[VIDEO] Mathlete Mondays- Account Scorecard

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Overview-

Today we’re going to explore the corporate request for proposal process. For those of you in urban markets, the annual corporate negotiation cycle represents a huge opportunity to set yourself up for success in the upcoming year. Throughout my career I’ve seen properties that have handled this process extremely well, and others that have significantly hampered their ability to drive RevPAR in the following year by negotiating just a couple unfavorable agreements.

Often, the mistakes made during the RFP process can be traced back to a couple factors, the first being that the hotel evaluates each account solely based on room night and revenue production, without an understanding of how the account fits into the bigger picture. The second factor is that hotels are often so focused on the rate that they overlook the implications of other contract terms, including last room availability status.

This often results in excess displacement from lower rated corporate business, turning a decision that is supposed to generate tens of thousands in revenue for our hotels, to one that prevents the hotel from realizing its budget goals.

These mistakes can usually be prevented by using your property management system’s company production data to take a closer look at the account’s performance in relation to your other corporate accounts and business types.

Analyzing Corporate Accounts-

The first step is to evaluate each account to determine whether production has increased or decreased year over year and get a feel for the scale of the account in relation to your average corporate accounts and other business types. This will allow you to determine how much time should be spent evaluating the account and whether or not this is a “must win” account.

In this case you can see that Price and Parker is one of our major accounts, representing just over 2% in occupancy over the course of the year, which far exceeds the average corporate account. We can also see that the room night production is down from the prior year, potentially due to the year over year rate increase applied.

Once you have a solid understanding of the account’s production details, you’ll want to analyze their stay patterns to determine if they are providing incremental occupancy to your hotel or displacing other types of business. Begin by bucketing your high occupancy, medium occupancy, and low occupancy days and determining the number of rooms produced by the account for each as a percentage of rooms available over those days.

Here we can see that Price & Parker tends to produce heavily during the days where the hotel likely would have sold out anyway at a higher rate. However, we can also see that most of their production still falls over lower demand time periods, so we should assess the incremental production provided by this account against the potential displacement.

Next, it can be helpful to consider the arrival/departure and production patterns of each account. Oftentimes you’ll see a Tuesday/Wednesday peak night pattern. However, there may be some accounts that arrive earlier or depart later in the week, which definitely have the potential to provide incremental revenue for your hotel.

It may also be helpful to analyze the room type production patterns to see if each account is buying up from a room type perspective, or simply booking the lowest rate and receiving a complimentary upgrade at the front desk.

Finally, I like to take a look at how the average lead time and length of stay varies for each corporate account in relation to the other business types.

Account Groupings-

As you complete the analysis of each account, it can be helpful to place them in a quadrant according to their current and future performance potential. Classifying accounts in this manner will lead to four major account groupings:

High Displacement Potential:  While these accounts may appear desirable at first glance given their high production volumes, careful negotiation is warranted in order to ensure these accounts are a net positive after considering displacement. For these accounts, you may want to consider applying blackout dates, non-last room availability status, or potentially even a dynamic rates that floats off your BAR rates where the hotel is projected to sell out.

High Incremental Value:  These accounts provide substantial incremental demand on dates where the hotel is not projecting to sell out. As a result, they should receive the most favorable rates and terms of any account. These are the accounts you want to aggressively pursue. You may want to consider LRA status and either a deep discount off BAR or a rate that you are confident will consistently be attractive in relation to your publicly listed rates.

Low Displacement Potential:  While these accounts provide marginal production, they do not often stay with your hotel over nights where you would have sold out anyway. For these accounts, you should determine whether you have the ability to increase their production volumes through a more attractive rate or more favorable terms in order to convert them into high incremental value accounts. If production increases do not seem feasible, you may want to consider charging a slightly higher rate last year while keeping the terms generally the same.

Low Incremental Value:  These accounts are of little value to the hotel as they tend to only provide production during days in which the hotel would have sold out anyway. You may want to consider whether it makes sense to even partner with these accounts, or to simply offer them a marginal % discount off the Best Available Rate. Your sales team should spend as little time negotiating with these accounts as possible unless there is an opportunity to shift them into another quadrant.

During this process, consideration should also be given to pricing integrity between like account types. You should generally see accounts of a similar type clustered similarly from a rate standpoint, which will make it easier to manage your corporate rate strategy in a cohesive manner moving forward.

By adopting this approach to the corporate RFP process you’ll be able to successfully leverage corporate business as a base layer, allowing you to generate internal compression and drive higher rates.

Closing-

I hope this Mathlete Monday lesson was useful for you. If you’d like a copy of the handout discussed, please click the link below and enter your email when prompted.

At Focal, we’re keyed into helping our hotel partners improve their revenue optimization efforts by obtaining actionable insights more quickly. If you have any questions, or are interested in discussing this subject further, please feel free to reach out to me directly at mike@focalrevenue.com or via telephone at 970.471.6722.

Thank you for joining me, and until next time—good luck outrunning the competition!

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