Government Connections - Spring 2013 - (Page 15)

GOOD TO KNOW Do You Need Per Diem? Understanding How Hotels Manage Revenue By Cheryl Wierenga, CGMP Red Lion on the River REVENUE MANAGEMENT DEFINED: The basic definition of revenue management is selling the right product to the right person at the right time for the right price. The conditions necessary for this to happen include having a perishable product (hotel rooms) with a fixed amount available (maximum occupancy) and consumers willing to pay different prices (leisure, group, business travel). OTHER BUSINESSES THAT PRACTICE REVENUE MANAGEMENT: Hotels are not the only type of business that uses revenue management strategically to obtain maximum revenue. Airlines use revenue management by offering lower fares for a less desirable time of day, day of the week or less desirable seats on an airplane. Restaurants and salons also use revenue management by offering a special for a day of the week that on average is slower. Venues and sports teams charge a premium for the best seats and big attraction concerts while at the same time offering less desirable seats at a fraction of the cost for the nosebleed seats or for a game that won’t be a big thrill. UNDERSTANDING HOW HOTELS MANAGE REVENUE AND WHAT THAT MEANS FOR GOVERNMENT PER DIEM AVAILABILITY: Hotel rooms have an expiration date – once the date passes, the opportunity for revenue on that guestroom on that date is gone. In order to maximize the amount of revenue on each hotel room, a hotel revenue manager sets rates based on a combination of demand, availability, expected forecast and guests’ preferences. A hotel pricing structure is similar to the food pyramid. As you move from the base of the pyramid to the top of the pyramid, less rooms are allocated to each level. Where the hotel places the government per diem rates within the pyramid varies by hotel. When looking for the per diem rate either for individual travel or for a group, you may be told, “I’m sorry, but that rate is not available.” It doesn’t mean that the hotel is 100% sold out, but rather that the hotel has filled the number of rooms allocated for that level of discount. You may be told by your sales manager that he or she needs to “check with the revenue manager” before offering the required per diem rate for your group block. What does that mean? The revenue manager is reviewing the amount of business already on the books and forecast levels for that particular time to understand if the new business will displace business. The forecast is reflective of how busy the city is for that date, if there is a citywide convention block that will increase demand for the area or if there is an event or concert that could increase the demand for those same hotel rooms. If the revenue manager finds that the total revenue with the new business is greater than the forecasted revenue then the sales manager will get the green light to move forward. If the total revenue is not greater than the current forecasted revenue, the sales manager will return to you with some suggestions of what can be negotiated so that the hotel is not passing up revenue opportunities and still working with you. If the revenue manager advises that taking the new business would not displace the total forecasted revenue, you will get your per diem rate as required. SUGGESTIONS FOR PLANNERS TO SUCCESSFULLY NEGOTIATE PER DIEM: What are some things a planner can do to negotiate the availability of per diem for a group? Ask your sales manager what are the different room types the hotel offers and which room type the hotel would be able to offer at the per diem rate. By doing this, it allows the hotel to sell the more premium rooms at a higher rate while still accommodating the per diem requirement. Communicate to your sales manager if there is any flexibility with your day of week pattern. If a hotel’s peak nights are Tue/Wed, can your group arrive on Monday? Is there an alternate week that your group could meet if the hotel has a week with lower demand and could better accommodate the per diem? Can you work with a 45-day cut off to allow the hotel additional time to sell rooms not used from your block? Is the conference per diem rate an option? Be open to creative solutions presented by your sales manager or offer a suggestion yourself. It’s with this collaboration between planners and suppliers that win-win contracts are negotiated. And, if the most creative solutions don’t result in a mutual outcome, remember that it’s business and look forward to another opportunity around the corner… FROM THE BOARDROOM TO THE BEACH. 608391_Ocean.indd 1 The Roland E. Powell Convention Center in Ocean City, MD, has what you need to be more productive than ever. · Expanding exhibit space, including a renovated grand ballroom · 25 meeting rooms · Beautiful panoramic bay views · 10 miles of free beach, three-mile boardwalk and 17 championship golf courses FOR BOOKING INQUIRIES AND INFORMATION: 1-800-OC-OCEAN 02/10/12 15 PM 5:30

Table of Contents for the Digital Edition of Government Connections - Spring 2013

President's Letter
Editor's Letter
SGMP Nation
The Meeting Minute
Advertisers' Index
Plan Green: Why Create a Sustainable Event?
Good to Know: Do You Need Per Diem?
That's Technology: Dispelling the Myths about Strategic Meetings Management
Conference Connection: 2013 NEC & Expo
SGMP's New Headquarters
Working With Your Convention and Visitors Bureau
Starwood Looks Forward to Seeing You

Government Connections - Spring 2013