IN-DEPTH: Integrating revenue management and CRM

Published: 14 Sep 2009

IN-DEPTH: Integrating revenue management and CRM

The cornerstone justification of CRM is utilising customer information to optimise profitability.

Its application is based on the ability to segregate/understand customer profitability and take consequent actions that enhance profitability.

In this context, integrating revenue management and CRM is essential for any organisation.

“CRM allows for greater customer segmentation, which results in more targeted marketing campaigns and greater conversion. Increased conversion means greater demand, which allows the Revenue Manager a greater ability to yield the product,” says Mark Molinari, executive director of Revenue Management, Strategic Marketing, The Venetian Resort Hotel Casino.

Molinari added, “Also, the more we know about the guests the better service we’ll be able to provide. We can increase ancillary revenue sales once the guest is on the property if we can present the guest with products that he or she will want to purchase.”

Molinari spoke to EyeforTravel.com’s Ritesh Gupta about optimising revenue from CRM. Excerpts:

Philosophically, RM judges “best customer” in terms of maximising current profitability while CRM philosophy adopts a longer-term view. Which according to you is the best approach towards the same?

Mark Molinari: We strive to take a long term approach without significantly diminishing our short term revenues. Lifetime value is a key criterion in the gaming industry, and it is definitely something that should be considered in the hotel environment. A strong CRM programme will be able to identify guest frequency, changing patterns in their frequency, and provide predictive modelling to determine their likelihood of repeat frequency. All of these factors should be considered when determining what to offer to a guest.

Integration of a jointly accepted, fact-based methodology that confirms that current profitability maximisation is substandard to optimising long-term profitability. Certainly not an easy task but such clarity is needed. Until such time, optimisation of current profitability is the more tangible option. What do you make of this viewpoint?

Mark Molinari: I agree that current profitability is the more tangible option. Again, the Casino industry focuses on predictive modelling for future gaming worth based on the past and current gaming trends of the consumer. This type of modelling should be developed for the hotel guest, based on their demographics and trends. For example, we know that guests have children based on the number of children that is on the reservation. So, if a guest used to frequent the hotel and had zero children on the reservation and the last two or three trips we see that they have one child, we can assume that the guest now has a child and this may impact their purchasing behaviour at the property. They’re likely to spend more money on meals, and perhaps less on entertainment (depending on the resort). Either way, these are factors that can be considered when evaluating the long-term profitability of the guest.

What major challenges are suppliers facing today when it comes to optimising revenue from CRM?

Mark Molinari: The greatest challenge is the implementation of the CRM among several different applications. For example, we have a PMS, a Casino Management System, a ticketing system, a restaurant reservation system, a concierge system, a catering and conference management system, and they’re all unique systems. So the integration is quite complex, especially when there has been significant customisation done to the systems. The second largest challenge is the quality of the data that’s put into the CRM. We have to train the front line team members on the importance of the initiative and get their buy-in as well. If we receive partial data, poor data, or no data at all, we will never be able to effective optimise revenue from CRM.

Do you think CRM, in order to accomplish both buy-in from RM, and more importantly, to correctly assess profitability trade-offs, should be as firmly rooted in hard science as much as possible?

Mark Molinari: Absolutely. Revenue Managers love data and facts, and I believe that a strong CRM programme will rely heavily on hard science. You will also need strong operators that can interpret the data and provide actionable recommendations from the results.

Opaque channels are becoming more popular with rate-hungry consumers. Does brand loyalty inevitably diminish in a recession? And what can you do to maintain customer loyalty?

Mark Molinari: Yes, brand loyalty is certainly going to diminish during a recession. Guests are searching for value, and brand loyalty has always been somewhat disingenuous. Loyalty is often confused with convenience or value.

For example, a frequent flyer may be loyal to Southwest Airlines because they have flights that are convenient for the guest. If a new airline came out with a similar flight schedule and more aggressive rates, the loyal Southwest flyer would likely try the new airline. What we try to do to maintain customer loyalty is focus on experiential factors rather than discounting. We want the guest to have a feeling of exclusivity if they’re a member of our loyalty programme. We want to give them something that they will likely not get from another property. For example, we may provide limousine service to and from the airport, or a personal concierge, etc. We want to make the guest feel important and provide a certain level of personalisation.

Molinari, along with other 25 speakers including ones from Continental Airlines, Wyndham Hotel Group and InterContinental Hotels Group, is scheduled to speak at Revenue Management and Pricing in Travel USA conference, to be held as a part of the Travel Distribution Summit N. America 2009.

Travel Distribution Summit N. America 2009

Mark Molinari is scheduled to speak at EyeforTravel’s Travel Distribution Summit North America 2009 to be held in Chicago (September 16-17) this year.

For more information, click here:
http://events.eyefortravel.com/tdsusa/conference/

or contact:

Helen Raff
VP North America
+44 (0) 207 375 7582 (UK)
helen@eyefortravel.com