What do hoteliers need right now? - By Jean Francois Mourier, RevPar Guru

Repeat after me: bookings, customers, cashflow, bookings, customers, cashflow.

Published: 24 Apr 2009

Repeat after me: bookings, customers, cashflow, bookings, customers, cashflow.

Most likely, these are the top-billing items on hoteliers’ `what I need right now wish-list’. But moving these items from wish to reality will take substantially more effort than crossing fingers, reactive strategies or hoping for the best. What hoteliers need right now is a finely tuned orchestration of effective strategies that work in tandem across all aspects of a hotel’s operation – sales, marketing and revenue management, right through to the front desk. And don’t forget about online – greatly overlooked and undervalued.

We have compiled a short wish list of what hoteliers need right now.

Revenue Management

The importance of having a robust and effective revenue management strategy (and system) is a business imperative in today’s market. Having the right system in place can wring the maximum amount of revenue from any hotel property – automatically. The added benefit of having such a system is that it frees managers to control pricing and other crucial variables in a proactive, rather than reactive manner. Hotels can increase their occupancy rates and manage their distribution costs like never before. Given the effects of the global economic downturn, managing RevPAR intelligently and effectively is a necessity for hotels everywhere.

Automate or Die

Most hotels (and revenue management systems) rely on the revenue manager to analyze and implement complex and rapidly changing pricing structures. But relying on humans is, unfortunately, a significant contributor to lost revenues. By implementing a system that eliminates the human error element will ensure rates are optimized for the best booking rates with the highest RevPAR available – at all times. Having such a system eliminates the day-to-day repetitive (and overwhelming) data crunching tasks, so that revenue managers can use their online sales knowledge and internet expertise to focus on the big picture - to actually manage revenues and grow business.

Go Forth and Integrate

Taking a cue from automation, integration is also vital to improving the efficiencies of all hotel operations. Rather than having multiple systems or tools that do not communicate with each other, look for a consolidated RMS system with a user-friendly interface to provide maximum pricing optimization flexibility, online rate distribution, competitive webpage positioning and inventory control. RevParGuru’s system is designed to empower revenue managers with technology automation and flexibility, the system provides proactive focus rather than reactive with greater inventory control, optimal online sales performance - not only in occupancy but also rates, and RevPAR. Is yours doing that?

The Death of the Comp Set – Online at Least

In traditional revenue management, managers only compare their prices with those of their competitive set (or comp set), the select group of hotels that is considered direct competition because of its star rating, quality, brand and so on. But what revenue managers tend to forget is that online, consumers aren’t thinking in terms of comp set, but rather in terms of price. So ignore your traditional comp set analytics and focus on comparing your pricing to ALL of your competitors within the destination. By having the whole picture, this will increase your ability to generate maximum bookings and, importantly, RevPAR.

More Site Visitors Does Not More Bookings

Many operators assume that more online traffic to a website equates to higher bookings. Unfortunately, increased website traffic doesn’t mean higher conversation rates or bookings. If you’re not seeing an increased number of bookings, evaluate your site to determine whether it is encouraging people to book or just to look, paying special attention to key metrics such as the bounce rate (what percentage of people left after just visiting just one page) and conversion rates (how many people are actually choosing to book) to see whether your site has the information and emotional component that compels customers to book a stay.

A New Booking Channel - Get Your Mobile On

More than 274 million Americans currently own a mobile phone. The mobile phone, just like the Internet before, is revolutionising the way we access information, the way we research restaurants and stores, or even plan and book our travel. And increasingly, consumers want access to all this information on-the-go. So it’s important for hotels to consider developing an mCommerce website, where consumers can quickly find hotel and rate information, and of course, book directly through the mobile site. Need proof? Marriott said that its recently launched site for Smartphones garnered more than $1.25 million in gross revenue during its first 100 days, and Hilton said its mobile capabilities generated more than $420,000 in revenue last October and $1.4 million during a “typical 100-day period”. And all this during a recession!

Channel Management

Right now, hotels need to make sure that there is room inventory available for purchase on all of the channels – be it OTAs, a hotel’s own website, the telephone and even your brand new mobile site. Keeping rates equal across all of the channels and offering the best possible rate (not discounted, just slightly lower or higher than specific hotels!) will entice consumers to choose your hotel over its competitors.

Worried about paying the huge OTA commissions for bookings? Steer bookings from expensive sites to your own hotel website. The leading hospitality brands have 76:24 direct vs. indirect online distribution ratio, and direct online channel sales will exceed 61% for the industry as a whole in 2009 – and you can too!

Revenue Managers, It’s time to Think Outside the OTA Box

Everyone knows about the big OTA players – Expedia, Hotels.com, Orbitz, Travelocity, Bookings.com and Priceline – your hotel cannot afford not to be doing business with them. If you aren’t in today’s market, you might as well close your doors. But there are 200+ travel search engines and hotel booking channels online, so revenue managers need to be on the constant look out and ensure they have a solid presence on the most number of sites possible. Why? Because more exposure and more visibility, equals more bookings. Online hotel bookings are the most popular travel item purchased on the web, and with more portals and sites appearing almost every day, don’t forget all the niche markets available out there. Take advantage of the bookings that come in from those sites. And if you think that more sites to manage means more headaches and parity issues, consider automating the process with a robust RMS system, like RevParGuru’s.

Last But Not Least, Fixed Rates vs. Dynamic Rates

In contrast to the hotel industry of the past, where consumers did not have access to pricing information unless they used a travel agent or called a hotel directly, today’s market is completely transparent (well, almost), with all hotel rates openly advertised on the Internet. Consumers use travel search engines such as Kayak, to compare hundreds of travel sites - what they get is an easy-to-digest display of hotel rates that can be classified by price, star rating, traveler opinion, location and other more variables. But as the booking window becomes shorter and shorter, how are hotels handling the increased “commoditisation” of their business, especially in the current rate parity and best rate guarantee requirements?

The fixed rate concept was fantastic before the Internet revolutionised hotel bookings. BAR rates and rack rates were the benchmark (or the base) of all other rates. But now that pricing is transparent, the rules have changed and the online sell rate is dictating all other rates because anybody can access these, at anytime. Further, the online price transparency following the ever-changing supply and demand is forcing hotels to use flexible rates. Therefore, wherever possible, it makes sense to gradually shift your fixed rates to dynamic rates, to avoid all price conflicts with wholesalers, corporate accounts and groups. Providing a negotiated percentage discount may work in some cases, but in reality, only automation of pricing, yielding, distribution can achieve the perfect, yet complex calculations of rates via direct bookings, opaque channels and promotions.

So there you have nine simple, but very effective strategies for hoteliers to implement. Whether it is a fully automated revenue management system, or optimising distribution channels, orchestration of the above tactics can provide hoteliers with what they truly need right now - tools for success to thrive in these adverse market conditions.

(Jean Francois Mourier is CEO & Founder of RevPar Guru).

Read more: revenue management, RevPAR, distribution channels, pricing, rate parity, best rate guarantee, BAR

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