Making funtion rooms function
With hotels well on their way to grasping revenue management for bedrooms, it’s time to look at other spaces, says HOSPA CEO Jane Pendlebury
I started my hospitality career working in hotels many years ago. It was at a time when revenue management didn’t really exist beyond the aim of selling as many rooms as possible. I don’t remember much flexibility on rates other than those already negotiated and agreed with booking agents.
How times have changed! Not only have most hotels (large or small, leisure or business focussed) embraced revenue management on bedroom sales - many are now looking to more carefully manage revenue from meeting and event space.
In a recent presentation I attended by Heather Hart, director of Smart Space at IDeaS, she asked some pertinent questions that many hotels and venues would benefit from answering.
• How do you measure success from your function space?• What % of your time is spent on function space sales?• What % of your revenue comes from function space?
It’s commonly accepted that it is complicated to measure. Reporting can be time consuming and disjointed.
There is so much to consider when working out the basics. With bedrooms, it is relatively simple. With function rooms, much less so. Most venues will have a list of function space with capacity for theatre style, classroom style, reception etc. It is also relevant to list room dimensions (and total square meterage).
So, how to simplify measurement tools? Should it be an income per square metre? It’s glaringly obvious to anyone in hotels though why that would not show the whole picture. Often function rooms can be sold with a room hire element, other times with a Daily Delegate Rate (DDR), sometimes both.
Heather suggests focusing on total delegate capacity and - to keep it realistic - using the classroom style set-up.
• So, if your venue has two meeting rooms, one seating 75 people classroom style and the other 45 - the total delegate capacity would be 75 + 45 = 120.• Assuming the DDR is £80, the potential daily opportunity value would be 120 x £80 = £9,600.• If this same hotel has 50 bedrooms with an average daily rate of £150, then the potential value of the bedrooms would be 50 x £150 = £7,500 each day.
It gets trickier still when trying to decide which business to take and which to turn away for function space. Taking the wrong piece of business can seriously impact profit. However - as in the early days of rooms revenue management - it takes nerves of steel to turn away business when you have the space available on the anticipation of receiving another, better piece of business. Sales people need to steer away from their gut feeling and budget goals, and learn to rely on real historical data, facts, trends and realistic strategy.
These are just the highlights of the tips I picked up. Heather Hart is bursting with suggestions to improve meetings and events (M&E) strategy management. So please do approach her directly on Heather.Hart@IDeaS.com
There are many hotels and venues already a long way down the line with M&E strategy, but there are many more who may benefit exponentially from applying a little more structure and science to their events. Here at HOSPA we aim to help, advise, guide and educate - either through our own courses or by addressing your queries to an appropriate HOSPA member or sponsor.