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Make integrated revenue management systems work for you

25 January 2017 by
Make integrated revenue management systems work for you

Elly Earls explains how to make integrated revenue management systems work for your business, from controlling room rates to managing overbooking and even marketing campaigns

According to Warren Mandelbaum, EMEA sales director for revenue management solutions provider IDeaS, this starts with developing people, processes and technology capabilities to directly tackle each component of the 'revenue management cycle' - from coherent data collection and analysis to robust forecasting and inventory management.

The strategy then needs to be communicated effectively to the organisation overall through visual analytics, reporting and review, which provides actionable insights enabling the real-time execution of strategy and tactics. "This will all elevate your hotel positioning and customer perception ahead of the competition," he says.

Within this framework, the strategy should be one of 'total' revenue management, which means looking beyond room revenue to ancillary spend, such as F&B, function space and spa. It should also take into account the cost of acquiring this business - ie commissions to OTAs, transaction costs and digital marketing expenditure.

"Hotels today are spending more time analysing the net worth of any significant decision when considering group/wholesale series/airline business and the displacement of other revenue that may potentially produce a greater yield," Mandelbaum notes. "IDeaS, as an example, allows hotels to analyse data prior to deciding whether to accept or decline volume business by evaluating a group and its total value contribution.

"In addition a 'what-if' scenario simulation ascertains the net profit/loss of any intended marketing campaign so a change in strategy, such as lowering a rate over a period of time, can be modelled to see the effect it will have on your business prior to putting it in place."

As Brian Reeves, chief executive of GOPPAR Digital, says: "Adopting a total revenue focus is the right option for hotels, not just for the insights gained, but because looking at overall profitability in this way will mean that you engage with channels differently and assign marketing budgets in a more intelligent way, seeking out the more profitable customer.

"For example, Mr and Mrs Smith may appear to have similar net rates to booking.com when looked at from a rooms revenue perspective (due to today's rate parity environment), but when you consider the customer types each channel delivers and their propensity to spend additional money on property, the channels may now appear quite different."

The key to getting started with a total revenue management strategy is to ensure you begin with 'clean data'. "An integrated suite of systems will consolidate all the information feeds required, allowing you to analyse what the data is saying and make decisions based on scientific evidence," Mandelbaum advises. "Leaving behind reports and spreadsheets to have fully integrated solutions saves time and increases performance."

Managing OTAs

Unfortunately, there is no definitive answer to hoteliers' biggest question: 'What percentage of business should come through OTAs?' It depends entirely on the property. "Hotel chains with established marketing and loyalty programmes rely less on OTA business and see a 20%-25% reliance, while independent properties that do not have the ability, budget or requirement for investing in their own marketing spend receive up to 76% OTA business," Mandelbaum notes.

What's important is looking not at the commission percentage per channel alone, but the net profit per channel after cost of acquisition.

"Too often I have seen a hotel's unease in having too much OTA business purely based on the high commissions and excess levels of cancellation making operations difficult. However, when compared with wholesale or airline business, after breakfast, taxes and lack of spend in the hotel outlets, it is often the case that the hotel would have been better off taking even more OTA business and paying the negotiated commissions to receive a much higher net yield," Mandelbaum explains.

It's also crucial to separate strategic long-term OTA success factors like reputation management, content, membership type and loyalty programme incentives from tactical day-to-day controls such as rate changes, commission overrides and the opening and closing of promotions, Reeves advises. "The latter set can be changed (increase, open/close, decrease) on a date-dependent basis to get the maximum performance from the channel on dates when you want to sell more rooms."

Direct is best

Despite the continuing dominance of OTAs globally, the idea of booking direct has been gaining much more momentum in the last year, something that can only be a good thing, according to Charlie Osmond, chief tease at direct booking platform TripTease. "In addition to managing disparity, for many hotels the focus this year has been building an effective communication strategy around the benefits of booking direct," he says. "It really is an exciting time in the industry for direct bookings and we believe this will continue throughout 2017."

Step one of any direct booking strategy is to make sure that OTAs aren't undercutting the room rate for booking direct, something hotels have been paying more attention to over the last 12 months. Indeed, research from TripTease, based on over 200 million price comparisons, found that OTAs are only cheaper than hotels 14% of the time, down from 21% a year ago.

Then, it's about making sure the content, user experience and booking engine on brand.com are the best they can be. "Every hotel looks templated on an OTA site but on a direct website, hotels can offer consumers a richer experience where they dive into the brand and learn how it's different from every other hotel," notes Frank Reeves, co-founder and CEO at booking engine provider Avvio.

Brand.com should also include special offers, such as spa breaks, that third-party sites can't offer, as well as a sophisticated booking engine, much like those the OTAs use, which becomes more effective over time based on the data it gathers, and is able to offer different booking paths to different market segments.

Most crucial, though, is that hotels treat the direct channel just like any other; in other words, they adopt a cost of acquisition approach to direct marketing.

"For example, if an OTA booking costs 15% then how much can you afford for a direct booking?" Frank Reeves asks. "While this will likely change throughout the year, it is the clearest approach to determine sensible online advertising budgets for your digital marketing strategy. A good digital marketing agency should be able to manage your budgets dynamically on this basis."

Metasearch, which is addressing a major pain point for travel consumers by delivering clear hotel price comparisons across booking channels, from OTA to direct, also enters the picture here. "Hotels with a strong direct booking performance can use metasearch to bring in business at lower than OTAs and we see cost-of-acquisition coming in close to 10% for metasearch," Reeves notes.

Brian Frank agrees. "Metasearch can yield a strong return if rate parity is under control; however, if wholesalers are offering lower rates for the hotel on metasearch websites, this becomes a big problem."

Finally, it's vital for hoteliers to remember that travellers will rarely book the same hotel twice through an OTA; third-party bookers are therefore ripe to be converted into direct bookers while at the hotel. To capitalise on this, every guest arriving at a hotel should be asked to leave an email address so that they can be contacted post-stay and front-desk staff must be informed and empowered to encourage guests to book direct.

More disruptors ahead

Looking to the future, the travel intermediary space is incredibly dynamic at present and the online customer journey is only set to evolve further. According to Frank Reeves, the main players hoteliers should be looking out for are TripAdvisor, Google, metasearch sites and travel apps that offer customers curated travel experiences like Google Trips.

Meanwhile, disruptors like Airbnb and onefinestay, as well as the emergence of extended-stay apartments, will continue to challenge the traditional hotel transient model by increasing competition and thus reducing market share, according to Mandelbaum, who also forecasts artificial intelligence eventually playing a much larger role in the travel sector.

"Today, Chatbots support services like Uber and food delivery, but in future I see integration with things like the entire hotel journey from beginning to end. The 'internet of things' too will make the entire customer journey both effective and efficient while also being helpful and hopefully fun," he predicts.

Bringing revenue management, distribution and marketing together

When GOPPAR Digital partners with a hotel client, the start point is always bringing revenue management, distribution and marketing into the same conversation, with the goal of boosting net revenue across all channels of sale. And this was no different with AB Hotels.

"We partnered with GOPPAR Digital to bring their expertise into our team at the Arch with the goal of driving net revenue on brand.com and OTAs," recalls Rafi Bejerano, director of AB Hotels.

The first steps were to look at brand.com marketing and to evaluate the production of the OTA channels being used, making refinements to each to improve the hotel's performance without compromising on rate, the ultimate goal being for the website to dominate room night production.

"To that end, we have made some strategic decisions on how and when to do particular things with OTAs and have introduced some new channels for last minute bookings," Bejerano notes.

Ongoing areas of focus include content marketing to improve organic search performance for the brand website; refinements to the hotel's PPC strategy to expand its reach within a defined cost per booking that can be controlled and flexed according to the forecasted occupancy; understanding the nuances of OTAs and how to make tweaks that improve bookings without affecting rates; and introducing new channels for last minute bookings.

"We meet regularly to review performance, and we review our strategic approach each quarter," says Bejarano. "I am pleased to say that this is paying dividends. We finished last quarter 71% up on net revenue through brand.com and OTAs."

Ensuring the best price is available on the hotel website

Since partnering with Avvio, the booking experience on the Ampersand hotel's website has been transformed in all sorts of ways, reducing confusion for customers and boosting conversion rates.

"Our original booking engine was more static but Avvio is constantly updating the booking engine with new functionality, a lot of it based around what the OTAs do," says the hotel's general manager Roberto Pajares.

For example, customers can see if there's only one or two of the room type they want left on a particular night, creating urgency, and can compare rates against OTAs via the TripTease Price Check widget. "That way, guests understand they are getting the best price on the hotel website," Pajares notes.

The booking engine also offers rate blending so guests can combine different rates to get the overall best price for their stay, something that's reduced the number of phone calls to the hotel. "Previously, customers were getting frustrated because for example, they'd have to book two separate stays if they were making use of two different promotions; you couldn't package them," Pajares explains.

Next on the horizon is more personalisation. "We want to be able to interact with our guests depending on what stage they are at in the booking process with relevant information either about their booking or upcoming stay," says Pajares.

Sponsor's comment: IDeaS Revenue Solutions

A pioneer and global technology leader, IDeaS Revenue Solutions offers industry-leading pricing and revenue software, services and consulting for businesses of all types and sizes in the global hospitality and travel industries.

Founded in 1989, IDeaS has been serving the hospitality industry for over 20 years, having even been called on by industries as far-ranging as parking, air travel, transportation and event ticketing. We transform the right data into clear and actionable insight, so that our clients can price, forecast and report with speed and confidence, improving business performance. Our solutions drive thousands of pricing decisions every second for hospitality businesses across the world.

IDeaS was acquired in 2008 by SAS, the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Headquartered in Minneapolis, Minnesota, and with our Global Technology Centre located in Pune, India, IDeaS maintains sales, support and distribution offices all over the world.

Throughout our history, our mission has been the same: make revenue management so user-friendly, insightful and profitable that revenue management professionals wouldn't dream of doing it another way.

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