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Hospitality Leadership Through Learning
Faculty & Research

Hotel Revenue Management in an Economic Downturn: Results from an International Study

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Vol 9 No 12
By: Sheryl E. Kimes Ph.D.

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Executive Summary:

The sudden reversal in the lodging industry’s fortunes from 2008 to 2009 has brought a renewed focus on revenue and profitability for revenue managers. In a survey conducted in 2009, 291 revenue managers cited concerns about customer rate resistance, contract renegotiations, competition, and price wars as their top considerations. This contrasts with a 2008 study, where human resources and technology issues were ahead of economic concerns. Participants in the 2009 Revenue Management Roundtable, produced by the Cornell-Nanyang Institute of Hospitality Management, concurred with the study’s findings. In particular, the meeting participants pointed to the difficulty in maintaining pricing positioning, because the drop in demand has shifted considerable pricing power to the customer. Although many hotels can compete effectively on price (and others may have little choice), revenue managers may also draw on numerous non-price competitive techniques, including adding value. One pricing approach might be to create a set of targeted rate promotions that are protected by rate fences and designed to attract price-conscious guests. Another technique is to bundle services into packages that disguise room rates. Non-price techniques include competing on the basis of quality, creating strategic partnerships, taking advantage of your loyalty program, developing additional revenue sources, and developing additional market segments.

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Comments

I have read this report several times - as a small leisure property owner/manager I find many of the findings right on the money with regards to the trends in our leisure market over the past year. On the FL Gulf Coast, the overbuilding of coastal destinations for condo and second home owners have flooded the market for family rentals. The lines of definition between product types and quality levels have been blurred by so many online marketing channels. This has also resulted in  downward pressure on prices, especially on product that cannot be easily distinguished i.e. condos and hotels in big buildings. This report confirms our strategy of staying with our current price structure and accepting slightly lower occupancy in the short term. 

The other strategy effectively employed was spreading rates within current bounds based on varying demand for (previously) similar priced rooms. We are currently  working on a marketing strategy for 2010 - 11 based on your work and  several of the other recent studies.  Thanks for sharing.

Lee Wilkerson
Gulfside Resorts
 

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About Sheryl E. Kimes Ph.D.

Dr. Sheryl E. Kimes is a professor of operations management at the School of Hotel Administration. From 2005–2006, she served as interim dean of the Hotel School and from 2001-2005, she served as the school’s director of graduate studies. Kimes teaches restaurant revenue management, yield management and food and beverage management. She has been named the school’s graduate teacher of the year three times. Her research interests include revenue management and forecasting in the restaurant, hotel and golf industries. She has published over 50 articles in leading journals such as Interfaces, Journal of Operations Management, Journal of Service Research, Decision Sciences, and the Cornell Hospitality Quarterly. She has served as a consultant to many hospitality enterprises around the world, including Chevy’s FreshMex Restaurants, Walt Disney World Resorts, Ruby’s Diners, Starwood Asia-Pacific and Troon Golf. Kimes earned her doctorate in Operations Management in 1987 from the University of Texas at Austin.

For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=43