TECHNOLOGY : REVENUE MANAGEMENT
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THE ONLINE HOTEL BOOKING TIMELINE
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managers . Much of the hotel industry is only in the initial stages of accomplishing this , though . “ I know there are some hotels that marry revenue management and sales brilliantly , but there are also some where the two hardly work together ,” says Whitney Merrick , director of revenue management , Sofitel Minneapolis . “ That says we ’ re moving closer to having the alignment of revenue management and sales across the industry , but there is still work to do .”
In addition to sales and e-commerce , marketing may become more of a responsibility of the revenue manager rather than sales . “ Get ready to see more ‘ director of revenue and marketing ’ titles ,” says Calvin Anderson , director of revenue management , The Lexington New York City . “ These individuals will likely absorb marketing responsibilities as metasearch and digital advertising merge further with distribution channels . Sales and operations , however , will continue to silo into their specific fields as revenue absorbs the hotelwide leadership roles that formerly belonged to operators . Sales will become more of a dual channel leader for group and negotiated .”
Other new responsibilities for revenue managers are optimizing prices beyond transient room rate to include group , meetings , ancillary and total revenue . “ It ’ s really time to
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Tech companies have a positional advantage over hotel companies for online reservation booking , as customers use their products before reaching a hotel company ’ s website . Hypothetically , a customer could turn on their iPad and go straight to Apple ’ s iTravel app or Facebook to book , should those metamediaries offer the possibility to do so .
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look at all of the revenue streams in the hotel and take a hard look at how we are going to incorporate strategies to optimize total hotel revenue ,” Merrick says .
Still at odds Although there is general agreement on the strategy of expanding price optimization , the tactical advantage of lowering rate to generate demand remains a point of contention among revenue managers .
Recent industry research criticizes the widely used practice , but some revenue managers say the conclusions of the research are flawed . During a general session at the conference , Sloan Dean , vice president of revenue optimization , Ashford Hospitality Trust , Dallas , Texas , said that the 2009 study “ Competitive Hotel Pricing in Uncertain Times ,” which was published in the Cornell Hospitality Quarterly , was “ one of the most destructive studies that has been written about this industry .”
Dean asserts that the study ’ s conclusion that lodging demand is priceinelastic , suggesting that lower prices mean lower revenues , is incorrect . “ Taking a simple correlation to define causation and to translate that into ‘ inelasticity ’ is not only dead wrong , it ’ s embarrassing ,” Dean says . “ I can ’ t tell you how many senior vice presidents I have heard say ‘ lowering price does not create demand .’ The comment without context is partially wrong . Leisure travel demand , which is growing domestically and internationally , is highly elastic . Demand is a function of price and other factors , and price is a function of demand . They have a circular relationship according to basic economics . You cannot measure true elasticity at an aggregate level for hotels when ADR is a collection of hundreds of different channels , stay patterns , room types and other variables . Only true commodities like gas or milk can have their elasticity measured at aggregate pricing levels .”
Revenue managers cite the advantage of lowering rate for incremental revenue . “ Lowering rate by offering a deeper , fenced discount does allow hotels to capture incremental revenues where existing demand lies ,” says Denise Broussard , senior vice president , revenue management and e-commerce , Interstate Hotels & Resorts , Arlington , Virginia . “ However , Interstate ’ s revenue management strategy will shift within the next five years to diminish highly discounted group rates .”
Revenue managers say seasonal demand shifts are important in determining rate and the efficacy of lowering rate . “ It depends on the market ,” Woodley says . “ In the middle of summer in a hot-weather destination … a hotel needs to consider its overall market position as well as fenced rates for specific audiences with opportunities .”
Other revenue managers state that typically lowering rate merely shifts demand rather than generating it , except when done strategically at certain times . “ Personally , I do believe that a rate deduction only shifts demand from one hotel to another but does not increase demand in general ,” Seefried says . “ If you drop your rates to match your competition , you only start a rate war and cut existing revenue your customer was willing to pay initially . However , sometimes it is wise to lower rates when it is a very strategic decision and only for a very limited time period .”
60 HOTELS September 2013 www . hotelsmag . com