Is revenue management the secret ingredient for Australia’s hospitality industry?
- Written by Paul Hadida, General Manager APAC at SevenRooms
Few businesses have been hit harder by the impact of cost-of-living pressures than restaurants, bars, cafes and hotels. Owners and operators have trialled numerous strategies to increase their revenue and safeguard their bottom line – from increasing menu prices to reducing their operating hours to only peak periods.
Ultimately, many of these strategies have a short-term focus and risk relationships with guests, who have to carry the burden of higher prices and lower availability. However, there is a more viable alternative – focusing instead on increasing value and optimising a restaurant’s operations through data-driven revenue management.
Turning Data into Dollars
To help venues overcome economic pressures and create long-term growth strategies, SevenRooms has launched ‘Revenue Management’. This enables operators to generate more sales and profitability from the same seats, using approved guest data and data science to improve reservation availability and better utilise the tables at their disposal.
Using the data collected by a restaurant, including the number of nightly guests and their spend, Revenue Management helps owners and operators understand how they can make more money from the same seats. With this knowledge they can improve their reservation availability and enhance their guest experiences, providing greater value for both them and their guests.
More covers, more often
Let’s start with reservations. A reservation book isn't just a calendar. It's a tool that, when it’s fine-tuned, enables venues to get the most guests through their doors to make more money. If a venue understands how many guests and dollars come from their reservation channels, they can better match that guest behavior to their restaurant’s table availability and party sizes, ensuring their venue is at capacity more often.
Today, there are so many ways for diners to reserve a table, from in person and over the phone to via a venue’s website, social media or third-party booking platforms. Each channel is unique and will differ in terms of the volume of bookings and their average value (e.g. average guest spend when booking through each channel). Data lets operators understand which channels are most valuable to their business.
When a venue can see how much it costs to acquire new customers on each channel, how lifetime guest value differs, and which channels are responsible for the most bookings and revenue, they can better steer guests toward their most cost-effective channels to maximise covers and profits.
Better seat utilisation, bigger profits
The longer a venue is fully booked, the more revenue it creates. Knowing which tables should be blocked for reservations and which should be left for walk-ins, the most profitable table configurations, how long it takes for parties to dine, and the maximum number of guests they can host, impacts this.
If a venue’s reservation slots are two hours but the average turn is 75 minutes, a 90-minute slot would create more availability and more opportunity to get guests in the venue. Where guests sit matters too, and even incremental changes can yield tangible results. Typically, venues can maximise capacity by prioritising large parties during peak hours. A party of eight is more lucrative than a four-top and a two-top. The best platforms automate the entire process, and with a revenue management tool in place, can provide specific recommendations that can be implemented seamlessly.
Reduce no-shows and cancellations
No-shows and cancellations can be a huge drain on revenue, but venues can minimise this. For example, offering value-adds during the reservation process - like a birthday cake or bottle of champagne - creates incremental revenue and reduces the likelihood a guest will cancel or fail to show. This also improves the guest experience from the very first touchpoint. Similarly, deposits make guests more likely to show up or cancel within a grace period.
In addition, data can suggest if and when to use cancellation fees to deter no-shows or encourage guests to cancel with enough time to fill the table. These don’t have to be universal, either - they can be customised so they only apply for certain party sizes or during peak periods.
Experience, experience, experience
Acquiring a guest is the first step, but retaining them has the biggest impact on revenue. That’s where the guest experience comes in, and it’s more important than ever. According to SevenRooms research, 68% of Aussies say that cost of living pressures mean they’re prioritising the quality rather than quantity of their dining experiences. Meanwhile, almost half (43%) would be willing to share their data for personalised experiences.
Data can be used for personalisation and marketing automation, which in turn increases sales and profitability. For example, data tells venues about their guests’ order history, frequency of their visits, spending patterns and more. It can provide a holistic 360-degree picture that includes allergies, birthdays, whether they order delivery, their tipping profile, whether they’re a positive reviewer and even their favorite type of wine.
With this information, venues can send automated marketing campaigns, loyalty programs, and special offers. When it’s personalised to them based on their unique habits and preferences, it improves their experience and a venue’s ability to improve retention and revenue. Marketing automation can also be used to stimulate demand during slower periods – for example, with discounts or offers on weekday afternoons when a business might not be as busy.
As the economic environment and shifting consumer behaviour continue to present challenges, data-driven revenue management is key to securing long-term growth and improving the guest experiences at hospitality venues.
