Revenue management is becoming increasingly complex, but ever-smarter technology allows you to administer all of your income streams while gathering information about your guests, allowing you to predict demand and drive direct bookings. Rosalind Mullen reports
Happily, while revenue management has become more complex, technology is developing at a cracking pace. It can now help you look beyond room rates to the revenue available in the restaurant, bar, spa and function rooms, as well as gathering information about your guests so that you can manage customer satisfaction, predict demand, maximise revenue, drive direct bookings and a lot more.
Andrew Stembridge, managing director at Chewton Glen and Cliveden House hotels, uses IDeaS G3 RMS technology. âPreviously, we were manually forecasting four months into the future, which was very time-consuming,â he says. â[The program] saves us time by providing a 12-month demand forecast and better business intelligence that helps us improve overall revenue by optimising demand by room type and length of stay.â
But if you think you can kick back once you have found the best strategy, think again. In this ever-shifting marketplace, a winning strategy is an ongoing process, with constant reviews to achieve optimal price positioning in your business mix and market.
Warren Mandelbaum, sales director EMEA, at IDeaS Revenue Solutions, lists the main issues that drive the need for review: âThey include managerial, owner or investor pricing pressure, the launch of new hotels or the renovation of existing properties, new business, market or competitive dynamics at play, and the desire to maximise potential â¨revenue of executive rooms or suites.â
Prioritise key data
If you are struggling to leverage multiple data sets to create a strategy, Mandelbaum suggests prioritising key pieces of data. âSome core data requirements include revenue management systems, Smith Travel Research [STR] historical reports, STR global marketing forecast reports, rate shopping tools, reputational scoring tools, demand intelligence reporting and upselling front-desk strategy providers,â he says.
When setting overall business objectives, Mandelbaum suggests:
Arguably, the sheer abundance of data available creates its own headaches. In the past, limited technology meant it was only possible to manage availability, price and distribution reach. Todayâs managers need an agile revenue management strategy that can manage cost of acquisition, consumer sentiment and guest reviews along with travel data and intelligence.
âThe key to achieving an intelligent strategy is understanding which data to prioritise, which is most relevant to the business and subsequently converting it into actions that deliver optimal revenues,â says Mandelbaum. âDemand and market intelligence continue to evolve and provide insight beyond just-booked data and offer the intention to book, creating a new level of clarity for hoteliers by bridging the gap between return on investment on marketing efforts and overall revenue strategy.â
Sandro Guadagnini, asset manager for Topland Groupâs Hallmark Hotels (see panel on this page), welcomes advancements in data crunching. âGoing forward, hotels will be able to feed more external information into their systems, such as flights and schedules, which can indicate what demand might be,â he says.
âToday, you can get information from a number of sources, but in future it will be data-mined by artificial intelligence [AI], which works at a faster speed to get more accurate and more comprehensive information. At that level, it will have to be automated. AI is progressing and will increasingly become a topic for all customer service industries.â
Total revenue strategy means different things to operators. A budget hotel, for example, may simply focus on beds, while casinos barely care about room rate because their main revenue is from guestsâ gambling spend. But a total revenue strategy also needs to take the cost of distribution into account.
Guadagnini warns that while OTAs have grown the market and boosted occupancy, the distribution costs have reduced profitability in rooms. Although many businesses use trevpar (calculated by dividing net revenue by available rooms), a clearer picture can be provided by netrevpar, which is net of commissions, such as distribution costs, transactions and OTA fees. âOTA fees can be 20% [or more],â says Guadagnini. âIt is not about total revenue, it is about total profit. The cost of â¨distribution needs to be accounted for.
âThe market spend of OTAs is huge â" and that comes from the charges paid by hotels. Everyone wants to sell a room direct. You can offer guests incentives if they book direct. But you also need to look after guests and give them confidence in you, so they donât want to shop around, because at the end of the day, guests get a choice in the OTAs.
âOffer an out-of-the-ordinary experience and guests will share it on social media. We think of the Instagram moment in our hotels, such as a birthday cake or towel origami. Hotels need to customise offers â" know what guestsâ hobbies are and give them the wow factor.â
Guadagnini believes revenue and marketing will merge to such an extent that it will revolutionise the level of customised offers for guests. âYou will offer guests a package based on their personal preferences, which is based on information we can find out about them,â he says.
Guest relations technology helps hotels to manage OTAs through boosting customer satisfaction and reinforcing brand integrity on review portals and social media channels.
Thomas Landen, marketing director at reputation management company Revinate, explains: âOTAs are great but they cost money. They have their place, but hotels need to look at how much they spend with OTAs and how they can improve direct channels.
âAlso, you need a more holistic view of marketing, including social media and email rather than one single channel.â
Build excitement beyond the stay
One way to attract direct bookings is to build excitement before and after a guest has made their booking, rather than just during their stay. âWhen you check out, few hotels ask you to come back or email you,â says Landen. âThe retail industry sometimes does this to an annoying extent, but hotels donât even ask.
âWith airlines, you get prompt emails at seven days and 24 hours before the flight. That helps you prepare and sets an expectation of the whole journey. There should also be a whole-journey experience with hotels. OTAs do it â"Â Â Booking.com will send maps.â
Guest relations technology helps hotels to compete by finding out more about guests, so they can deliver personalised experiences that lead to repeat business. Revinate, for example, offers an automated marketing tool that is paired with rich guest data so companies can segment guests and create and send targeted emails in less than an hour. It also collates online reviews and social media references about a hotel and brings them into a single, integrated view. Hotels can then adjust operations, respond or use positive comments to raise their profile on the internet and attract bookings.
Other tools can help hotels improve online ratings and rankings by soliciting guest surveys and collecting reviews for TripAdvisor or Google. Landen says Revinate customers who publish their surveys on TripAdvisor see an average 409% increase in new review â¨volume and can improve their TripAdvisor ranking by 15% or more.
What each revenue manager must decide is the ideal ratio of OTA to direct bookings that a business can sustain. âIf a guest visits a hotel more than once and books through the OTA, it is a missed opportunity,â Landen points out.
Looking ahead, he predicts that next year there will be an increase in the trend of personalising messages via website, emails â¨and communications generally. âHotels are realising the need to catch up with technology and this will continue,â says Landen. âCompanies such as Marriott are hiring tons of data and marketing people. There is still a knowledge gap. Retail and e-commerce are so far ahead of hotels.â
So how much should you invest in technology? âThere is no magic number,â says Guadagnini. âYou have to invest in all the technology that allows you to get all functions to work together. To me, marketing, distribution and revenue management are bigger than sales, although a big convention hotel may need a big sales department. But those three have exponentially grown in hotelkeeping and you need to invest in them.â
Centralising revenue management
Asset manager Sandro Guadagnini oversees 15 of the 28 midmarket Hallmark Hotels owned by property and investment company Topland Group, which also owns the Royal Crescent in Bath and seven leased hotels.
Hallmark was created by Topland in 2015 with its own management team, including HR and IT, and uses IDeaS revenue management technology. It will have its own headquarters in Derby by early 2018.
âGroups recognise that centralising revenue management is a sensible approach. Hilton, for instance, has created a revenue management team in Watford, away from the buzz of hotels,â says Guadagnini.
âRather than take hoteliers into this discipline, they take people who are analytical and good at maths into a hub away from the distractions of a hotel and let them be objective on pricing, inventory and so on. At Topland, we have six revenue managers â" each looks after three to five hotels.â
Guadagnini, whose background is in commercial and revenue management at groups such as Hilton, joined Hallmark more than two years ago and works alongside director Lionel Benjamin.
âRevenue management was a novel discipline 20 years ago and not understood,â he says. âHotelkeepers were starting to use data to tell you what to sell your rooms at. Now, it is more established, and more general managers are coming from a revenue management background.â
How independently owned Apex Hotels implements revenue management across its properties
Average room rate £124.99
Occupancy 87%
Revpar £108.69
Pre-tax profit £10.3m
We asked Apex Hotels commercial director Clinton Campbell for his views on revenue management across the 10-strong, independently owned, midmarket hotel group.
What is the total revenue management strategy at Apex?
We have worked hard to ensure the focus isnât on top-line revenue in isolation. We have calculated â" and understand in detail â" the cost of acquisition, so we now manage profit through our distribution landscape and direct marketing efforts.
Most revenue and profit comes from our rooms, so that takes priority. But with the launch of the Apex City of Bath Hotel this year, as well as planned refurbishment works across other hotels, there will be more consideration given to meetings space and leveraging our relationships within that area of the business.
What do you see as best practice in revenue management?
There are many people around, and systems available, that claim to be able to do better and more complicated things in terms of revenue management. Weâve removed that need to add complexity and have simplified our approach. Our priority is getting the revenue management basics right, so we can focus our time and energy on distribution and direct marketing.
We have properties in key cities â" London, Glasgow, Edinburgh, Dundee and Bath â" where demand is generally high, so we manage that demand rather than trying to create it. If youâre covering the basics well, then you have the ability to react to unplanned events on any scale, from unpredicted cancellations to terror attacks, as well as to capitalise on new trends.
Where does metadata fit into the mix?
Meta-search is becoming popular and has a lot of potential for us. Its growing popularity is the reason TripAdvisor is focusing so heavily on pushing it as a channel. Weâve also recently seen Trivago invest heavily in advertising, with Google playing a large part in meta. With a well-defined distribution strategy, you can use meta traffic to your advantage and, even though there is a cost attached to acquiring that business, the guest is still âownedâ by the hotel. We capture the data and can interact with them of our own accord.
How many rooms do you think should ideally go on to an OTA site?
I would encourage hotels to put as much of their bedstock as they can on OTAs â" this is a key factor in determining your ranking on their sites, because they canât sell what they donât have. And if youâre going to work with OTAs, it makes sense to give them rooms to sell â" and itâs a good idea to focus on upgraded rooms and suites. The costs will be higher, but the chance of converting those room types is higher through OTA sites.
If possible, I would suggest that when demand is extremely high, that availability â" apart from suites â" is removed from the OTA. However, most contracts donât permit this.
Some guests will remain loyal to using an OTA when making any bookings because the sites are specifically tuned to convert bookings. By comparison, hotel websites have so much more information that guests will often choose to look at after making a booking, so they better understand all the facilities, local attractions and dining options.
How can operators turn OTA guests into direct bookers?
First, clean up your website and make sure itâs mobile-friendly. Then ensure the booking engine is as fast as possible. You must also â¨give guests a reason to return to your hotel before incentivising them to book directly. â¨Last, hoteliers must understand that OTAs now target customer segments other than those seen as transient, so itâs key to work on protecting your own remaining customer segments, to avoid paying commission on them.
The corporate market is big business for Expedia, via Egencia, and on Booking.com through its Genius and Corporate programme. They are looking to facilitate group bookings, and Expedia has successfully entered the MICE space.
Sponsorâs comment
With more than 1.5 million rooms priced daily on its advanced systems, IDeaS Revenue Solutions leads the industry with the latest revenue management software solutions and advisory services. Powered by SAS® and with nearly three decades of experience, IDeaS proudly supports more than 9,500 clients in 111 countries and is relentless about providing hoteliers with insightful ways in which to manage the data behind hotel pricing.
IDeaS empowers clients to build and maintain revenue management cultures â" from single entities to world-renowned estates â" by focusing on a simple promise: driving better revenue.
IDeaS has the knowledge, expertise and maturity to build upon proven revenue management principles with next-generation analytics for more user-friendly, insightful and profitable revenue opportunities â" not just for rooms, but across the entire hotel enterprise.
For more information, â¨visit www.ideas.com