"Customer Profitability Analysis has become a logical extension of RM"
Published: 01 Jul 2008
Revenue and Pricing Strategies in Travel
The hoteliers have to consider several factors before finalising pricing for any room category.
Be it the perceived value of the hotel against its competitors or ensuring that a hotel isn't competing with its own prices through the other channels, these factors are quite critical in shaping up the pricing strategy.
Commenting on how consumers act differently when they are able to forecast, Millennium Hotels and Resorts' Regional Director Revenue Management Europe, Nayan Peshkar, says technology is revolutionising the way consumers choose and book hotels.
"Today's consumers prefer booking hotels online over traditional offline options. Consumers focus on the available pricing and content information and use cognitive heuristics to form judgments and decisions. At the point of information search with a view to buy, consumers will form internal and external reference points based on their previous price encounters and what they can view at the point of sale, respectively."
According to Peshkar, consumers are able to form an opinion of price transparency based upon what they have seen frequently in the past, what they perceive to be fair and what they are willing to pay.
"Revenue management traditionally only recognises the last of the factors mentioned above - willingness to pay, hence a good recipe for loss of trust and perceived lack of transparency. Relevance and depth of information, be it about the product, service or price point, will go some way in stabilising conversion rates. The key is to have one strategy with rate parity and a best rate guarantee, which is then backed up service delivery assurances. Also, clear product definition and description helps consumers to compare and evaluate their options," Peshkar shared this viewpoint with EyeforTravel.com's Ritesh Gupta in an interview. Excerpts from the same:
Ritesh Gupta: What according to you is the key to driving profitable customer relationship is an integrated RM and marketing approach?
Nayan Peshkar: A promotion keeps the product in the minds of the customer and helps stimulate demand for the product. The value of information in enhancing decisions by reducing uncertainty has increasingly led to the consensus that the growth and even survival of today's business entities will depend on their strategies for handling and processing information – hence, marketing activities relating to consumer and market research play an important role in the success or otherwise of hospitality ventures.
A good example would be the current day business scenario where hotel companies are scrambling to establish a B2C relation with SME consumers. This relation would not be profitable if hotel companies do not understand the values, attitudes, and behaviour of this market subset. Consumer centric planning and a thorough information management policy are critical for the success of any business initiative. I agree that RM and Marketing will have to develop a symbiotic relation to optimise product / service value to consumers and to the business.
Ritesh Gupta: In your opinion, how has the travel industry succeeded in using data and the science to improve their sales processes at a base "customer profitability" level? Do you think decisions are being driven mostly by intuition and less by factual information and science?
Nayan Peshkar: Consumer research, data analytics and the resultant relationship marketing are very much in vogue. These are increasingly seen as efficient ways for hotel companies to have an understanding of and to respond to their consumers' needs and preferences. In some ways, it allows us to build more meaningful connections with consumers, which should ultimately benefit the bottom line.
Marketing research allows for data collation which sales and revenue resources will then exploit to drive business growth. However, this synergy between the three elements has to be performance managed to allow for conflict resolution and goal achievement. Also, as a result of access to such data, consumer mix decisions now incorporate not only the revenue data relating to the sale of accommodation, but also the ancillary spend and customer cost data. Customer Profitability Analysis has become a logical extension of revenue management. Successful hotel companies make decisions and service customers based on the data at their disposal. The feasibility of business decisions is dependent on good data, and good data is dependent on an effective approach to data management. Hence, logically, decisions will be driven by factual information and science.
By the way, for the sake of discussion – Can customers be truly classed as profitable or should we considering, instead, the profitability of the business?
Ritesh Gupta: According to you, which are the best cost-effective technologies to integrate vast amounts of customer data into your RM science?
Nayan Peshkar: A robust Enterprise information management strategy is a fundamental requirement for managing huge volumes of data. Such a strategy will allow decision makers within hotel companies to have access to varied types of information coming from multiple data sources across the estate. Enterprise content management propagators include technology behemoths such as Microsoft with its SharePoint product family and Oracle with its Oracle Content Management product. The question does not have to be only about the cost effectiveness, rather one of the usability, scalability and reliability of such technology. Technologies that harness the full capability of "Master data management" focused on Customer data integration seem to be in favour at the moment.
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