The magical world of last minute

Last minute, cancellation policy, occupancy, cancellation forecast: what is the link between all these concepts? and how can the revenue manager make a good use of them? Here are a few tips to avoid mistakes…

Last minute consists in selling rooms close to the arrival date, under the cancellation policy coverage. If there’s no Cancellation policy coverage you cannot technically talk about last minute: it is rate readjustment.

A powerful weapon… to handle with care

The last minute is strategically a very important weapon that serves to maximize the revenue of the rooms that would otherwise remain unsold.

Even if it is a powerful weapon – which should always be used when there are unsold rooms – we must not forget that it is still a correction to an error, and that using it means “repairing” a mistake.
In a perfect action of Revenue Management, filling rooms before distorting variables (early check outs, no-shows, cancellations) compensated then by cancellations, should not determine nor unsold rooms (and consequently last minute) nor an oversale, the physical materialization of overbooking, with the complicated consequence, alas, of rerouting. So, no benefit.

The target curve

Obviously, complying with the “target curve”, the perfect rate curve, is almost impossible and therefore the last minute is often necessary.

The last minute goes hand in hand with the cancellation policy because these two values influence one another, sometimes exalting each other and sometimes in opposition.
We know that a long cancellation period protects the hotelier, but not the customer who is rather discouraged by a booking with a too restrictive cancellation policy. It goes without saying that a cancellation policy too close to the date, leaves little room for manoeuvre to the hotelier for corrective measures, but … IF CORRECTIVE MEASURES ARE NECESSARY!

To these two related strategies, the last minute rate and the cancellation policy, should also be added a third variable, called the active distance to the date: this empirical datum which detects the reactivity at the last minute of a given rate, in a given place, sometimes requiring a progressive last minute. Make a last minute 24 hours before arrival in London or Margate leads to the analysis of two completely different scenarios that cannot be apprehended in the same way by the revenue manager.

Moreover, analysing a last minutepolicy also means not only evaluating the best current rate, but also analysing the level of the competitors and their degree of rate aggressiveness. Anyone who knows us knows we don’t look to our competitors since we believe it is not only useless but even harmful.

Look to competitors, but only this time…

This rule has its (partial) exception in the case of the last minute, where the control of competition is not dangerous and may prove useful. Imagine operating a last minute on the last day on a very popular date, with most of the hotels of the area sold out … It is obvious that not only the rate could remain the same (so without considering adjustments), but even higher. In fact, the idea that the last minute should necessarily be a promotional rate is only a partial vision even if in most cases this is what happen.

Then we see that a hotel market that has done damage on rates for several weeks – if not months – then generally introduces compulsive rates trying to repair with the last minute all the damage done during the previous weeks, implementing reckless rates measures, especially in some locations with high reactivity, at the last moment, as in art cities.

It is possible to get out of this last minute struggle by working differently on the cancellation policy, the occupation and the forecasting of cancellations, a fundamental data too often underestimated from a statistical point of view.
Practicing the last minute also offers commercial visibility and helps in some way establishments that lie along major roads, allowing better use of the smartphone channel.

Let us also remember that greater visibility every day alsorewards the rest of the year, fuelling reservations that can materialize on the same day or in the days to come.
Therefore, the last minute undergoes the same rule as any other revenue management tool: use it yes … but use it PROPERLY!

For those who would not have seen it, here is also a video where I explain many aspects of the last minute

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