Integrating Revenue Management, Marketing Data and Analytics

By. Kelly McGuire 05th Nov 2014

It is not news to hoteliers that there are advantages to revenue management and marketing working more closely together. The better synchronized these two activities are, the more profitable the enterprise becomes. As an industry, we’ve been talking about opportunities in this area for a while, and recently with the advent of digital marketing and personalization initiatives, the need has grown for these groups to work more closely together. In this article, I’ll talk about emerging opportunities to synchronize demand generation and demand control activities with the goal of profitably increasing guest engagement and guest conversion.

Intelligent Demand Management

In past discussions, I have outlined the kinds of data and analytic results that should be shared between marketing and revenue management. For example, revenue management should provide demand patterns and prevailing rates to marketing so that campaigns can be placed in need periods, and pricing does not dilute revenue. Marketing needs to let revenue management know when campaigns are running and what the expected lift will be so that revenue management can adjust forecasts accordingly. This ensures that promotional rates stay available, and pricing reflects where the demand is really coming from. Both groups need access to this information when they need it and in the systems they use every day. They should not have to wait for the next weekly meeting.

After this simple data sharing step, I have advocated that this kind of data can be incorporated into each departments analytics, so the RM forecasts automatically account for demand from promotions, and the marketing systems automatically predict what campaigns should be deployed to which segments to stimulate the “right” demand to fill the need. I have called this vision of synchronized decision making across pricing, revenue management, campaign optimization and customer relationship management “intelligent demand management”. It should no longer be about one group generating demand and one group controlling demand each in isolation. Rather, both teams manage demand through the funnel, ensuring that decisions made at the points where demand is generated or controlled are synchronized to what is most profitable for the hotel as a whole, not what is likely to meet a departmental goal or incentive.

I have always recognized that this vision of intelligent demand management was not just a technology strategy. While technology could be the glue that binds these departments together, in most cases, achieving this level of synchronized decision making requires organizational and culture change as well. Reporting structures may need to be adjusted and incentives realigned. Departments will need to spend time to understand how each other work, and to develop a common business language. Then automated reporting and analytics can support a shared vision and strategy.

Since I started writing about intelligent demand management, the industry has made a lot of progress. I have seen many examples of companies adjusting their organizational structure to have marketing and revenue management reporting up into a common VP or SVP. I hear stories about sharing reports across divisional lines, and adjusting marketing plans based on demand patterns. This is really exciting to me because the market has certainly not slowed down to allow us to catch up! In fact, new initiatives across the hospitality industry are making a tighter relationship between marketing and revenue management even more critical.

The Path to Personalization

As mobile gains in popularity, and social media, review and rating activities only increase, consumers’ expectations of the relationship they have with the companies they do business with is changing. Consumers expect to be treated as a market segment of one – not part of a larger, generic, group. They provide a wealth of information across the internet, including to the companies they do business with, and they expect this information to be used to deliver a more personalized experience, regardless of when, where and how they choose to interact with that company.

In this midst of this, as competition continues to heat up, hotel companies recognize that in order to stay in the game, they need to “own” the guest through all stages of the guest journey – from research to booking through the stay and in follow up activities. They need to compete against other hotels, but also with the third party distribution channels that are aggressively targeting the hotel consumer. Personalizing the experience for the guest or giving them control to customize the experience for themselves opens the door for hotels to develop a relationship with individual guests, increasing their engagement and loyalty behavior. If they feel personally connected, and get more value from interacting with the hotel directly, they will always go to the hotel directly.

There are opportunities to deliver personalized service through the hotel website, surfacing content and products that are relevant to the guest’s profile and intent at that time. Allowing guests the flexibility to customize packages, select a specific room, or provide “special requests” during the booking process gives them control over the experience. Clearly, “knowing” your guest while they are on your property will help you make offers such as restaurant recommendations or spa treatments, and even just to have the right amenities in the room when they check in. Finally, there’s the opportunity to use what you know and what you learned to market to the guests after their stay, ensuring you stay relevant to them for next time.

All of this customer-facing activity is definitely a marketing challenge and opportunity. Getting it right in front of the customer is crucial, but it’s also crucial to align the infrastructure and organization to support this initiative to ensure it drives revenue, not just engagement. This is where the unique data, analytics and skill set of revenue management must be involved.

Supporting the Personalization Vision

The revenue management department owns the critical piece of the puzzle that ensures that personalization initiatives drive profitable revenue growth for the company. All personalized content, offers and product selection that include a price require an input from the revenue management system. In many cases it can be just this simple. If the company is using a revenue management system, which updates prices in the selling systems, then the content surfaced to consumers during the booking process can be “price optimized”, assuming that promotions and offers do not discount below what the RM system says the room is worth.

However, this is only the first step to taking full advantage of personalization opportunities to drive revenue and profits. Revenue management holds information about demand patterns, which can be incorporated with the predictions of what content to show a web shopper to ensure that they are not just shown the properties they are most likely to be interested in, but those that “need” that kind of demand. The guest will book what they want, but also, as much as possible, where the hotel company needs the demand. This should extend beyond the hotel room demand forecasts into any revenue generating assets within the hotel, such as spa and restaurants. If the hotel is recommending spa treatments, the systems in the background ought to forecast demand for spa to ensure that the spa has sufficient capacity during the customers stay to accommodate the treatments. Revenue management can help with packaging decisions as well, keeping packaging from diluting revenue. They can ensure that the package components drive demand when and where it is needed and that the pricing of that package is profitable according to forecasted demand.

Revenue managers should work with operations in departments across the organization to help instill a revenue discipline. It always starts with understanding where opportunities exist, for example when to offer a discount or special to drive demand, or when to speed up service to increase volume (i.e. maybe the cheapest spa treatments are not available during peak spa periods, or the restaurant offers more expensive specials on weekends). Personalization initiatives can be layered over this revenue discipline, so guests are guided to experiences that are aligned with their preferences, but also with the operational conditions in the property.

Personalization initiatives also bring up the opportunity to think about customer-centric revenue management. The challenge we will face as an industry is how to include customer value in decision making without it appearing to the consumer to be price discrimination or price gouging. Encouraging guests to come to you through “private” channels (i.e. logging in to the loyalty program) provides you the opportunity to show them pricing that is not generally available, getting you around rate parity issues, and creating a “fence” that helps the customer understand why their price is different than the publicly available rate. More importantly, to maintain the perception of price fairness, customer-centric pricing and personalization should be about displaying products that the customer is most likely to be interested in or creating attractive custom packages, not pricing the same products differently for different customers. There might be some products or offers that are only available to customers that have a certain predicted value to the firm, but consumers need to feel that “the price is the price”, never think that they are being charged more because of who they are or what they do.

There is a tremendous opportunity within personalization initiatives to align the organization around a shared goal of delivering personalized experiences, but both revenue management and marketing need a seat at the table from strategy development through to execution. The success of this initiative will require a creative and relevant design, with a sound methodology for driving revenues, increasing profits and demonstrating success and ROI. The steps that many companies are making right now will form the foundation of a relationship that ensures success.

About Kelly McGuire

Kelly McGuire is an analytics evangelist, passionate about helping the hospitality and travel industries realize the value of data-driven decision making. I focus on connecting the dots between strategy, business process, technology and execution. I have a background in revenue management. I have also worked extensively in marketing analytics and hospitality operations. She adept at facilitating integration

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