LONDON—The relatively new but firmly established hotel sector discipline of revenue management is more than ever at the forefront of building profitability.
To offset potential clashes between GMs, sales teams and revenue management departments regarding pricing strategies and optimization, some are demanding revenue management adopts new thinking and strategies.
The goal: to pull in all available data, to forecast with the broadest possible view, to formulate a space where the entire team is more trusting of final information and to succeed in a crowded, competitive space.
So concluded a private roundtable chaired by Patrick Mayock, editor-in-chief of Hotel News Now and led by Patrick Bosworth, founder and CEO of revenue strategy company Duetto, at last month’s 2014 Hospitality Technology Europe conference in London.
Technology is playing a major role, according to the roundtable members.
“Previously we had all the information, but it was in different places, and by the time you collected it, it was out of date,” said Graham Dungey, a hotel consultant based in Paris.
“In a market such as Cannes, France, rate prediction might come no further out than the next weekend, where information such as what the weather can make the difference of say €500 ($690) to rates,” he said. “In other markets, it can be far, far more complicated.”
“Added to this is historical data and its market relevance,” said the group’s other consultant, Christopher Bates from Barcelona-based Enrich Revenue.
Leveraging data
“Big data is a funny term, one invented for Google, Facebook, Twitter, et cetera. (The hotel industry) describes (itself) as a big data business, but really it is one that is more about flexibility and being able to adapt to new data sources,” Bosworth said.
Moving quickly is not typically a trademark of larger, legacy chains, he added.
“With hotels being told that the benefit of being part of a chain is, among other things, the availability of good tech, but with innovation making available newer and newer tech, how can these properties get out of those legacy models without seeing disruption to their fee structures?” Bosworth said.
Their value used to lie in massive distribution systems, Dungey said.
“But now 30% of my brand business comes from the Internet. Increasingly, independents will be able to compete against the brand, and do even better than the flags if their review scores are higher,” he said, adding that brands are finding it more difficult to connect with customers.
“Often it is small and medium-sized businesses that led innovation and flexibility. Eventually, technology becomes cheaper and more available to independents,” Bosworth said.
The industry might see consolidation as large hotel companies acquire those smaller innovators to help implement better solutions across their bigger portfolios, he said.
Distribution and loyalty
Distribution and added value are becoming ever more critical, according to speakers.
“Hotels must reflect on how to add value via booking processes and differentiated experiences that online travel agents will never know about. Only by providing a better stay and the ability to book direct will they steal share back,” Bosworth said.
But fostering loyalty and the repeat business it generates is easier said than done, according to Arkadiusz Tomczyk, hotel manager of the Langtry Manor Hotel in Bournemouth, England.
“Many people simply do not want to stay in the same place twice,” he said.
That trend is even more pronounced among the younger generations, Bates added.
“Loyalty programs benefit business travelers, who often are not spending their own money, while leisure travelers want unique experiences, which often means a completely new destination and thus the obvious notion that they will not be a return customer,” he said.
“Then hotels need to capture the one-time customers’ reviews to better market the property to others,” said Ian Taylor, owner of the Abbey Hotel Bath in Somerset, England.
Price represents another hurdle in the distribution game, especially given a recent ruling from the U.K.’s Office of Fair Trading that allows hoteliers and OTAs to offer discounts to closed or “fenced” groups of customers.
“My concern is that it will get worse for hoteliers, not better. Hoteliers a dozen years ago demanded rate parity, but now many are complaining, and governments are potentially overruling it, so OTAs might get even more leverage,” Bosworth said.
“Take care of your own shop, for the worst enemy for any hotel is the most stupid hotel in its competitive set,” he added.
Courage is needed, the group concluded, and the landscape is complicated.
“The worst thing with previous systems was that they said that unless you were going to sell out, you needed to sell your room stock at the lowest price, generating only the mildest profit. That is unsustainable, and it is in our power to change that. Very few hotels are yielding their room types, and we need to start,” Bosworth said.
Human element
Will these complicated assessments and the technological solutions evolving to address them require less input from humans?
“Hotels will always need a revenue manager to manage certain segments. For example, a hotel’s room type might change, a factor that will impact the final decision,” Bates said.
“New systems allow trustworthiness in the data and to get a move on implementing changes, but there are things the system will never be able to see and that it will be futile to try and integrate,” Bosworth said.
“It’s not just about forecasting and barring rates. We must use revenue management to become more flexible, and we need a new age of innovation. If we do not respond, then the hotel business will be far less lucrative,” Bosworth added.