Eight things Smart Hotel Revenue Managers do Differently

In today’s connected world your hotel can find it difficult to be different. Most hotels are online and they are working with the same channel partners as you. They have pricing strategies aligned to the competitor set (which you are definitely part of) and are focused on their guest satisfaction scores and online buzz. There is no shortage of technology but it’s rare to find that you have a competitive advantage because you have implemented a product that is better than the rest or something that the competitor doesn’t have access to. It is a level playing field for most smart hoteliers. So what do you do differently to outsmart the competition when the competition isn’t really sleeping or as clueless as we would like them to be?

Here are some of the things we have seen successful hoteliers do (for easy reference, lets refer to them as ‘SRM’: Smart Revenue Managers) to be different in this dynamic landscape where it is as competitive as the Olympics.

1. There is more to automation

It is easy to get hung up on automation as the cure for all that ails distribution.

If we can achieve the utopian seamless 2 way connectivity between our PMS and everything that forms part of the distribution food chain then we will have no parity issues with brand.com, all our pricing decisions will be seamlessly applied everywhere, there will be no more “we are being put at a disadvantage” emails from channel partners and everything will be fine.

Once everyone has the same single-image view of my inventory I can sit back and relax, correct?

SRMs and their teams don’t just settle for automated distribution but also incorporate decision trees based on occupancy, cost of distribution of each channel and the target net ADR and RevPAR.

The decision tree is an interlinked matrix that provides the sophistication needed to maximize returns from the same inventory / occupancy levels.

2. New vistas, new insights

Hotels are comfortable tracking competitor web rates and GDS bookings (associated fair-share indices) and using that information to feed their competitor strategy.

Meanwhile hotel guests have been active too, they have found new avenues online to book a room – whether it is through private networks, flash sales, group buying, mobile apps, Facebook fan pages or Twitter deal handles.

Promotions have become so integral to the product mix that every major OTA now works with supplier partners to run promotions to drive bookings.

The more forward-looking person (i.e. SRMs) have already started to track promotions and offers from competitors, new channels, email newsletters. These are early warning of potential impact on transient demand.

3. It’s all about ROI

An SRM is well prepared for the monthly or quarterly review with each demand partner by having detailed insights into their productivity for the hotel.

Key matrices the person will use to create pre-meeting dashboards include,

• Booking window and lead-time pattern for the partner  compared to other channels
• LOS patterns
• Room types and Rate plans sold
• ADR v. Room revenue produced

These data-points help drive better insights and make the review sessions more productive compared to the more typical discussion of total bookings and revenue.

4. Data, not for volume but for decisions

Hotels use competitive intelligence tools to track the market on the web or on the GDS.

It’s not unusual for a hotel to take all the available data, believing that more is better.

Whether we feed all of this data into a RMS or into a BI tool or use the product’s visualization capabilities, we need to remember the first rule of data analytics – “Garbage in – Garbage out”, not to mention that sometimes decision making can be ineffective due to a large volume of data which becomes obsolete very quickly.

SRM will analyse booking windows by each major channel or channel group and create buckets of active booking windows to highlight the period when majority of bookings from each of these bucket channels are received.

SRM knows that each type of channel attracts a different segment of business and booking patterns for all segments are not necessarily the same.

Also, SRM will track the competition on each channel bucket and its active booking window that will enable to identify key data that drive results.

5. Apples and Oranges

When a hotel is benchmarking in the market it is very important to compare apples to apples.

After filling in all those RFP responses every year, a lot of hotels have started believing that the definition of an apple is their product benchmarked with the competitor’s product in the way the hotel defines its products.

Let’s say my base category room has a certain square foot size, has certain amenities; I need to find the comparable product of my competitor and then look at the packaging of that product (is breakfast included; are there any other inclusions or board type configurations that will change the apple) to create my definition of an apple and then compare my apple to the competitor’s apple.

An SRM realizes that his/her way of defining an apple (setting benchmark) is the way the guest is defining it when they are making their shortlist of hotels and then comparing the hotel with its competition.

So the SRM takes a smart approach – talks to guests, looks at historical booking data, overlays that with future pricing data and then derives budget buckets of daily rate that the guest is willing to pay.

These buckets let the SRM benchmark what the hotel is offering within a budget range compared to the equivalent competitor offerings, as well as keep track of delivering the most value in the guest’s budget bucket.

6. Not just demand forecasting but demand mapping

Hotels know who their typical customers are and where they come from. The distribution partners they work with usually produce predictable patterns of business.

For more effective analysis, the SRM digs out historical data of guest source countries and maps it against the current pattern of inbound traffic to the hotel’s location.

By doing this gap analysis the SRM is able to identify newer markets and demand partners that will bring in additional business rather than allowing it to go to competitors (Outbound air travel from China to America is growing 25% YoY and to Europe 20% YoY)

7. Catch the bull by its horns

We have all gone through our days of cribbing about and questioning the authenticity of online guest reviews and how guest feedback received on property is more reliable than online feedback.

But the majority of hotels have realized that online guest reviews and comments are important (the law of averages ensures that some fake negative reviews do not impact overall image if we track and address them promptly) and they actually impact the value perception that prospective guests build of a property in comparison to its competitors.

This value perception that guests build plays a big part in the rate evaluation when they shop since value received vs. price paid is a common consideration.

Now everyone is tracking and responding to reviews through one or the other tool available in the marketplace.

However, an SRM realizes that online reputation and guest satisfaction being tracked and managed solely by colleagues in the operations or quality assurance teams doesn’t help in building a value based competitive pricing strategy.

It also does little to maximize the revenue potential of the value that has been built with so much hard work.

SRM takes the next step and includes a Value Index (a comparative index) in the hotel’s rate decision-making process instead of purely using the benchmark rate as a standalone variable.

8. History no longer a true reflection of the future

Many hotels, whether on excel or within a RMS environment, still rely heavily on historical data to forecast demand and base their pricing decisions on that forecast.

Some will mix in future rates of competitors as well as a competitor-based Value Index (as mentioned above). But they are also aware of variables that impact their demand beyond these things.

Let’s illustrate with few examples:

• India saw a drop in international tourist arrival to a tune of 25% recently because of women safety concerns. This demand got shifted to destinations like Malaysia, Thailand and Indonesia but the hotel rates didn’t change to reflect this additional shift in demand.
• In 2010-11, Yen depreciated by 8% against the Chinese basket currencies and appreciated by 13% against the US$. During the same period there was an increase in vacation bookings from Tokyo & Osaka in Vegas by 6.3% and corresponding drop in Macau by 5.9%
• A 3 day promotion blitz in June 2011 on the JFK – Cancun sector introduced by United saw most hotels sold out in Cancun within a week of the offer before anyone could change their pricing strategy. Similarly a 3-day promotion blitz by JetStar on flights from Australia (MEL) – Vietnam (DNG) saw most budget hotels sold out in Danang within a week of the offer before any hotel could change their pricing strategy.

So a strategy which might appear successful based upon historical configurations of events and actions may well turn out to have different consequences once new events and actions have taken place.

Incorporating a range of current events and information into the analysis adds new dimensions and reduces the chances that a hotel will be left behind or miss an opportunity.

Overall

In any consideration of smart revenue management it is important to be looking out for Customer Lifetime Value (CLV) and the changes that make a real difference, not those which are based on hype or illusion.