"A hotel has to understand the current situation in the outside world"
Published: 16 May 2008
Revenue Management Special
Revenue managers acknowledge that customers have begun to understand the concept of rate parity across the channels, rate of the day and fluctuations in availability per rate type.
"Customers know the seasonality and city-wide events very well. They try to book in advance when possible, avoid high demand periods and book through the easiest channel for themselves. Information is power – consumers now have more power and are in a stronger position as buyer," says Ananya Narayan, Senior Vice President - Global Strategy, Preferred Hotel Group.
According to RM professionals, consumer's reaction to price strategy changes can vary a lot depending on the price sensitivity, demand situation and market segment.
Narayan says the hotel has to understand the current situation in the outside world whether it is political, economic or with the competition etc and how this will affect the behaviour of the various customer segments in the future.
"Then one looks at the trends for the respective segment that we have recorded in the systems for the historical data and take both into account when making a decision about what should be done by the hotel to maximise revenue," says Narayan.
In an interview with EyeforTravel.com's Ritesh Gupta, Narayan also spoke about pricing strategy, scientific methods available today for a hotel to establish a superior pricing strategy and much more. Excerpts:
Ritesh Gupta: A price change and the ability to make it simple to buy and simple for customers to understand that they are gaining value for money is crucial in setting your pricing strategy. What according to you is critical in achieving the same when there are so many distribution channels?
Ananya Narayan: Firstly, the pricing of the hotel has to be in line with the perceived value of the hotel against its competitors. Next, there needs to be rate parity across all channels so that you are not competing with your own prices through other channels. The selling points of each room category or rate plan have to standout so that the rate modifiers are justified. The ability to keep offers across all channels in line with each other and updated. Lastly, it is also critical to keep everyone in the hotel to be on the same page of what the hotel is offering different channels ensuring everyone communicates to customers in the same way.
Ritesh Gupta: How do you assess current scientific methods available today for a hotel to establish a superior pricing strategy? How sensitive is RM systems forecast quality about frequent price adoptions in a dynamic pricing environment?
Ananya Narayan: To establish a pricing strategy depends of the factors affecting demand and supply which is all about economics. In some countries, economics is seen as an art and in others a science. I believe that it is a combination of the two. One has to look at the changes in the market situation and key factors that have changed and how this is different when looking at the Revenue Management systems based on what happened in the past. The combination of using the two can help the revenue Management team make the most informed decisions.
Ritesh Gupta: Transient customers versus customers who buy as part of a group have varying degrees of price elasticity. According to you, what is the trick when it comes to assessing how much elasticity a specific type of customer will accept and the booking lead time in which to apply it to your pricing model?
Ananya Narayan: Price elasticity is based on your comparative value (Unique Selling Points such as location, brand, facilities etc …) each customer segment puts on your hotel versus the competition. The more your hotel has a distinct advantage the higher the rate gap your hotel can have against the competition. The booking lead time for the segment needs to be taken into account as well as the market situation for the competition for this segment.
Ritesh Gupta: How would you relate brand/ price relationship and how much significance should RM executive give to this relationship in pricing strategy?
Ananya Narayan: This depends much on the objective of the owner, general manager and the executive committee for the hotel as well as the product. There is a balance that needs to be achieved in order to maximise your revenue whilst maintaining the brand image and the loyalty of customers. This balance is different for every property and it is the duty of the management team to determine this fine line. In general, luxury hotels find it more important to keep this balance right because their brand perception is very important compared to that of a 3 or 4 star hotels.
Ritesh Gupta: A RM executive referred to difference between reactive and proactive revenue management. Reactive opportunistic RM is often evolving around the short-term optimisation of high demand periods, where as the long-term, proactive revenue management is based on clear strategies built on more accurate demand forecasting, price integrity and profitability measurements. Which is the best way to go about the task of reactive and pro-active RM?
Ananya Narayan: A hotel has to identify the objectives and the strategies by which it shall work and thus build a framework by which it shall work throughout the year. The will look the bigger picture and identify the major opportunity periods through out the year. This is the proactive revenue management. Once you come closer to the opportunity demand periods, you have to build and execute action plans to maximise the revenue in that period based on the on book, demand curve, and changes in the marketplace.
Comments
You must be logged in to post comments.