Sign in

Revenue Management never stops

by Neville Isaac

                        This week, we thought it would be a good idea to take a look at what is happening in the mid and long term. Since all hotels in Spain are now closed until the end of the state of emergency, we have taken our starting point as 01 May, traditionally a busy Bank Holiday weekend.

                        As well as updating the cancellation and occupancy data  which we have been reporting in previous blogs, this week we will also analyze the pricing information. In this case we have taken the lowest available public rate for each property and calculated an average price per day. We will analyze how demand is being affected in the mid to long term, and also what impact the demand situation has on pricing.

                        First let's take a look at Madrid 

                        Here we can see the Occupancy level on the books compared to the same point in time in 2019. We have also added in a dotted line ( in blue)  showing the situation of occupancy on the books 1 week ago. Unfortunately what this line shows is that we are in a situation of negative pick up : there are more cancellations than bookings. This is most apparent in the month of May , where we see significant worsening of the occupancy levels until practically the end of the month. From the middle of June onwards the situation does not seem to have changed significantly - this would suggest that whilst people are not booking travel for these dates, they are also not cancelling long term reservations right now, presumably waiting to see how the COVID-19 situation develops over the next few weeks

                        Now let's take a look at public pricing in the destination over the next 6 months: 

                        What we can see here, is a typical pricing pattern for a city like Madrid, with slightly lower price in the summer months, then peaks in September/October covering city-wide events.

                        The really interesting aspect to take into account here is that the pricing for May and June is practically identical, although as we have seen, the demand behaviour is completely different. Whilst we in no way recommend getting into a price war, it would seem that Revenue Managers in Madrid should already be taking into account the new demand patterns, and adjust their prices accordingly in order to catch the limited bookings still available in the marketplace.

                        Let's look at the same data for Barcelona 

                        First the occupancy level on the books compared to last week and to the same point in time last year.

                        Whilst the overall picture is similar to Madrid : negative pick up in May - no significant cancellations from mid-June onwards  there are some appreciable differences: the gap between this year and last year is huge, and continues to be so until almost the end of June , which would suggest that the destination may take a little longer to recover.

                        In terms of pricing , the picture looks like this:

                        Again we can see little reaction in terms of pricing , even with the changes in demand. In May for example we also see pricing peaks for the F1 weekend ( 8th and 09th May), even though this event has already been postponed.

                        Bearing in mind this data, we have some  recommendations:

                        Clearly, there is nothing to do in the short term, since hotels are closed. However, this means that teams should be focused on the mid and long term:

                            1. In the mid term, adjust your pricing according to the new demand situation. This doesn't mean going crazy and slashing prices, but it does mean pricing to sell. Keep a close eye on updates around travel bans, hotel closures in your domestic and international markets as this can have an affect.

                            2. Be really on top of events. At present many events are being cancelled, postponed or held without public, which obviously has an impact on demand. Most hotels set high prices for these excess demand dates well in advance - have you reviewed your pricing for these dates to check it still makes sense?  

                           3. Don't make any drastic changes to your long term strategy. Keep an eye on developments and simply ensure that you are offering sufficient inventory availability on all channel.

                        And remember:

                        Revenue Management NEVER stops!!

                        Subscribe to our newsletter

                        We give you the facts, you set the prices