The coronavirus pandemic has created one of the most turbulent periods in the history of the hotel sector.
But as properties and chains attempt to recover from the devastating impact of having far fewer numbers of guests, many are considering new strategies and models across their businesses.
Central to this new awakening is understanding how different elements of hotel operations – distribution, revenue management and marketing – can cease to operate in silos from a technology perspective.
There is an argument that with integrating these platforms, and their associated data sets, revenue management can be established as the core of hotel operations.
PhocusWire spoke to Dori Stein (CEO at Fornova, a leading hotel business intelligence solutions provider) and Ludovic Cacciapaglia (hospitality distribution and e-commerce specialist and former head of global distribution at Shangri-La Hotels and Resorts) about the evolving role of the revenue manager and why smart thinking and a detailed understanding of new processes can make a significant difference to a property’s distribution strategy.
How can the Revenue Manager role be positioned at the core of the hotel?
In a period like this, a revenue manager has to provide more value to everyone in the hotel above forecasting and pricing. There is a clear opportunity for them to step up into the role of a trusted strategic advisor - working in partnership with distribution and marketing colleagues to guide the hotel through the current crisis.
Central to the role is acting as a gatekeeper to both internal and external data and being able to communicate with all stakeholders in a way that’s understood. A future-focused revenue manager should be positioning themselves at the core of their property and providing additional value by getting involved with generating revenue directly and indirectly.
At a time when there is such low occupancy, it is not enough to forecast and communicate room rates - revenue managers must get acquainted with how the hotel is planning to generate revenue and help facilitate the way through. For example, they need to understand if the main source of demand is direct or from online travel agencies, the main types of guests that are coming to the destination and how they plan to attract them.
To secure demand now, colleagues in distribution and marketing need to be selling the right hotel room, to the right customer, at the right time, for the right price, via the right channel, with the best cost efficiency.
To play a pivotal role, revenue managers need to be central in the creation of all of those offerings.
Revenue managers would typically focus on maximizing room revenue by acting through yielding inventory and pricing decisions, looking to any adjustment needed according to forecast and pace.
However, the pandemic requires the revenue manager to take a leadership role in the hotel commercial strategy; for example, revenue managers are likely to be the only ones to know when and how marketing campaigns should be run and to create truly relevant offers.
As demand is currently predominantly domestic, it will be important for the revenue manager to segment hotel guests by travel intent, so if there is the potential of families traveling to the hotel, the revenue manager should create relevant offers specifically for this segment.
This goes beyond just creating an offer or price point, but it goes as far as looking into the suitability of the product offering. For example, is the product description appealing for the segment, does your website display valuable information on room occupancy, are all pricing components displayed enough and have you made sure that all health and safety measures are communicated.
Revenue managers should also step up to lead the digital marketing efforts, for example, CPA is becoming more available through metasearch, allowing hotels to decide their commission and giving more control to grow share from this channel.
Revenue managers should also look into greater details at their direct channels beyond pricing and inventory, a small change in conversion rate can drive large benefits, for example, if the hotel wants to target a specific source market, does the website enable guests to use their preferred payment/language options? What is the cart abandonment rate and why are consumers dropping?
There are now a lot of free tools to run split A/B testing, such as Google Optimize or Google Mobile Test to gauge how mobile-friendly your website is. Last but not least, only revenue managers have visibility on all channels’ activity and performance that could impact conversion.
What should be the initial steps a hotel takes to overhaul their revenue management thinking?
The hospitality industry finds itself in unchartered territory. Doing what they have always done is not an option for hotels that are determined to survive.
That’s why we believe it’s essential that the sector modernize, breaking down silos between revenue management, distribution and marketing. In such stressed times, they need to be working in tandem and that requires an overhaul.
Currently, in most hotels, information is shared between teams during a weekly meeting. For transformation to be successful, hotels need to concentrate on ways joint decisions are made between departments - especially marketing, revenue and distribution. The overhaul isn’t just about making sure they meet but making sure they are seamlessly communicating and sharing information.
Most importantly, teams should be making decisions together with a key focus on optimizing activity across indirect and direct channels.
One of the first steps any forward-focused hotel must take is to create a new strategic function and revenue managers need to step up and fulfil that role. Out of all of the functions, they are best placed to become the property’s data gatekeeper - collating, analyzing and setting strategic priorities based on the internal and external data flowing through the hotel.
For example, when travel restarts it will be the revenue manager who is best placed to identify which countries have the greatest demand, which guest demographics to target, what rate to set and offers to run.
By working hand-in-hand with colleagues in distribution and marketing revenue managers can break down silos, streamline decision-making and make revenue generation more effective and more efficient.
To date, the largest and most used tool a revenue manager had was adjusting room rates. To effectively optimize revenue today, managers need to stop thinking about revenue in those terms and stop relying on room rates to do the heavy lifting.
A modern strategy takes a granular approach - being involved with setting room rates in specific countries, agreeing on different rates for different platforms and adjusting rates by demographic - for example offering reduced family rates since they are more likely to make the most of added-value services such as the restaurant or for loyal members who are likely to return time and again.
- Indirect channels: In this day and age, the revenue manager should be instrumental in which promotions are running on OTAs, which OTAs and which OTA tools to use. It’s the revenue managers that should be making these recommendations and what the marketing spend should be or what commission to allocate.
- Direct channels: Currently, revenue managers focus on setting budgets and leave the marketing department to deliver the strategy. We believe that in this environment, revenue managers and their counterparts in distribution and marketing need to be completely coordinated.
How can data be sliced and diced to assist this new approach to revenue management?
Revenue managers must start looking at everything through the eyes of their guests. They need to see the rates as shown from the countries that potential guests are in and as seen on the platforms and devices they are searching from such as Google and mobile. Understanding how your guests are exposed to your rates and your competitors’ rates will give you an advantage.
For example, if guests are local and searching on their mobile revenue managers need to know how their hotel measures up to their competitors’ visibility.
The revenue manager must understand how competitive they are by sourcing the right data and slicing it by point of sale, platform and channel.
How might a typical hotel use new revenue management techniques to balance their distribution mix between OTAs, direct, bedbanks, GDS etc.?
With such low occupancy, hotels have stopped paying attention to distribution health. As a result, there is rampant undercutting. The OTAs and wholesalers you work with have taken a hit and so revenue managers can play them off against each other.
If they identify partners who are not playing fair - wholesalers leaking inventory or OTA undercutting rates - managers need to take the difficult decision to cut them loose and reduce the available inventory to focus on working with the OTAs who are behaving fairly.
We would argue that contrary to pausing monitoring distribution, hotels should be stepping up activity - tracking rates across points of sale and channels to optimize every opportunity to capture demand, boost visibility and protect parity. Distribution Intelligence allows managers to allocate what little resource they have effectively - saving time and costs.
When identifying feeder markets there is little point in analyzing flight data - things are so up in their air at the moment, pun intended, this makes no sense. What is most important now is understanding how the small number of potential guests are comparing hotels and knowing how rates are displayed.
Revenue managers should look to understand in detail each channel and refrain from ‘over commercializing’ the property, for example looking at which specific geo source each channel operates in and it stuck up against each other, there is little gain to have many channels targeting the same audience or markets.
Revenue managers should work with partners that enable smart distribution and that can offer actionable insights to drive demand from distribution channels to understand when travelers are searching/booking in their markets.
As international travels have not yet started, the focus should be on channels that allow hotels to drive demand from leisure and drive markets. Rethink participation to last-minute/deals to optimize capacity is also critical but always protecting your direct channel (for example using non-refundable rate.
Content strategy to drive direct, use the website and social channels to communicate what you are doing on health and safety, be transparent by communicating the outlets that are closed but also highlight what you could offer as a substitute. Make it easy for customers to change their bookings if travel plans need to change, so using live chat or having a call to action button can help enhance the guest experience.
The adoption of pay-per-stay by Google is a big shift by the company. For those hotels that are nervous about the switch, how can you reassure them that it is a move to follow?
We are very bullish on PPS and are the only business intelligence provider for the hospitality industry that has branched out to become an accredited Google Hotel Ads Connectivity and Bidding Partner. PPS is a no brainer for most hotels.
It improves cash flow by keeping revenue from bookings in the hotel’s bank for longer before commission is paid, reduces risk with hotels only having to pay commission on confirmed bookings rather than paying fees upfront regardless of whether the booking gets cancelled and lowers the cost required to manage the service - hotels no longer require the support of a costly agency.
We are positive that even though PPS is not necessarily relevant to every property in a chain, we are confident that it’s worth testing the service with a cross-section of properties and comparing the results with traditional PPC or CPA.
If we're to assume that a rethink of revenue management gets the attention it deserves over the next year, what happens next?
The reasons to rethink revenue management are compelling and we believe are key to successfully navigating the pandemic.
Following the steps which I’ve outlined will make the revenue manager even more important to their organization, future-proofing their role against the threats of greater automation and reorganization.
By helping their hotel to react to market conditions by providing more granular solutions as opposed to the previous world where they stopped at setting room rates. Focusing on incremental gains revenue managers will develop and oversee the implementation of a revenue-generating strategy that will deliver sustained gains.
Should there be a new type of overarching KPI for a hotel, rather than the individual ones that hotels usually include in their benchmarking?
The typical hotel metrics have mostly been focused on top-line revenue over the years with particular focus on RevPAR or RGI. This is for the most part due to the complex model between owners, management companies (or operators) and brands, as fees are often paid by the owner on top-line revenue or gross operating Profit.
The current trading environment is revealing the sole focus on top-line metrics is not sufficient to understand the decision made by the hotel, for example in a world with diminished capacity or limited inventory what does RevPAR mean and how do you compare performance to last year or even last month?
Most revenue management decisions had the objective to maximize RevPAR based on unconstrained demand however the pandemic impact on demand requires revenue managers to focus to maximize all opportunities (big and small) to drive cashflow for the hotels.
New metrics likely will require the revenue manager to be closer to the overall performance of the hotel, for example, which segments or guests are bringing the better return (total revenue per guest).
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