Coming to terms with cost structures associated with search, social media and mobile evolution

IN-DEPTH: Interview with Brij Bhushan Chachra, director, Revenue Account Management – India, Middle East & Africa Preferred Hotel Group

Published: 30 Sep 2010

IN-DEPTH: Interview with Brij Bhushan Chachra, director, Revenue Account Management – India, Middle East & Africa Preferred Hotel Group

Hoteliers are always trying to find the optimal point in a cost benefit analysis with regards to technology.

However, it is said that often that analysis is difficult to accomplish since there are so many factors that impact the business. Clearly, hotels and other businesses want to focus their energies on the highest lifetime value customers but investing in technology and resources to segment those customers and develop strategies to retain them is an expensive undertaking.

Significantly when it comes to controlling costs, hoteliers often miss out on technology costs and support costs. Also, ideally, if the focus is on highest revenue customer with the lowest required support with the highest lifetime value that books through the lowest cost channel, how tough is it today to manage the same?

Acknowledging such predicament, Brij Bhushan Chachra, director, Revenue Account Management – India, Middle East & Africa Preferred Hotel Group, says although in this part of the world hoteliers do understand the importance of technology they do more than often take it is as "a good to have rather than must have".

“Today technology is changing the landscape of communication and distribution and there is no way a hotelier can ignore the same. While we have managed to understand the management of the channels, it is the new channels and evolving landscape of the Internet through search, social media, mobile evolution is to define how the cost structures and the lifetime value will change. It is therefore something we will need to continue to adapt and will continue to be a challenge to manage,” says who is scheduled to speak at the forthcoming Travel Distribution Summit India 2010, to be held in Mumbai (6-7 October).

Chachra also spoke to EyeforTravel’s Ritesh about the main considerations in formulating a distribution strategy. Excerpts:

Changing a hotel’s market mix does not happen overnight even as one reacts to changing market conditions. Would it be right to say that those suppliers, who have been focusing on going direct to consumers, have lost out on indirect channel partners?

To me, it is not losing out if you have gone direct but the hotels who have not maintained a balance between the direct and indirect channels have lost. Therefore, it is imperative that the hotel maintains a healthy balance between the two. Both distribution channels have their advantages and disadvantages and revenue managers have to maintain the equilibrium for maximising revenues. We need to keep in mind that each of the channels is having a different end user and the existence of various channels is to address the different needs of the client. Therefore, it is important to maintain the alignment between the direct and indirect channels. With the change in the global economic landscape, you would like to use as many distribution channels to have the maximum and the best reach to the consumers hence have better market shares and revenues.

The nature of the lodging business is that there are always peaks and troughs of demand related to the supply available in any given market. This can be seasonal, development-related, or economic. What factors do you take into consideration for all five channels - hotel direct, voice / reservation center, 3rd party Internet, brand web and GDS / agency – as the external environment varies?

It is important to understand the reach and contribution of all of the mentioned channels depends upon the hotel and the segment of business it targets. The geographies where the hotel wants to target the business from will also influence the channel mix. While we may debate on cost on distribution as a key point, my view will be to look at the revenue contribution from the various channels. For example, although the cost of distribution on the GDS may be higher than the hotel website, however if the market moves a high volume of international corporate business it is logical to focus more on the GDS channel. The other factors which can be looked into are branding and influence on the image of the hotel to consider the various channels. It is important that the hotel when considering the channels uses channels which enhance the image of the hotel in accordance to its physical persona.

In case of hotels, customers are purchasing more than just a convenience. Customer decision making is influenced by a mix of tangible and intangible benefits represented by the brand or the physical asset. For their part, OTAs say that they offer tools that help consumers discover value as a function of the benefit that matters to them. How do you think OTAs have played their part in today’s environment?

OTA’s have played a very important role in forming todays’ electronic environment. The OTA’s were the first to show the power of the Internet. From making electronic brochures of their websites to using the Internet as a powerful sales and distribution tool was highlighted by the OTA’s. With their focus on the web OTA’s have evolved and providing tools to the consumers to discover value as a function of the benefit that matters to them. However, the environment has changed today. The hotels have realised the importance of the web and are providing similar tools. Also with the advent of social media and the ability of the hotels to reach out to their client base in a cost effective manner is reducing the reliance on these channels.

Online channels allow hotels to be more dynamic in fast-acting in their rate management strategies. OTAs say the very dynamic nature of online channels does make them the most effective channels for quickly driving demand and occupancy via pricing strategy flexibility. Discounting, when applied in a targeted and strategic manner, should positively impact occupancy and revenue. Are OTAs associated with “last minute” production or do you think there are strategies in place for months or even 365 days a year?

Every channel has its own business model, lead time and patterns. Therefore it will not be correct to define OTA’s as a “last minute” solution. It always pays to have a long term strategy looking at your peaks and valleys. However, the truth is that not many hoteliers and revenue managers are doing it. One of the tips we give to our hotels is to keep a rolling 13 months of inventory open. Once per month, add one more month of rates on an on-going basis – by doing so, you can use the experience of the month you just finished to apply appropriate strategies for the same time period next year. Also this helps to exploit the full potential of electronic systems and would help to improve the image of the OTA’s from a “last minute” solution to a strategic thought after distribution medium.

The industry has witnessed the emergence of a new referral marketing platform that intends to reach out to friends, families and followers of existing customers on different social networks. Such platform allows businesses to engage and reward their customers as they emerge into brand ambassadors and open up a new and cost efficient channel of distribution. The industry has also seen the activation of the travel industry’s first ecommerce capability on Facebook (Delta’s initiative). How do you assess such developments pertaining to social media?

It is going to be a great way of reaching to consumer through a credited source. Companies will gain if they go for the first mover advantage. In my opinion although it is a great idea, the referral is only going to influence business for selective hotels who have a strong product and consumer focus. Also the key will be the level of electronic engagement from the hotel with the consumer. Again the channel mix is a key driver here. Also the luxury segment may gain more than the budget segment as a consumer always want to showcase about the prestige associated with the same in social networks. This is an extremely interesting new platform and we will need to wait and see the emergence.

Travel Distribution Summit India 2010

EyeforTravel is scheduled conduct its annual Travel Distribution Summit India 2010 event next month in Mumbai (6-7 October).

For more information, click here:

Or contact:

Simon Carkeek
Executive Director
EyeforTravel
+44 (0)2073757181
simon@eyefortravel.com

 
 
 

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