom line on their financial statement of $1,920,000 of net income. Using a 7x time's earnings factor, the value of that hotel is considered to be $13,440.000. This would be the asking (or selling price).As a side note: Hotel revenues overseen by a professional revenue manger will typically produce an optimization score range of 75.0 to 83.0; the higher the score the more efficiently (profitably) the hotel is performing.The hotel achieved an optimization score of 69.0; this would be considered to be an unremarkable optimization result. In essence, it means the hotel is using too many expensive channels to bring in business. It also would be indicative of a hotel management team that perhaps has NOT taken "the long view" that would provide for sustaining long term growth.The good news here is that an optimization score of 69.0, indicates that there is great potential and hidden value in this offering. By employing a qualified revenue manager after acquisition, the hotel should, for all intents and purposes, be able to raise that 69.0 to a 75.0 to 83.0 optimization range. See Exhibit "C" below for general optimization scoring ranges. As you can see above (Exhibit "B.1"), the optimization rating can be used in calculating actual dollars.Exhibit "C" below, provides a good guideline on typical hotel optimization performance.Exhibit "C" - aboveThe Result - (Exhibit "B.1" & "B.2", above)In Scenario #1, Gross Reservation Revenues are increased (using a typical Optimization Score level as the guideline) to $11,600,000. We than use the same 19.2% profit factor, which increases "new earnings" to $2,300,000. This is the hidden value the Optimization Score uncovers.The new-earnings are then applied to the 7 times earnings factor that brings the sales price of the hotel to $16,100,000. This increase in potential value, of the hotel of $2,660,000, is not nor ever need to be known by the seller. It provides the buyer, however, with piece of mind and confidence in the purchase price and the potential this acquired asset could bring.The bottom line: The above referenced buyer can now purchase the hotel at, or close to, the $13,440,000 asking price, with the knowledge that the ultimate Return on Investment would exceed desired expectations.My next article will discuss the impact of using true and complete costs in performing displacement analysis. Hoteliers can now compare bottom line impact in comparing two pieces of business; an exact science!
Article by Richard B Evans

"Key Performance Indicators" are the DNA of Reservation-Providers!

The Revenue Report Card ·23 February 2016
Advances in computer capability allow hotels to see things in reservation-vendors, that could never be seen before. This new capability allows us to search vast amounts of data for defined parameters sought to fill need periods!Your property management system contains valuable insights held within your historic reservation data. The key that unlocks the door to high level revenue optimization comes through the recognition of relevant Key Performance Indicators. They can be common or cater to specific hotel needs.What are Key Performance Indicators (hereafter "KPI's")?"KPI's" are the DNA of each "reservation-vendor".Drill down and you will find a unique mix of attributes that define each reservation-vendor (hereafter "vendors"). The key, however, is to find common ground with other "vendors" in creating meaningful "KPI'" groups (also called CHANNELS). "KPI's" can be as common as commissions charged or as obscure as using currency exchange advantage as a booking driver.It's important to keep in mind that "vendors" can have more than one "KPI" and that means that they can be listed in multiple revenue channels. Unlike the strict parameters of hotel accounting (where vendors are typically grouped through rules set by sales segmentation standards) revenue analysis must be a petri-dish of alternative "KPI's" that explore many attributes. This allows hotels to consider multiple "reservation-drivers"; booking advantage can come in many forms. See a few possible variations on the On-line Travel Agent channel, below in Exhibit "A". Hoteliers are only limited by their intellectual imaginations in creating new channels driven by "KPI's"!By correctly defining your Property Management System SEARCH CRITERIA, with the goal of filling "pieces of the puzzle" that require attention, "KPI's are the answer.The following, is a list of common Key Performance Indicators. Revenue Report Card TM has created over 100 variations!Historic Fill PatternsBased on the "fill periods" shown above, which Key Performance Indicators might you consider to bring more parity over the week in filling need days of each type of hotel?
Article by Richard B. Evans

The Calculation - the Merchant Model Effect on ADR, RevPAR & Profit

The Revenue Report Card ·17 February 2016
Since publishing the article "the Merchant Model Effect on ADR, RevPAR & Profitability" on HospitalityNet.org several months ago I've received quite a few inquiries requesting the details behind the calculation.There were so many variations on the "theme", that I thought the info graphs below would sufficiently answer most.We adjust industry analytics and place all reservation-vendors on the same playing field by I grossing-up the Gross Reservation Revenues (for merchant model vendors) and then use that margin as a commission expense. The formula can be used in the hotel, airline or cruise ship industries. All engage Wholesaler / Receptive Operators and On-line Travel Agents (that use the Merchant Model).Those whose total contribution to Gross Reservations Revenues, from mentioned sources, exceeding 5% would be interested in this adjustment analysis. As you can see, the deviation over your industry metrics in Average Daily Rate, RevPAR and profitability can be quite large. Based on the hotels channel mix, above this small hotel, of 118 units, shows a differential of 7% of Gross Reservation Revenues.Channel mixes with a lower number of merchant model providers would create a smaller optimization score and, in turn, a less significant difference in ADR, RevPAR and profitability. I believe however that most in all industries contribute more than 5% in merchant model business.Thank you all for the many nice notes and the high interest in the original article. The original article on HospitalityNet.Org can be found at http://bit.ly/1LrP8jZ
Article by Richard B. Evans

Hoteliers: do we want white bread....or baguettes, bagels, and croissants?

The Revenue Report Card ·11 February 2016
What do we want in hotel analytics and financial reporting?Can we live with the standard metrics of yesteryear when so much has lost its veracity due to advances in computer capability & indirectly, internet technology?Or should we embrace intuitive metrics that take things like channel mix, the merchant model effect, potential revenues, and/or Key Performance Indicator driven channels into consideration?Is the status quo in metrics and financial reporting fulfilling the needs of today's hotelier? Or should new insights that previously went undetected be used to better address our revenue undertakings?The age old questions relating to analytics and financial reporting have and always will be the same:"Why do we use metrics / ratios?""Why do we use financial statements?"The answers to these questions also will always be the same.We use metrics to take a photo in time of how well we've performed. We compare ourselves to historic and competitive set results to track advances and /or declines in our revenues and operations.We use financials to take a photo in time of our financial position & performance. Through metric study of the financials we can assess the health of our "hotels" and the "hotel function".Through each, we determine whether we are a going concern or a faltering one.What can change, however, is the methodology and reporting by which we reach conclusions. They must evolve along with advances mentioned above.With the new capabilities of this current "big data era" we can collect vast amounts of information and see things we could never see before in our reservation-vendor relationships as well as the booking patterns and attributes (KPI's) that define them. In turn, we can use our metrics and reporting to create actionable strategies that take advantage of what this data uncovers.With major advances in the internet coupled with a society that has become more and more comfortable in its use, we now have countless new B2B and B2C reservation-vendor entrants to the marketplace that can communicate and transmit to us at lightening speeds. We also have a society that has become comfortable in booking reservations confidently through the internet; through "vendors" or with us directly; unlike ever before!We can look at reservation revenues in a whole new way and with new purpose. Unlike at any time in the past, we can now view the contributing factors (triggers) that occur and that bring business to our hotels and, in turn, see how these factors themselves interact with one another. How will a high performance channel react if we place more emphasis on it by devoting more marketing staff "time"? Will the channel become more profitable with higher volume? Or, how will that same channel react to added promotional investment? Needless to say, added cost in either case requires more volume.Revenue Managers become equation solvers or "analysts" in every sense of the word and a "new mix" is born (a mix within a mix; so to speak!)!The optimal mix of promotional cost (what we spend in each channel to enhance revenues) and the internal labor cost (executive sales and marketing time devoted to channels to enhance revenues) needs to realize optimal channel-by-channel profitability. Simply stated, how much of each can or should we devote before benefit begins to decline? On the whole, we can now scientifically project the "investment" needed in each factor, within each channel, in order to produce optimal projected results. Of course, we have to be able to measure and apply actual time devoted to each channel by or Sales and Marketing force. Our algorithm does this (sorry for the cheap plug!).The reality check is shown through immediate increased profitability (week over week, month over month and year over year). Nothing else tells the tale as to optimized revenue channels better than higher bank deposits and bottom line results.Finally, once actual complete channel-by-channel profitability is attained, performance can be measured with new ratios and standards. These can measure relationships to gross reservation revenues compared to (1) labor, (2) promotional investment, (3) labor & promotional investment and the return each "investment" brings itself to the revenue puzzle. They also can be compared to a competitive set.The revenue section of our hotel financial statement also requires consideration and can also adapt to this "new era"; eventually perhaps by adding a new "Revenue Division" to the financial statement, or in the interim add a supporting schedule that highlights "Revenue" as a stand-alone, self-contained measure onto itself. This would create a statement in which all revenue and reservation related costs would be collected and, once again, provide new metric relationships that can be measures used to evaluate production. The emphasis and sophistication brought to reservation revenues these days means that this analysis should be a future consideration.With so many advances and different ways in which we are now able to look at and assess revenues and related costs, is new reporting warranted? Does separating (a) revenues and related wages & costs from the "Rooms Division" and (b) reservation wages & costs from the "Sales & Marketing Division" make sense in bringing them all together in a "Revenue Division"? Or is it sufficient to accomplish this simply in the form of adding a supporting statement to the financial statement?Exhibit "A" below, presents a collective statement that could lend itself to either (a) the formation of a new "Revenue Division" or (b) a "Supporting Statement to Revenue".Exhibit "A"Newton's first law of motion draws an interesting parallel here: "What's in motion stays in motion, unless acted upon by an unbalanced force." The "unbalanced force" would be the "new era" of computing and internet advances. Change is inevitable; it's constant and that... will never change (excuse the cheap play on words!)!!

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