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Shell Vacations Finds Synergies Between Hospitality and Club Divisions

Thursday, March 19th, 2009

by Marge Lennon

Lennon Communications Group

Today, vacation ownership developers struggle to keep their units occupied while ensuring member use priority and at the same time obtaining optimum revenue from their unused inventory. Once again finding a better way to improve a challenging situation, Shell Vacations has created a platform for the monetization of its vacation club.  Prior to the launch of its points-based Shell Vacations Club (SVC) in 1999 and up until the fall of 2006, Shell Vacations Hospitality functioned independently from Club operations.  

“As our Club’s membership grew, says Sheldon Ginsburg, CEO of Shell Vacations LLC, “it became clear that the Club and Hospitality would greatly benefit from a closer relationship. Each division had similar goals but worked independently from the other.”  After many strategy sessions and guidance from Ginsburg, the two divisions created cooperative operations. In August 2006, the operations of Shell Vacations Club and Shell Vacations Hospitality aligned with Sue Kelley and Paul Adreani both having a direct reporting line to Tracy Sherles, architect and President of Shell Vacations Club (SVC).  Their primary motivation was to more efficiently service the Club product, fulfill monetization needs and deliver the promise being sold on the sales tables, which was the members’ potential to use points for a growing list of external benefits.  Today, these two divisions are working together to offer a myriad of benefits through greater efficiencies. In less than a year, they have effectively merged, making them each more cohesive, generating a dramatic increase in revenue and benefiting SVC members in the process. Here’s how the transformation occurred.

As senior VP of Shell Vacations Hospitality, Sue has been with the company for over twelve years, responsible for the total management of the company’s resorts. She was also renting inventory for the Developer and the Club, but driving rental income totally independent of strategic planning with the Club. Now Hospitality and the Club are jointly focused on getting the right yield and the right guest in each unit, thus optimizing inventory usage.  Explains Sue, “Hospitality always had programs to rent unsold inventory and create cash flow for the developer during the selling process. But once we began working with the Club and realized that the consumer was going to use the Club’s external benefits, our rental responsibility dramatically increased. Now there was a need to generate rental revenue to serve two masters: the Developer – to assist in driving cash flow during sellout – and the Club – to pay for the external benefits offered to SVC members.”

A Shell Vacations Club member’s points equate to inventory, Sherles explains, “The more members use their points for other things, the more we must rent their inventory to pay vendors. This can amount to some healthy numbers when you’ve got thousands of members utilizing these benefits.”

Yield Management/Rental Strategies Evolve

As VP of Operations for Shell Vacations Club, Paul has been with Shell for eight years. When he joined the company, he was responsible for SVC inventory control and points management. Since then, his responsibilities have expanded into yield management, partner programs, centralized purchasing, member services and the SVC travel department. He also forecasts how much the Club is going to pay for external benefits and if there is enough money coming in to cover their costs. There are now 80,000 points-based members.

A typical hospitality management company in the timeshare industry must focus on housekeeping and customer standards, maintenance, budgets, legal compliance, and refurbishment. But now, Shell Vacations Hospitality has a need to perform all those functions in an exemplary manner as well as the equally important responsibility of supporting the Club in monetizing the inventory unused by members taking advantage of the nearly one million SVC external benefits.  Says Paul, “After combining our two divisions, hospitality has a much better understanding of our costs per point for external benefits, rather than focusing solely on room nights and revenue. We are trying to drive 100% utilization of available room nights with as much member use as possible while aiming to obtain the highest yield per point for every room night. As long as our net revenue per point exceeds our cost per point, we are accomplishing what we set out to do. We are also able to continually incorporate new partner programs.”  

Forecasting Procedures Grow in Sophistication 

Precise forecasting of inventory usage is critical in monetization of points and operating an efficient rental distribution platform. Prior to the merging of the Club and hospitality functions, SVC estimated on an annual basis the members’ expected use at its resorts vs. the members’ use of external benefits. Then hospitality would rent the inventory they forecasted would be unused.  Since the consolidation, Director of Inventory Management, Ralph Kerr, reports to Sue and Paul and adjusts the forecast on a weekly basis, constantly re-estimating these needs instead of looking at it once a year at budget time and basing the expectations on past history. He uses a variety of strategies to drive member demand to the available SVC resort room nights.

Paul says, “We constantly review new variables like franchisees or new resort acquisitions and try to forecast what impact those properties will have on member utilization. Once we identify a new trend or change in inventory usage, hospitality alerts revenue managers at each site. For example, if we predict an 85% usage by members in Las Vegas and see that we are headed lower, we must immediately correct our forecast or the rooms will go empty, revenue will be missed and sales people won’t have enough guests to tour.”

“After we forecast the use of external points for benefits such as airline tickets, car rentals, cruises, safaris, golf and dining,” adds Paul, “we take the gross number of points to Hospitality along with the associated cost and target these points for rental.  Once we know the number of points that need to be monetized and the associated costs, we know what the yield per room night needs to be. With a better understanding of our collective monetization goals, we can now drive higher room utilization at a lower room rate (depending on day of the week and season) and still have a sufficient yield per point to cover the cost of Club’s external benefits.”

Inventory Optimization Supported by Software

Shell Vacations made a large financial commitment by purchasing Top Line Profit Enterprises (TLPE), software systems to support Ralph Kerr, Jason Geno, Director of Club Operations and Hospitality teams in the field. This software supports the inventory optimization efforts by applying the rules for usage equitably across all the properties while simultaneously helping comply with inventory regulatory requirements.  Every property has been installed with Opera by MICROS, the largest hotel property management system in the world. TLPE works in concert with MICROS, which handles inventory management for hospitality. The implementation of this system took over two years and is now running smoothly. All field personnel have been trained on the system and the company’s expertise in inventory and yield management has excelled with the support of this tool.

Inventory Optimization Enhanced

According to Sue Kelley, “Today, the ability to optimize inventory usage is an ongoing weekly and sometimes daily initiative instead of receiving a static number once a year at budget time. Annual estimates almost guarantee a mistake because inventory changes every day. For example, if the Club added a new benefit in mid-year to meet the needs of members as well as sales and marketing, this might result in more club members using outside benefits and increasing the inventory that needs to be monetized.” 

“Today,” she continues, “everyone in the company understands the Club’s monetization objectives, including resort GMs who once thought like hoteliers, concerned mainly with putting ‘heads in beds’. Today, they are trained to place the guest that will be in the best interest of the company while optimizing the use of available inventory.”

Sharing knowledge and information between the Club and Hospitality helps when budgets are prepared together, making them far more accurate. Working together results in member utilization and satisfaction, which translates into member reloads, the most profitable sale. The majority of the company did not understand this concept five years ago. Now they do.  Adds Paul, “In the past, we did not forecast availability as frequently as we do now and many rooms went unused. That is extremely rare today. We are trying to create the best product in the industry and constantly thinking about making it better while responding to customer needs. The more external benefits we have, the more difficult my job becomes but at the same time it makes our Club more attractive to our members, who are more likely to want to use our external benefits.”

“One of the important ingredients that has made this consolidation work is the vastly different but complementary skill sets and core competencies of Sue and Paul,” adds Tracy. “Sue’s relationship and team building skills enable her to train her General Managers, the operations personnel and revenue generation staff. Paul’s strength is the details and financial aspects of the business. These overlapping characteristics and strengths have resulted in smooth resolutions to highly complex problems.”

Concludes Tracy Sherles, “The consolidation has enabled us to maximize synergies with our Club and Hospitality divisions, moving out all the inventory and funding our external Club benefits in the process. Because of the huge number of external points benefits we continue to add to the Club, the pressure is on to continue to maximize our inventory. We are happy to report that our occupancies and the quality of our guests have never been better. Along with high sales, this has resulted in a terrific first quarter for our company. We know we’ll have to be able to sustain this, but we have made significant strides in conquering yield management issues.”