IHG says a best rate guarantee drives revenues and loyalty

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Revenue management today is not what it once was and those entering the profession must have both commercial and creative sense. Pamela Whitby reports on some of the themes to emerge at this year’s Travel Distribution Summit, Europe.

Prior to making a reservation the online shopper visits an average of 22 sites.

“This fundamentally changes the way we price and the way we put our rates out,” says Brian Hicks, VP Revenue management Intercontinental Hotels Group (IHG), Europe EMEA, who was speaking at the Travel Distribution Summit, Europe earlier this year. As such, traditional revenue management, which relied heavily on customer segmentation, has to go out the window and revenue managers today must introduce diversity and creativity into their thinking.

One of the biggest challenges is achieving transparency in pricing and ensuring a hotel’s rates are available, and visible, across all different channels. “That is a big challenge to keep on top of,” admits Hicks.  After all, competition from the likes of booking.com, Trivago, lastminute.com and Expedia is only going to intensify and there are new entrants almost daily. All these brands are constantly coming up with new ways to drive customers to book on their channels – booking.com’s The Booking Truth campaign, which claims to highlight exactly what makes a hotel stay a delightful experience, is just one.

With all this competition, hotels are increasingly looking to drive more direct bookings. And the good news is that most consumers prefer to book direct. In the key note address on Day 2 at TDS Europe, Paulo Salvador Global VP Marketing & Sales at WorldHotels, pointed out that over 60% of customers would rather book via the supplier website. The trick, however, is giving the customer exactly what they want.

Best is best

For Hicks, the most effective way to drive direct bookings is to offer a best price guarantee and a free night if they find a better rate on another site. “That is a pretty powerful offering,” he says. But does the best price guarantee work? The answer, says Hicks, is overwhelmingly yes. In fact as many as 80% of customers surveyed would book direct if they knew they were getting a best rate guarantee. Since many customers are price sensitive, and if they are shopping on multiple sites, the best rate guarantee is, Hicks believes, one of the most important things to consider.

With the tonne of data available today, hotels have plenty of means at their disposable to understand what customers are looking for in terms of both pricing and products, so there really is no excuse. “We now know, for example, that guests value free WiFi more than a minibar,” explains Hicks.

The numbers back this up.

·         In Q1 IHG generated $910,000,000 through on-line best price guarantee advertising on non-IHG websites

·         47% of website visitors are aware of the best price guarantee

·         85% of customers surveyed said they would likely or very likely book direct with a particular travel site if it offered best price guarantee

·         A best price guarantee has a greater impact on booking patterns than social media integration (58%) or personalised advertising (68%).

Transparency drives loyalty

One of the most important things to increase loyalty to a hotel brand is transparency, and that is something worth taking seriously.  Again, the numbrs speak volumes - 41% of IHG revenues last year were generated by IHG ‘Priority Club Reward’ members (this is now being rebranded as IHG Rewards to build on customer loyalty to the brand). 

So how do achieve transparency in pricing:

1.      Be consistent

2.      Think logically– what would customers be prepared to give up to get that discount?

3.      Be inclusive - Pricing is about packaging up the right offer to the right person

4.      Make sure you are current – think mobile and the day of arrival which Hicks believes is one of the biggest opportunities today,

Today the revenue manager must understand all aspects of the business and the discipline is increasingly becoming an art and a science. For Hicks, traditional customer segmentation is now history. Traveller expectations are more subtle today than they were in the past, so regardless of the segment, price optimisation is key. This means being price sensitive (many customers are), understanding demand in the market and knowing the price points of competitors, he says.  Once you have pricing right, the next step is to ensure the customer booking experience is smooth and seamless. IHG branded websites are highly transactional, says Hicks. In fact of those that come on the site, 75% of time they are transaction based. Next customers must have the ability to create and package their perfect experience.

Like we said, RM is increasingly becoming an art and a science. 

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