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Archives for January 2016

Hotel Revenue Management – Future and Past

I have recently noticed that revenue management is no longer a profession and a science, it is the new social conversation “talking about the weather” for people in the hospitality industry. Everybody has suggestions to offer on how we need to run the hotel, but nobody would speak up in meeting when opinions and ideas are asked.

You get your coffee in the canteen and the HR Director is talking about increasing rates because the hotel next door is selling higher – she knows it for a fact. (Yes, but it is a 5 star deluxe and we are not!) You have your lunch and the security guy is telling the porter that we definitely need to pay more attention to our promotions, we do not have enough, because the beautiful hotel down the road has at least ten and they are always full! (not really, they have tons of promotions because they are always empty and the rates are really low!)And again the restaurant manager thinks that our menus are too cheap, because we get very cheap clients who do not leave any tips for the staff, we need to increase the prices to get more reach people, who spent and leave tips like the restaurant around the corner. (yes, they are a 1 star Michelin!). The Financial controller wants to increase rates because we get more money. I have never paid too much attention, when I get my lunch or coffee, I usually take these few minutes to relax, but one day it really hit me…colleagues of any department are just talking about the weather, they do not know what to say and the subject in fashion right now is revenue management.

I would love to tell them that “Rome wasn’t built in a day” and that revenue management wasn’t either… not created last year and not even the year before, that there is more to that, than to be the most expensive hotel or restaurant to get more money or “better” clients!

Remko West from Xotels answered to three simple questions on very valid points, what is the past and the future of revenue management:

First question – past vs future/present […]”What are the most important developments & strategies that have led to where we are now with revenue management?”[…]

  • The availability of information – analytic, benchmarking, reviews, no available 5-10 years ago
  • Technological developments – less manual work load and definitely more accurate
  • SoLoMo (Social-Local-Mobile) – more channels to launch promotions, to be visible in the market
  • Maintaining a healthy channel mix
  • Lowest Price Guarantees
  • Metasearch – not yet very clear to many hotels

Second question […]”What are the top changes that you expect to happen in the next 3 to 5 years in hotel revenue management?”[…]

  • Rate Parity will soon no longer exist. On contract – no legal issue? Only a marketing strategy? But the price war is not over
  • Sharing economy
  • Metasearch channels
  • Availability of data

Third question […]”Will these changes be different for chain versus independent hotels?”[…]

Not really the answer that I expected and then I give you my opinion. My answer is yes, it will be very different for independent hotels.

  • They will not have all information at their disposal, because they do not have the budget to implement their technology with all the latest software to improve data analysis.
  • They do not have a dedicated person to manage social media at the right standard.
  • They cannot compete with OTAs marketing strategies
  • Metasearch is still a word for many of them

I will be happy to hear your thoughts to achieve better results and to play fairly and at the same time to make sure that we all understand the meaning and the importance that this new “fashion” can help us all to strategise for the future of our properties!

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How will OTAs evolve in 2016?

Hospitality is a world in continued evolution and we have to keep up with it. Every day we are amazed by a new technology and we are constantly thinking of how we can make our guests’ stay an unforgettable experience, how to make our time more valuable, how to get surrounded by more professionals and experts and how all together we can improve our revenue and at the same time decrease the costs.

Evolving is part of the growth, but one question is constantly recurrent, how do the OTAs can play a smaller role in this process? How can we get to keep more of the earned revenue without bleeding commission to them?

The opinions and the suggestions on how to act to get better, more healthy and keep more money are countless, but in reality – and here not to be pessimistic – deep deep down we all know the answer and nevertheless we are all in denial. Opinions are very important, but revenue managers, financial controllers and marketing directors, as well as general managers, can read numbers and figures are not opinions, are facts.

Frederic Gonzalo, a strategic marketing consultant, briefly explains on eHotelier, the OTAs domination and their future, asking everybody to add their point of view. He presents a summary of what the OTAs have been up too in 2015. Facts that have happened between the giants of the hospitality industry. Expedia which became the biggest OTA with the acquisition of TraveloCity and Orbitz as well as HomeAway, leaving Priceline behind on the second place with its best known brand Booking.com. He also mentions Airbnb, TripAdvisor as well as Google’s stories.

The point is that we cannot compete with the OTAs or think to cut them out, what we need to do is to learn to live together and to accept that part of our business depends on them; they are bigger, they are stronger and definitely they have more capital to invest.

My point of view: either we try to invest as much as they do in PPC campaigns, advertisements of any kind and we know that independent properties cannot compete with that, or we save in the investment and we pay them a commission. In one way or another we have to spend to have a return of investment, it does not happen if we simply want to save. We only need to make sure that the “big boys” do not abuse their power with us.

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