When a hurricane hits the west coast of Mexico, resorts on the east coast can experience a surge in demand.
While it would be unethical, and probably illegal, to hike prices on the back of such an event, hotels operating in the region need to be prepared.
NB: This is a report by Pamela Whitby, editor for EyeforTravel.
In practice, this could mean adjusting media spend to target keywords for Mexico vacation destinations, pricing appropriately to ensure maximum capture of demand or loosening existing restrictions.
So, if holidaymakers to Cabo St Lucas typically stay for three nights but a resort in Cancun has five-night restrictions, then it’s important to shift strategy to accommodate that demand.
By having the right data-led inventory controls in place after a recent hurricane hit Mexico’s west coast, Viceroy Hotel Group, which has competing operations on the east coast, saw a significant uptick in the right sort of demand.
Scott Pusillo, vice president of sales and revenue management at Viceroy Group, says:
"As the increase came in, we were able to offer the full spectrum of availability. If we hadn’t paid attention we would have oversold our lower room categories and undersold our upper room categories forcing upgrades into the premium room category for no additional revenues."
While slightly less prepared for the group leads that rolled in, Pusillo, a firm believer in the practice of applying future and historical data to decision-making, says this is a lesson for next time.
He is, however, also quick to stress the importance of understanding and tracking that these are one-off events, which should not necessarily inform decision-making the following year.
As Monica Xuereb, chief revenue officer for Loews Hotels & Resorts, points out:
"Flexibility is paramount in an ever-changing world and while you shouldn’t be afraid to try new things, you should always measure effectiveness."
Goodbye gut instinct
With access to data and analytics tools that allow you to assess, process and make proactive decisions, revenue managers today are far more prepared. That’s a big shift for the hospitality industry.
Pusillo says:
"Our industry has been notorious for reacting to the decisions of others and following them down a path that may not be the right road to follow.
"Most people would have said somewhere in my gut is this little feeling suggesting that I turn on more rooms via Expedia or that I need to drop my price by $50."
That’s no longer true for savvy hoteliers.
Xuereb explains:
"Our ability to react using real-time information today really gives us a competitive edge."
The chain's regional teams review hotel data on a daily basis and at the hotel level even more regularly.
Meanwhile, at the corporate level, RM teams look more at overall brand trends to drive marketing activities in order to benefit all hotels and advance brand awareness.
Measuring success
Today, RM teams trained in using business intelligence can start to look at what is on the books, at changing trends in terms of lead times, at how ancillary spend is shifting, as well as looking at the market segments by customer segments – and then equate that to historical information.
Xuereb says:
"With most systems we are able to send out alerts based on defined criteria so we can take quick action."
Of course, success needs to be measured and while the hotel industry has for a long time focused predominantly on top-line performance that too is changing.
While traditional metrics like RevPAR are still important, increasingly hotel groups are focused on total revenue per available room.
"Net RevPAR will be as critical if not more critical than RevPAR as it factors in the cost of acquisition and the true success of our revenue management strategy."
In this brave new risk-taking world here are four tips for success.
1. Know and trust your data and trust the data
Business intelligence and RM systems will produce a lot of information.
An important element is to create a base-line for how to analyse the increasing volumes of data. Once you have consistent mapping and understanding of the data and you trust it, then you have to go with what the data says whether your gut agrees with it or not.
The data doesn’t lie. You have to believe that what you are seeing is the truth. Then you have to make intellectual evaluations from that.
2. Don’t work in silos and think about the customer
All hotel revenue is interconnected and pricing strategy should take that into account. So once you’ve base lined your data, and trust what you see, it’s important to draw on sources from across the business – such as sales, finance or marketing directors - to inform strategic decisions.
This will help to ensure that you aren’t missing pieces of data that may be important to others. Another point is the importance of think about pricing from the customer’s perspective and not always in relation to your budget or forecast.
3. Test, test, test, track and then evaluate
Start with the end in mind, but then continue to track performance against what you have set out to do.
If you just say at the beginning I am going to achieve $100,000, and then you make $99,000 and say "well I was pretty close", you don’t really have an evaluation of what you did and what happened along the way.
Track your moves, as well as relevant past events, and you will have a better understanding of what went right or wrong.
4. Be willing to take risks, get it wrong and learn
Even with data, mistakes are made but Pusillo says you need to be prepared to takes risks and to be wrong.
In working to put a smarter mix of business on the books, it can be a bit scary as we do have owners saying your pace is falling behind.
But follow the steps of testing, tracking and evaluating then you can say: in the past A happened and I needed B to occur so I did C.
It kind of led to B but this time I’m going to morph from C into D and exceed what I did last time because I’m learning from the past. This is the crucial piece in the jigsaw.
Be flexible and learn something new everyday.
NB: This is a report by Pamela Whitby, editor for EyeforTravel. It appears here as part of Tnooz’s sponsored content initiative.
NB2: Scott Pusillo and Monica Xuereb are just two revenue chiefs who will be rolling into New York for Smart Travel Analytics, North America which takes place on January 28 to 29, 2015.
NB3: Hotels data image via Shutterstock.