Revenue managers shared successful strategies from 2014 and red flags looming in 2015 in this end-of-year digital roundtable.
REPORT FROM THE U.S.—The distribution landscape continued to evolve at a breakneck clip during 2014, and it’s showing no signs of slowing..
To prepare for such change, revenue managers are adopting new technologies and metrics of success. Many also are abandoning departmental silos in favor of a more holistic approach that emphasizes cooperation between sales, marketing and operations.
In Hotel News Now’s digital revenue management roundtable, we asked some of the savviest experts in the field to reflect on their biggest wins from the year that was and to flag some of the obstacles lying in wait in the year ahead.
1. Describe one winning distribution strategy employed in 2014.
Kalibri Labs’ Estis Green: “One of the smartest changes I have seen in the last year is an organizational one where I have seen a few companies altering their structure into what I would call a revenue strategy team that integrates sales, digital marketing, loyalty, price optimization, brand marketing and communications and gives management a singular view of the revenue levers. This change allows them to manage all human and financial resources with a more holistic view and optimize all channels together rather than the traditional silos where each revenue department is expected to optimize individually with limited regard for tradeoffs in resource allocation between departments.”
John Q. Hammons’ Burgess: “The hotel teams agreed to specific metrics with a targeted ‘win by’ date. A shared digital file with action items showing stats achieved were discussed in weekly (and often lively) conference Web calls. The calls truly became a team effort as hotel level, regional and corporate teams started to trust each other. We often called it the locker room.
“Results: Within 90 days in the 18 targeted hotels, group productivity increased by 92%, over $2.7 million. (revenue generated index) improved by 3.4%.”
Vantage Hospitality Group’s Schell: “(Vantage created) the distribution analyst role to complete a deeper dive into all of our channel distribution and utilize information to strengthen our partnerships and leverage data to make more effective decisions resulting in a significant growth across a number of key channels.”
RLHC’s Thielbahr: RLHC deployed a new revenue management technology solution. “Because the technology weighs multiple factors impacting room bookings, such as weather, air lift, citywides and major events, we are able to engage dynamic pricing from moment to moment. The system optimizes our bookings and pricing opportunities and prevents us from leaving money on the table.”
2. What is the single greatest challenge facing revenue managers in 2015? What are you doing to overcome it?
Estis Green: “They need to evaluate the channels that provide the best source of net revenue and choose to work with those and reduce dependence on those that contribute less to their net revenue objectives.”
Thielbahr: “More channels, increased visibility for online reviews and greater demand are all impacting decisions by the consumer. … In 2015, the hotel companies with maximized interpretable and usable data—and not necessarily the most data—win.”
Burgess: “Keeping up with the rapidly evolving digital changes impacting revenue management and embracing the fact that sales systems, marketing and revenue management are merging into one discipline as opposed to three. Our operative word has become revenue ‘optimization’ (instead of) ‘management’—identifying how to break down the traditional barriers between revenue management, group sales and the ‘us-versus-them’ mentality that often resides at the hotel level impacting retail strategies.”
Schell: “(We are) concerned by the desire on the part of some to turn mobile into a discount channel. As an organization, we will develop a strategy based on data and revenue management practices to avoid needless discounting and minimize the risk of offering more margin than is necessary to our distribution outlets.”
3. What is one thing hoteliers aren’t paying attention to that needs to be addressed during 2015?
Thielbahr: “Hoteliers need to be prepared to react quickly to breaking news or events in order to earn the right pricing on their rooms. Before we upgraded our technology, we might have been caught off guard by a last-minute announcement of a concert or some other unexpected impact. … Dynamic pricing and the ability to make changes quickly across all channels is the biggest priority for 2015.”
Estis Green: “Few hotels have started tracking their revenue net of acquisition costs. The net revenue view of the business accounts for the cost of acquiring their business and allows them to be more realistic about their objectives so they are more closely aligned with profit contribution and (gross operating profit). As the cost of acquisition in North America is close to 15% to 25% and rising quickly (and higher in Europe and Asia), these costs will be essential to manage going forward. They need to measure it in order to manage it. Much like labor cost is closely managed, acquisition costs have to be treated similarly.”
Vantage’s Ostrum: “Hoteliers need to pay attention to how they integrate (revenue management) into their executive team. The days where sales, development, operations and marketing all acted independently without any tie-ins from revenue management are in the past. It is important to involve (revenue management) in the planning and executive strategy role so that all aspects of the hotelier’s operations are developed to target the same goals and revenue-generating practices, both at a brand and individual hotel level.”
Burgess: “Focus on overcoming the dysfunction of ‘lack of trust’ often felt between the hotel and corporate. Work to communicate effectively with each other, by talking live in person as a team—a team that trusts each other and commits to a strategy.”
Source: Hotel News Now