"Middle East suffers from short forecasting lead time"

RM and Pricing Middle East SpecialCustomers, especially in the mature markets, have become used to flexible pricing although in many cases they do not like it, but are willing to accept it.

Published: 15 Dec 2008

RM and Pricing Middle East Special

Customers, especially in the mature markets, have become used to flexible pricing although in many cases they do not like it, but are willing to accept it.

This can be attributed largely to the approach of the low cost airlines.

From Middle East's perspective, Soha Zahar, director of revenue management, Rotana Hotels & Resorts feels the introduction of low cost airlines like Jazeera Airways, Air Arabia, Bahrain Air and the upcoming flydubai by Emirates have somehow educated the market on flexible pricing and accepting different prices for the same product over a certain period of time.

"In hotels, customers are now used to different pricing per different season and we have seen this especially in booming markets like Dubai, Abu Dhabi, Beirut and they accept it because of the urgency to get a room during a specific period. Certain companies and customers don't like it because they believe in view of their status of regular clients or top accounts they are entitled to a different treat however the pricing strategy depends largely on the demand and what the customers are willing to pay for a certain product in a specific period of time," said Soha, who is scheduled to speak during EyeforTravel's Hotel RM and Pricing Middle East Conference 2008 (to be held in Abu Dhabi on 15-16 December).

In an interview with EyeforTravel.com's Ritesh Gupta, Soha spoke about dynamic pricing, short forecasting lead times in the Middle East and much more. Excerpts:

EyeforTravel.com: Markets must accept variable and dynamic pricing for RM to truly flourish. What's viewpoint regarding the same?

Soha Zahar: Dynamic pricing means that prices can vary constantly with changes in supply and demand at little cost, buyers can find more easily the price at which they are willing and able to buy and companies are able to capture a higher average room rate during peak periods.

If a company decides to go with dynamic pricing, it has to be well prepared to launch this pricing model in the market and convince the accounts of it's benefits and the accounts must have the clear understanding of how this model works; if one criteria is missing then dynamic pricing will not work and will not be accepted by the market.

EyeforTravel.com: Due to transparency, pricing has become one: one sell rate for all. Controlling the distribution costs nowadays is more important, hotels are getting more focused to bottom line results: profits. What's your take on this?

Soha Zahar: Managing costs is key to run hotel operation, however, there is a limit for that…that you cannot go beyond; therefore in order to maximise profitability we should focus on revenues that can be driven with no limits. Whether it is one sell rate for all or displaying better rates on the channels with lower costs, the main thing is to find new ways and ideas to drive and increase revenues from every single channel.

EyeforTravel.com: The greatest pressure on revenue management professionals is the ever increasing complexity and variety of competencies they need to master in order to optimise revenue. A lot of it is driven by increasing complexity in the distribution environment and the changes brought about by the Internet, transparency and price parity are there for critical focuses. Do you agree with the same?

Soha Zahar: Optimising revenues is always a challenge for revenue managers and there is no one recipe. What works for a hotel might not work for another; it all depends on the active market segments, location and attributes of the property. What is happening is that revenue managers have to look at different players nowadays and the Internet is becoming a very important one where customers are buying hotels, airline tickets and pretty much everything. Hotels should be transparent in their selling and price parity is a real challenge especially if we want to focus on costs. So I will not say that they suffer from complexity. However, [there is a] need to take into consideration more factors that were not present before and have the task of maximising revenues from more channels.

EyeforTravel.com: It is said that the Middle East already suffers from short forecasting lead times. What new ways will your forecasting be impacted by a flexible pricing structure?

Soha Zahar: I agree that the Middle East suffers from short forecasting lead time therefore we need to be alert on what is happening in the environment and monitor on a daily basis the change in trends and pick up per market segments to be able to accurately forecast new booking patterns.

Educating the management team in the hotels about forecasting and the factors to take into consideration is another aspect to look at. Regardless of the pricing model we are using if everyone in the organisation does not understand the components of a forecast then we will suffer from misleading figures.

EyeforTravel.com: What measures can be taken to ensure your negotiated accounts don´t find your rates cheaper by searching through other channels?

Soha Zahar: Negotiated accounts are given usually a percent off the best available rate valid all year long; cheaper rates selling trough the channels as promotions or packages are usually valid for a certain period of time nevertheless they should be fenced with an advance purchase, pre-payment, full cancellation charges in order to have a logical pricing strategy that is accepted by all.

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