Revenue management opportunities for extended stay properties

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A common view of the extended stay industry is that challenges all hotels face - from balancing availability to managing pricing - are amplified in this market. Could it be, though, that opportunities are amplified too?

The opportunity for revenue optimisation in the serviced apartment industry is real and achievable - it all depends on your approach.

The serviced apartment sector is a rapidly growing segment within the wider hospitality industry, in large part because it appeals to so many different kinds of potential guests.

Guests use serviced apartments for a variety of reasons, ranging from construction crews working on a multi-week project to guests who prefer suite-style or apartment lodging.

Serviced apartment owners benefit it two key ways. Firstly the cost of service typically drops for longer length-of-stay (LOS) business - additionally their properties maintain a relatively constant occupancy throughout the week as compared to city centre hotels and weekend resorts.

Market segmentation, therefore, is a critical opportunity for serviced apartments.

Identifying the type of guests staying at a particular property requires reliable separation of data and grouping for accurate forecasting. Understanding and accounting for key demand factors for each business segment serves as the most reliable basis for key business controls to drive profitability.

This includes setting the right price, achieving the right mix of guests, achieving the right length-of-stay (LOS) mix, setting appropriate over-sales limits in order to avoid lost revenues and applying the right mix of pricing and inventory controls to achieve profitable growth.

An advanced revenue management system can facilitate this kind of forecasting. It takes into account demand by arrival date and length-of-stay, cancellations and no-shows, extensions, early departures and more.

This capability to analyse data and generate robust forecasts, as well as optimise for maximising RevPAR or ProPAR, is where many current revenue management systems fall short.

Looking more closely at in-house extensions, there's opportunity to take advantage of this frequent occurrence in serviced apartments.

For example, the construction crew that reserved four weeks may end up facing supply delays, equipment problems or bad weather. Accommodating their needs is obviously in the property's best interest, not just for repeat business, but for maximising the overall mix of business.

Let's consider a related scenario where specialised controls can help drive revenue. Guest 'A' wants to book three nights at £100 per night - guest 'B' wants to book 30 nights at the same rate.

If one night has zero rooms to sell in the room type the guest wants, there is far less revenue loss on the short LOS reservation, but it has significant impact to the longer reservation if the serviced apartment owner is unable to accommodate.

In this situation, overbooking while demand exists is an acceptable option - particularly if the customer profile for Guest 'A' suggests a likelihood of cancelling. And even if Guest 'A' walks, the apartment secured the 30-night booking which, again, typically means a lower cost of service.

Optimising the remaining capacity by considering all available demand across all arrival dates and by length- of-stay, in addition to overbooking and sell-through controls (straight-line availability where there is still demand), is critical to maximising revenues.

Understanding the wash - cancellations, no-shows, early departures, and straight line availability (the constant availability of rooms across guests' stay-pattern enquiry) - is significant and this level of understanding is imperative in an advanced revenue management system for driving better revenue.

Here's an additional opportunity for consideration.

In the extended stay sector, pre-contracted rates are common. For instance, a large employer may contract with a local serviced apartment property when new employees are relocating. Or guests may belong to certain organisations that qualify them for established rates.

Based on their behaviour, different business controls may apply. This impacts not only a serviced apartment's forecast performance, but also the ability to optimise and / or price rates correctly.

It's the responsibility of the revenue managers (and their revenue management system) to understand these qualifications and all of the complex relationships that may affect what a guest's behaviour will be, and select the most valuable demand.

In the previous example, if Guest 'A' is un-qualified and Guest 'B' is qualified (because she has a specific contracted rate through membership in a specific group), what rates should each be charged? How do the rates relate to one another and to the rate structure as a whole?

Advanced revenue management systems understand the complexity of publicly priced products in addition to qualified products, and intelligently set prices and availability controls to seamlessly optimise all types of business while producing the best revenues possible.

The short answer to all of these questions comes down to one word: data.

Collecting it - organising it - analysing it.

Continually refining the data acquisition and analysis loop lets revenue managers and executive leadership generate the accurate forecasts vitally important for fine-tuning business operations and increasing the overall value of an asset.

This is why an advanced revenue management system should be a necessity for the serviced apartment market - its ability to utilise sophisticated analytics to employ a rational and disciplined approach to revenue management overall; accurately forecasted key elements allows you to set demand- and market-relevant prices, optimise the business mix and LOS mix, assess all guest opportunities appropriately, and ultimately, increase an apartment's revenues.

In conclusion, as the serviced apartment industry continues to grow and evolve, so too must revenue management strategies and solutions in order to truly sustain growth and drive performance.

One by one, as challenges are met, new opportunities emerge, and the leading hotels in the serviced apartment sector will be the ones taking advantage of the most advanced revenue management technology to reach maximum profitability.


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