Free Sell or Free Fall?

How innovative hotel technology is turning traditional free-sell practices into a more profitable revenue strategy

Source: IDeaS

Blog Soundbites:

  • Meeting & events space can contribute 40-60% of a hotel’s total profits
  • A lack of integrated M&E technology hurts hotel profit potential

Contrary to any widespread belief, hotel meetings and events space does more than just sell guestrooms. In fact, for many hotels, the profit potential of this revenue stream is so significant that it can contribute 40-60% of their total profits. When it comes to leveraging this event space strategically, however, it’s often one of the most overlooked opportunities for substantial revenue generation.

The industry has talked about folding revenue management strategies into sales and catering processes for quite some time. But despite the damning evidence and encouraging conversations to support such an industry shift, there hasn’t been a strong call for technology that fully allows hotel teams to do so. Why does this matter so much? The answer is easy: this lack of integrated technology hurts hotels right where they feel it the most…their profit potential.

Take the concept of “free sell,” for example. This prevalent sales strategy is commonly used throughout the hotel industry, most notably in upscale and 5-star markets, and it follows a fairly simple premise: If a meeting request for a date in the future comes in, and it has no guestrooms attached to its RFP, a catering or sales manager can’t book the business without approval. That is, unless the time frame falls in a designated “free-sell” period, which is a short-term booking window in which the hotel will take any business to fill open meeting rooms in the near future.

While a designated free-sell period varies for every hotel, in every market, and fluctuates with different seasons, let’s assume a property has a current free-sell window of four weeks in the future. In this case, any meeting-only RFP looking to book three months out is likely going to be turned away in the anticipation a more profitable piece of meeting business (with a highly-coveted guestroom block) will come along in the meantime. And that strategy makes sense to a certain degree. Why fill up your space prematurely when there’s potentially better business with additional guestroom spend down the road?

But what happens when that highly-coveted business doesn’t actually end up knocking at your door? What happens if you turned down a $15k meetings-only event over a typically busy time period because they didn’t have any guestrooms and inquired too far out, but you didn’t fill that space with more profitable business later on? Think about the money hotels are leaving on the table when they rely only on this kind of rationale.

So how are hotels beginning to tackle this opportunity head on? With global spending on meetings and events on the rise, and a international manifestation of holistic revenue management cultures emerging, hotels are starting to leverage their function space revenue opportunities into bigger profits with cutting-edge data visualization technology.