A core strategy of Booking.com, the Priceline Group-owned reservations giant, is to expand into other services that hotel and vacation rental owners need to run their businesses. BookingSuite, its main division for doing that, has just clocked its one-year anniversary.
The director of BookingSuite is Rob Ransom, who, in turn, reports to Gillian Tans, president and chief operating officer of Booking.com.
Tnooz caught up with Ransom by phone to find out the latest about his team’s efforts.
A lot of our discussion focused on RateManager. This tool aims to help hotels set the most profitable rates based on demand and other factors.
RateManager makes a recommendation at the room-type and day-level. For each room type, a hotel gets three-hundred-and-sixty-days’ worth of recommendations.
It's up to the property whether it accepts, ignores, or modifies those recommendations. Basically, any time a hotel’s competitor changes its prices, the software will generate new rate recommendations.
In March, RateManager became available to hotels worldwide.
The product is an indication of the “long tail” of the market that BookingSuite has been targeting with its cloud-based software.
So far, the tool seems targeted at the general manager or the owner of a hotel at properties too small to have a revenue manager. (Though it could also be of use to revenue managers at larger properties, or to hotel groups that have a revenue manager who is managing multiple properties.)
Tnooz: What are BookingSuite’s goals and objectives for 2016?
Ransom: Probably the biggest thing is to continue to expand our partner base. We’re approaching 870,000 accommodations now. We want to educate these partners about BookingSuite’s key solutions, one for property websites and the other around revenue management.
Tnooz: Let’s focus on the new one, RateManager. What's important to know?
Ransom: The core of the product came from the acquisition of PriceMatch, a year ago.
We’ve added as an input aggregated data from Booking.com, particularly on forward-looking demand and on understanding demand at a destination-level. This has led to better rate recommendations.
A lot of revenue management systems out there rely heavily on historical reservation data from a PMS [property management system] or a CRS [computer reservations system]. We aren’t constrained by that.
Here’s an example of why that matters. This year, the European football championships take place in June in France. That impact on demand doesn't show up in any reservation history, and any tool based purely on historical data would miss it.
Yet Booking.com has very good visibility on aggregated demand at the various venues around France. We have a lot of detail about where that demand shows up, when it shows up, what the size of that demand is, what the booking window is....
Our investments have also led to us update the probabilistic model. The short version is that every recommendation is based on the likelihood to sell the next room at a certain price. Our data scientists are treating each booking as truly an independent event.
That’s opposed to how lot of other systems' recommendations will actually vary based on your current occupancy. If you think about it, your ability to sell that room should be completely independent of your current occupancy level.
We've also introduced machine learning into our system.
Tnooz: What's an example of how you're using machine learning?
Ransom: We’re observing how our users deal with the recommendations. Do they ignore? Do they accept? Or do they modify?
We can say, "Hey, why are certain recommendations being ignored? What are the contextual clues based on our users’ behavior?" We can then stop providing recommendations that our customers don’t find useful, or help provide more context to make the recommendations more persuasive.
Tnooz: Why would users ignore some of the recommendations?
Ransom: Trust. A lot of owners have a lot of experience in their particular market with their property and the demand dynamic at their destination. We've seen many examples where that experience may come in conflict with what's going on in the market for that day or what their competitors are doing, et cetera.
It's important that the owner or the revenue manager gets comfortable with, "Hey, that's not what I would do" and making their own judgement call.
Say a room is priced at a $120 and the recommendation will be: "Look, your competitors are much higher, demand is high, the occupancy is low, your pick-up is tracking above expectations, so you should be at a $150.”
What we'll see is that hotel revenue leaders don't ignore it, but they don't want to raise it that much, so they'll split the difference and raise it half-way. That's just an example.
What we see over time is that people get more comfortable with the recommendations, with understanding how it fits with the market and what results are produced, over time.
Tnooz: What else can you do with machine learning to improve the recommendations?
Ransom: Our data scientists say the art of a good algorithm is around the edges. We call it the softening of the edges of an algorithm. What that means, really, is there's so many individual use cases that could be specific to a certain day, a market, a property, or a combination of the above. We're looking for patterns of why certain types of recommendations are being modified or ignored, for example.
Then we’re looking to see if there is a pattern in the type of situation that's happening. Is it during extremely high-demand situations or extremely low-demand situations? We may need to refine the algorithm in those edge cases, but not necessarily in every recommendation.
Tnooz: Is there autopilot? Is it possible for a hotel to just accept all of the recommendations? Let's say I'm sick, and I'm willing to set my rates at whatever RateManager recommends while I’m recovering.
Ransom: That's probably our most requested feature actually. We've built that. We have it in pilot right now with a handful of properties. Basically, the property sets the parameters. If the recommendations fall within those parameters, it will automatically implement them.
The manager can say, "Automatically accept any rate changes recommended by RateManager between 6 pm and 6 am, while I’m off-duty," or something like that.
The other most-requested change is related to the book window.
Revenue managers are saying they want to actively manage their rates typically between now and the next two weeks or between now and the next 30 days. Beyond 30 days, many are just as happy to let our algorithm run for those longer book window scenarios. We built that and it is in pilot now.
Tnooz: Okay, to change the tune. Some people are cynics out there in the world, Rob. Hard to believe.
Ransom: I haven't met any of them yet.
Tnooz: A cynic who is a revenue leader at a hotel might ask, "How do I trust you? Let's say my competitor down the street gives a lot more money to Booking.com at the end of the day. It’s a more lucrative customer to Booking.com's other side, the online reservations side. Why is I that I should trust that there's a firewall, and that RateManager’s suggestions will be fair and impartial?"
Ransom: Great question. The core answer is that that is not how it works.
The RateManager algorithm analyzes millions of data points every day and optimizes exclusively against the performance objectives of the subscribing hotel, objectives which are set by the management of the hotel itself.
Importantly, the user maintains control over their recommendations and pricing.
We do see that there's this time needed to build the trust, which is a combination of hoteliers saying to themselves, "Hey, I know my market. I know my property. I know how I would do this. I'm looking at what the algorithm is recommending, and over time I learn that, yeah, I trust this or no, I don't."
What we're finding is that people see that it's genuine. They see what their competitors are doing. The tool tells them, but they can also look through all their other sources at what their competitors are doing.
Ultimately, if we're not driving additional revenue for the property with these tools, the hotels are not going to keep using the tools anyway.
Tnooz: What's coming this spring as new functionality?
Ransom: One, we talked about with the autopilot features or the self-manage features. Those we're testing.
Second, we're working on what you could call a dashboard -- a summary dashboard for analytics.
A revenue manager or a GM can come in at a glance and look at their rates, look at any new recommendations that need action, look at the pick-up in the last seven days, occupancy trends and forecasts -- a lot of those basic metrics that a GM, when they're focused on their revenue, or a revenue manager is going to need. Again, that's also in test, and we'll roll that out once it's ready.
In terms of real-time response, a lot of that exists today. The recommendations are already real-time if a property makes sure that their channel manager is integrated. With one click, they can choose to send a single rate, or groups of rates.
For example, any recommendation from RateManager that's plus-or-minus five percent from the current rate can be accepted by you with one click and pushed to all of your channels.
Tnooz: How many channel managers are participating?
Ransom: I don't have the exact number in front of me, but I think it's more than 120 channel managers that we're already connected with.
Tnooz: What other updates are coming to the product?
Ransom: Another one around RateManager that we haven't talked about publicly yet is, I call it a lighter version of the tool. We're testing that now, and that's more focused on a couple of things. One is a destination-level demand indicator. To help for each day, three hundred and sixty days in the future, what's the level of demand in that destination?
Then the other piece is competitive rate shopping. We want to make it easier for properties to understand and monitor what their competitors are doing in terms of rates. Tnooz readers know well that the rate environment is just so dynamic, moving very fast.
Tnooz: How many hotels have signed up?
Ransom: We're not revealing that now. We're very happy with the growth. Our customer base is predominantly in Europe today. We're aggressively moving to market to all the other regions.
Tnooz: What has been the customer feedback?
Ransom: One of the more interesting comments from revenue managers is that some say, "Look, I used to spend four hours a day reviewing competitive rates, checking across all of the different channels and thinking about rates across a pretty wide booking window. Now with this tool, I'm still using my judgment and applying my rate strategy, but it takes me only 20 minutes because I don't have to spend any time on data collection."
Tnooz: Two related points on that. Cost of acquisition of a guest is only one part of a hotel's business. As a hotel sets rates, it has to consider the costs of servicing that guest, like if there's a food and beverage offering, if there's a housekeeping expense, etc. The cost is somewhat buried in the spreadsheets. Is there anything RateManager does that would allow them to make a more intelligent call about that?
Ransom: Some of those costs and things you mention are probably consistent across guests. Where we focus -- and we're starting to do product development in this area -- is understanding really just marketing costs and channel costs and how can properties optimize across channels where there are different cost distributions?
Sometimes, those costs are much more transparent and easier to know. Other times, they aren't. There's a lot of opportunity for better decision-making about where a hotel's actual net rate comes from, which channels provide that combination of rate and volume that gets you to where you want to go.
What we hear consistently from properties is that they really struggle with that. Even ones who actually spend a lot of effort trying to put the numbers in a spreadsheet, as you said, still struggle with that.
Our approach at Booking.com would be to start simple, not try and solve the big problem all at once, but solve incremental problems.
From a hotel's perspective, that may be, "Hey, let me just understand what's going on with my wholesale rates and how does that compare maybe with what I'm doing with OTAs, getting a handle on my direct channel."
One of the things I always react to is when people say, "Well, my direct channel's free, so, of course, I'd rather have it there."
My response is, "Your direct channel is great, and you should have a strong direct channel, but it's not free. Let's help you understand what those costs might be and how you drive volume there while also having a healthy distribution mix."
For RateManager, we're very much focused on helping properties operate on how can they optimize the distribution mix. It's probably going to take a while. We're not going to get into things like service costs on premises anytime soon.
Tnooz: RateManager is not the only tool on the market for independent and mid-tier hotels. Some of the other revenue management software providers have had a head start, too, in tackling this. Why is RateManager the tool to go with?
Ransom: There are two things. One is: I talked a lot about the data science, but we have just as much investment in ease of use and making it really easy for people who may or may not have a strong revenue management background to get value from the tool. That's a big request from our users.
You can dive deeper if you want to, but RateManager is very easy to use, as opposed to some solutions where you actually have to go to training courses for weeks, you have to hire people to manage it. Our pitch is that in 30 minutes, you'll be up and running and know how to use the tool's main functions.
The second one is, we just made a decision to try and be as easy as possible to do business with. It's pretty common in the industry for hotel revenue management companies to require multi-year contracts, a lot of implementation fees, things like that. Overall, that approach raises the investment for properties, which just makes it a tougher decision for properties to do.
Those couple of things, training costs and upfront costs, are why RateManager is going to appeal to many hotels.
That said, we're often just competing against the proverbial pen-and-paper. I've heard the number floated about that more than 90% of mid-market smaller independents in the US and Europe are not using revenue management software.
Tnooz: So pricing is important?
Ransom: The way we do it, we don't have any contracts. Everything's month-to-month. You can come on RateManager. If you don't like it, for whatever reason, you can just stop. We don't charge any implementation or setup fees. It's just a fixed monthly fee.
Tnooz: Moving to the bigger picture: Does BookingSuite as a whole also target vacation rental accommodation owners?
Ransom: We're not explicitly focusing on that segment. We definitely have had properties in that segment sign up and are using some of our tools, but it hasn't been a primary focus.
Tnooz: Okay. How many people are dedicated to BookingSuite on the technical side?
Ransom: We are growing fast. We have dozens. I think we have more than 20 open positions now for developers or product development-related positions. We're hiring talented engineers and designers as fast as we can in Amsterdam and in Seattle.
Tnooz: The Pulse for Accommodation Partners app that debuted last summer for hotels as a B2B tool seems to be popular.
Ransom: First thing, I should clarify. We collaborate with the Pulse team, but Pulse is not developed by BookingSuite. It's part of our partner services team, which provides the core online reservation service for partners.
Ransom: We're working very closely with them on some of the functionality. In future products, there will be parts that may be more directly integrated.
But you're absolutely right. The uptake of the Pulse app has exceeded the expectations of everyone here at Booking.com.
There's just a really big need for guests once they book to communicate with the property and ask questions and get more information. When you give the properties an easy way to respond, both sides win.
Tnooz: Okay. Text and SMS-style messaging is sort of hot right now. Is that on BookingSuite's list? Or would that be an outgrowth from the partner services team?
Ransom: I would say it's definitely on our list, but it's not on our 2016 list. That said, that trend's going to accelerate in the industry. It's an efficient way to communicate. It meets the guest’s needs. It's easier for the properties.
Tnooz: Okay. Is there anything on the digital marketing service WebDirect -- the website design tool, essentially -- which was what BookingSuite led with a year ago? What's new to report there?
Ransom: We're very happy with WebDirect, a product that grew out of our acquisition of the hotel marketing platform Buuteeq.
The next wave for us there is expanding the feature set. We came out with a relatively straightforward, easy-to-manage, high-quality website builder tool. But now we're looking at adding additional features around additional content, ability to manage content, and other services like that.
Tnooz: Has there been much growth in terms of uptake?
Ransom: I would say it has wildly exceeded everyone at Booking's expectations.
Tnooz: Is WebDirect doing particularly well in developing and emerging markets?
Ransom: It is. As you may know, that product has a performance-based pricing model, so there's no upfront costs. The properties only pay when they get a booking. That model definitely appeals in emerging markets. It's doing very well in China and in other markets where the property is either unable or unwilling to make significant upfront technology investments.
Tnooz: Okay. Anything about services integrated from HotelNinjas, the cloud-based PMS, which Booking.com acquired a while ago?
Ransom: Not from Ninjas, per se. But I would say that one of the areas that we're working on and we're pretty interested in is, call it an all-in-one solution for medium-sized and smaller properties. That was generally a direction the Ninjas team was working on.
We've incorporated that and some other initiatives and find that a very intriguing space.
For a lot of properties out there, they just want a solution that meets a lot of their core needs to manage key parts of their business, but they want it to be simple, easy to use, and affordable. We're focusing a lot of effort on understanding that segment and how we can serve that.
Tnooz: Could you elaborate on BookingSuite's broader vision -- how these pieces fit together?
Ransom: There are core components that any property needs to be able to compete today. The days where a property could not have a website, not take online bookings, do their check-in and check-out and reservation login with a pen-and-paper ... That clearly still exists in the industry, but it's going away.
We have a vision where you have a core set of services around things that are traditionally -- I hesitate to label them by their traditional names because I actually think those definitions are going to change as the tools evolve to match new needs.
So how to say this? Hmm. It's a combination of property management functionality, distribution management functionality, booking engines, and direct channel websites. Broadly, you can talk about managing your guest databases.
There's a vision of a set of features that you say, "I'm a hotelier. I'm not a technologist. I don't want to spend the time or hire a big staff to manage and integrate a lot of tools."
It's really about delivering that all-in-one solution that's easy for hotels to use and that adds value to their business.
(Note: This transcript has been edited for brevity and clarity.)
Earlier: Interview with Booking.com CMO Pepijn Rijvers, who tells hotels it’s not a zero-sum game
Booking.com’s COO on what’s next for the travel dynamo