Jurgen Ortelee is an alumnus of Hotelschool the Hague in the
Netherlands. He graduated in 1989 and
went on to receive a master’s degree from Brunel University in West
London. He is currently the Vice
President of Revenue Performance, the highest ranking RM executive, at the Pan
Pacific Hotels Group, Singapore. PPHG
has a diversified portfolio of hotel investment and development properties. It has two acclaimed hotel brands: Pan Pacific Hotels & Resorts, which is a
leading brand in Asia and the Pacific Rim, offering upper upscale
accommodations and services. PARKROYAL
is an upscale regional Asia Pacific brand.
Jurgen’s interview is the first of the series. Not only does he have a successful career, it
is also interesting that although he is Dutch, his working experiences have
been thoroughly international during the last 22 years, spanning from Holland
to the US and finally to Singapore. To
make the interview more interesting and give it a personal touch, the interview
questions are a mixture of RM-related business questions and questions that
project the human side of the interviewee.
Questions are divided into six categories:
o Education
Background
o Career
Path
o Perspectives
on the Hotel Industry’s RM Development
o Perspectives
on the Company’s RM Development
o Management
Advice from the Interviewee
o Personal
Reflection & Aspiration
When you were a student, what
were the subjects that interested you the most?
The
two subjects that I find most helpful in my line of business are:
Marketing: It makes me think about the volatility of the
market and how market changes will influence my business. Secondly, it helps me to interpret the
numbers.
Accounting: Although RM has nothing to do with
accounting, it does make me look the details.
Accounting also helps me to deal with numbers.
Can you tell us something about your professional experience?
My
career experience can be divided into three categories:
At
operations management (OM) level: I
worked in OM the first nine years of my career; mostly in front office and
F&B [food & beverage].
At
corporate office at global level: I was
mostly involved in developing training programs and implementing revenue and
reservation systems. I also handled the
development and implementation of pricing strategies for several brands on a
global basis.
At
regional level: Currently I hold the
highest RM management position in my company.
I am primarily involved in developing revenue and distribution strategies.
Although you are Dutch, you have never worked in Holland. Was this what you had expected when you first started your career, or was it that opportunities led you to far away places?
Actually I worked for the
American Hotel in Amsterdam as a duty manager, assistant front office manager
and acting F&B manager. I also
worked in the US for nine years.
Eventually, IHG Asia offered me a career opportunity in Singapore. I’ve always wanted to work in Asia. So, I took the opportunity and ended up
working in Singapore.
What attracts you to Singapore and stay there?
What attracts you to Singapore and stay there?
Singapore is what you
would call “Asia for beginners”. If you
are going to live in Asia, you should live in Singapore first. It has been under the international influence
for a long time, and Singapore is quite westernized in its day-to-day functions.
Which aspect of the culture do you find, as a Dutch person, most challenging to adjust to?
The rational for
decision-making is different. In the
Western world, you look at all inputs.
Decisions are made based more on the information given, whereas in Asia,
decisions are at times made based on what makes one looks better .
Therefore, some of the decisions tend to be more subjective and
emotional.
If you have to leave Singapore tomorrow, what experience/memory will you take with you?
It is a very pleasant
place to work and live, i.e., it is much easier to adjust for the Westerners
who work and live in Singapore. I really
like it here.
Can you give a short description about your company’s organization structure in revenue mangement?
We have 27 properties in
Asian countries, such as China, Australia and Philippines. We own 14 properties; manage 11 hotels; and
run two franchisees:
At
the local hotel level and in more complex properties, we have Directors of
revenue management. In smaller
properties, we have Revenue Managers.
Both positions report to their respective GM.
At
the corporate level, we have a Senior VP of Marketing & Sales, who
reports directly to the CEO. The VP of
Brand, the VP of Sales and the VP of Revenue Performance (which is my position)
report to the Senior VP of Marketing and Sales.
In
my position and at the local property level, I work mostly with GMs and revenue
directors/managers. At the corporate
level, I work closely with the VP of Sales and the VP of Brands as well as the
online marketing team.
I noticed that the Senior VP’s title is “Marketing and Sales” instead of “Sales and marketing. Can you explain?
Marketing is the thinking
and strategy planning part of the hotel management, whereas sale executes the
market planning; therefore, it makes more sense to call it “marketing & sales”.
Your Company selected you to take your current job. There must be something about you that excels others. What do you think it is?
I
always try to improve myself in several areas that I think are important to the
company. I guess my effort has paid
off. My strengths include:
Diversity of my RM experience: I’ve worked in just about every aspects of
revenue management.
My operational management experience: Because of it, I understand and know where to
look for information and problem areas.
Rational thinking: I pay a
great deal of attention on analyzing data and based on the outcome of my
analysis, I try to make objective and logical management decisions.
Interpersonal relationship:
You need information from marketing and sales, operations management,
and GMs. It is through interpersonal
relationship I am able to obtain the information I need.
What are the most important lessons you have learned from your current job?
Keeping up with the
pace: The world is moving so fast that
it’s incredible! Not only do you have to
know what the current developments are, you also have to know what comes after
the current developments. Therefore, you
must have future thinking mentality. If
you look at education today, much what students are learning now will be
outdated by the time they graduate. Knowing
the current trends or practice is just not enough; students need to acquire
the ability to recognize signs of the future.
For example, we are already looking at what will come after social
media.
What is the difference between the Asian hotel market and European hotel market?
Service: The concept of hospitality is ingrained in
the Asian culture. “Employees” are happy
if you stay in their hotel, whereas in Europe, “guests” are happy if they stay
in your hotel.
Adapt
to Change: In Asia the adoption rate in
technology is much faster. People really
like electronic gadgets, whereas in comparison, Europe and the US are more
stagnant.
Brand
Image: Branding is very important in
Asia. For example, in China, which hotel
to stay is often depending on which hotel I can invite my friends over to
impress them? For the younger
generation, it is about the brand as well as price.
80%
of the boutique hotel guests are well-traveled, well-educated Westerners. Asians prefer the big brand names.
Motels
and roadside hotels don’t exist.
Casino
hotels are packed but theme park hotels are not.
Do you think revenue management implementation is widespread in Asia?
RM concept is developing.
Many hotels still do not understand the concept. Some hotels have an RM position at the local
property level but often there is no support from the corporate office. There is need for more RM education. Also, we need to find talent in revenue
management but there is a shortage of such persons.
What do you think of the concept of product development/improvement and revenue maximization? Why aren’t revenue management and/or marketing heavily involved in product development?
Many hotels design the physical products without first asking the
question: “Can we sell them?” While the owners in the hotel industry still
make the product decisions, more and more RM is involved. For example, we are currently building a new
hotel. We know Japanese guests like twin
beds, and we have many Japanese guests.
I want to make sure that we have enough rooms that offer twin beds.
What about the development of using social media to book a room --- and eventually with a mobile device? Do you think this will be the future?
Social media is the future.
Because we will become more mobile, Facebook and other social media
websites will have to change in order to stay compatible with the mobile devices.
Internet allows travelers to compare room rates worldwide. On the other hand, we know that discounting may or may not maximize revenue. Even if it does, at one point, more revenue will lead to less profit. Is discounting an effective competitive tool used widely in Asia?
In Asian markets, you can’t avoid offering discounts because
customers are always looking for the best deal.
In principle and as a hotel, you don’t want to offer discounts too
early, at the same time, you want to be the first company that closes the
discount rates, or you will lose out.
That is, when you detect early signals that the market is picking up,
you should be the first one to close the discounts.
What about the implementation of automated revenue management system in which most of the routine tasks and decision-making are taken over by computer? What kind of effect do you foresee on revenue management job performance?
An automated revenue management system is not just a future trend;
you need it. A sophisticated
system is necessary to achieve bigger revenues and good ROI. It’s a tool to help revenue management to
make better decisions. But you have to make
sure that the people who use this tool have good understanding of the
business. Otherwise, it can be more
harmful and in danger of making wrong decisions. Major companies such as Hilton, Starwood and
IHG all have automated revenue management systems.
Despite the fact that, in general, the total amount of overbooking is less than 1% of room revenue, many hotels in Europe consider it an important issue in a disproportionate way. What is your opinion on this issue?
The system will figure out the amount of overbooking but the
numbers are still discussed in management meetings. Adjustments are often made during these
discussions --- another example that the system cannot replace human assessment. We look at overbooking from two different
perspectives:
Service Perspective: In general, overbooking is not that acceptable
in Asia. It causes customers and hotels
to lose face, and it is really a big deal in Asia.
Management Perspective: You really don’t gain that much by
overbooking. Driving the length of stay
is preferred.
Some
of the European and American chain hotels are facing difficulties with powerful
OTAs in maintaining rate parity. Do
Asian hotels also face the same problems?
Are these problems created, in part, by lack of systematic channel
management in rate structure from the hotel side?
Online travel agencies (OTAs) are very strong. Expedia charges 25% commission for small and
independent hotels. But they do a lot of
advertising, and they bring the business.
This is why they are powerful. To achieve rate parity, you need good and hands-on channel
management. Customers should not be able
to find your rates in other websites that are cheaper than the rates offered in
your brand site. All rates offered
should be the same regardless of the channel employed. In the end, channel management is strongly influenced by the
strategy of “building the brand” versus “filling the rooms”.
In term of performance measurement, what are you looking to achieve in the long-run?
We would like to achieve
a better RGI that is above the
competitive set. In addition, we would
like to have higher systems contribution, which shows how much business is
channeled to the hotels via brand controlled channels.
In your opinion, what are the most important RM performance indicators, e.g., ADR, occupancy rate, RevPAR, etc.?
RevPAR is the most
important performance measurement. There
are many problems with GOPPAR. For one, revenue management
has no influence or control over various costs, which is required to calculate
GOPPAR. RGI is also important. We also look at
additional customer spending from each
segment. So, we do displacement analysis
to compare different segments.
What about using the concept of CM (contribution margin) as a performance measurement, in which you deduct the variable cost?
Regardless what rate we
are talking about, the variable cost is always the same, $25/room.
Assuming your ADR is $100/RN and your VC is $25/RN. Therefore, your CM = $75/RN. Assuming the demand is 100 RNs, consequently, your revenue is $10,000 and the CM is $7,500. Assuming the room rate is raised to $125 and the demand goes down to 80RNs. Your revenue will stay the same, $10,000. However, your CM will be $8,000, which is $500 or 6.7% more than the first scenario. What do you think of looking at the performance measurement from this angle?
Yes. You can look at it from a pure room revenue
management perspective. We would have to
also look at other expenditure so that we are looking at the full picture.
What about other types of indicators, such as RevPAC (revenue per available customer), RevPSM (revenue per square meter), and TotalRPAR (total revenue per available room)?
For resort hotels, we
look at the TotalRPAR because spending on other than rooms could differ
considerably from segment to segment.
For instance, we look at RevPAC by nationality [as a group and not as
individuals]. For conferences and
events, we look at the RevPSM. This is
because the general set up of the rooms can be flexible. How we divide the rooms can make a difference
in revenue generated per square meter.
We don’t use this measurement for restaurants because the space
arrangement is not flexible. Instead, we
use RevPASH to measure restaurant
performance. For asset management, you
always look at RevPSM.
Isn’t it true that if RevPSM is used to measure performance, you wouldn’t want to have, for example, a big atrium lobby, because it is an idling space? On the other hand, from the marketing’s perspective, impressive lobby may help to attract more customers and build brand image. How do you balance the two?
You take Shangri-La
hotels, for instance, it is famous for its lobbies. Yes, you have a five-story idling space but
it helps to build the brand image. Of
course, the Shangri-La in Paris is an exception because the hotel occupies a
historical building, and it is just too expensive to build a five-story high
atrium lobby.
Does your company apply revenue management concept other than rooms; e.g., restaurants, spas or health clubs, beauty salons?
In our spas, we use
revenue per available treatment hour to measure performance. We are just starting to look into it, whether
or not this will help us to achieve higher revenue.
Are you happy with the outcome of using these performance measurements?
The performance
measurements we use give enough information about our and our competitors’
performance but they do not specifically tell us about how well our strategy is
performing. For example, what is the
most efficient way to get business? What
is a better way to improve CRO [central reservation operation] call
conversion rate? We found out that by
improving the central reservation system, we are able to improve the
availability of information and the CRO team, therefore, improving the CRO call
conversion rate.
What are your thoughts on forecasting accuracy, especially group forecasting?
I am happy with our
forecasting system. It is very
reliable. We use it for both transient
and group forecasting. It all depends on
how much risk we are willing to
take. In some cases, we are willing to
take greater risk than others. The
question we ask is: “What is the typical
acceptable risk percent for that market?”
If you were to hire a new revenue manager, what are the most important qualifications, such as knowledge and skills, education, work experience, personality, work ethic, etc., that this person must possess?
The person I would hire
would have to possess:
Analytical skill: He or she
must be able to deal with numbers, understand numbers and know what they
mean. At a higher level of analytical
skill, he/she is able to turn the available data into strategy.
He/She has to be a logical thinker:
Decisions should be made based on objective information.
He/She must be curious and willing to ask questions: If you don’t ask questions, you are not
curious enough. You need curiosity to
detect problems and find solutions. You
also need curiosity to be able to pinpoint underlying signals on business
changes.
He/She must be able to see from the perspective of the employer as
well as the employees.
I would also mention work ethics.
Investors only look for exceptional companies. They do not appreciate mediocrity. Apple Computer is a good example. They excel in their brand, their
innovativeness and their strategy. This
is why I own only Apple stock and you know that they are doing exceptionally
well at the moment!
Will revenue management experience help to pave a career path to GM position?
RM is no longer a niche
career path. More and more we see GMs
come through the RM career path.
What advice would you give to our students who are interested in pursuing the career path in revenue management?
Look for a company that
embraces revenue management and is willing to put RM in the right
position. Ask about the revenue management
set-up at the corporate level. Does it
project the importance that revenue management needs to be successful for the
entire company? Check out the company’s
RM job description. You can tell a lot
from the job description the level of responsibility that is designated to the
job position.
Don’t work for a company
that doesn’t believe in RM and has a RM position only because everyone else has
one.
What is the single most standout issue that you wish you would have the chance to do it over again?
I can’t really complain, to be honest. I always move in the direction that interests
me. May be in the beginning I focused
too much on OM (nine years). I should have
focused on RM earlier. I am really
passionate about revenue management.
What were your proudest or the most satisfying moments in your career life?
My proudest moment is when I can promote one of my staff to a good
position. It’s a real good feeling!
Finally, you are currently holding the highest rank in RM in your company. What’s next?
I would like to start my own business and run a small hotel someday. After working for many years, I would like to
get out from under constant corporate pressure so that I can do something for
myself rather than for someone else. I
would like to start a hotel in Thailand, mainly because the Thai culture is
naturally compatible with “hospitality”.
They like to please and make you happy.
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