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Article by Ahmed Mahmoud

The Future of Revenue Management with the OTA's

Revenue Your Hotel 10 February 2019
Nowadays hotel revenue management has become a somewhat controversial buzzword in hotel industry, back in the day, revenue management meant opening and closing availability and rates. When Online Travel Agents entered the scene, the industry became obsessed with simple adjustments of rates. Today, the playing field is drastically more complex. Modern revenue managers are experts at analyzing, forecasting, and optimizing hotel inventory through availability restrictions and dynamic rates and have, appropriately enough, become instrumental in managing a hotel's demand.With the evolve of RM keep this fact in mind. Only 12,000-15,000 hotels in the world today use a major (RMS) tool. The rest of the 500,000+ hotels out there are using either something their chains developed or their own customized Excel spreadsheet as their RMS tool.Hotels that are not using a RMS tool now will begin adopting solutions over the next five years at a much faster rate than they have over the past ten years. And RMS tools developed by the chains will have to embrace innovation in the same way RMS providers will, and this is not until even more recently have hotels begun to implement formal revenue management policies, programs and systems. Fueled by technology, the field is now a true science. Increasingly powerful computer systems can handle many tasks essential for revenue management. The growth and proliferation of the Internet has changed core communications for travelers and hotels alike.Whereas early on in the era of hotel bookings reservations were either made directly (telephoning the property/face to face) or via a travel agent, over the past few decades a larger offer of booking channels has emerged, The OTA segment is becoming a strong competitor to the individual booking sector and distribution channels; it has already taken substantial share from traditional contracted booking channels, mainly wholesalers and tour Operators.Amid these developments, the online travel agency (OTA) has arisen, changing the rules of revenue management - and the professionals who practice it - on an almost-continuous basis. The role of OTAs and online distribution in revenue maximization has gained unprecedented importance. Of lately, hotels have started implementing formal revenue management guidelines, roping in committed professionals to sharpen and focus their revenue generation processes and augmenting their profitability. Hotels are using advanced travel technology tools for handling their hotel revenue management.When we talk about OTA's They refer to Online Travel Agencies and some of the most popular ones are Expedia, Priceline, Orbitz,, and OneTravel, among many others. The main goal of these organizations is to sell hoteliers the idea that OTAs are a great showcase for their businesses and, therefore, an aid to increase sells-in other words, it generates more exposure of your brand and products than the one you could create on your own. The trick? High commissions and a series of other medium and long-term side effects that you would possibly want to avoid in your business.OTAs have emerged as one of the most prominently online distribution channels among different sales channels for revenue generation, although hotels have to shell out chunks of their money to OTAs in the form of commissions. Approximately 60% of travelers comparison-shop rooms before booking, which makes OTAs a popular place to do business. In fact, the hotel industry has realized that OTAs and hotels exist in a symbiotic relationship, nurturing and supporting each other for mutual growth. Factors like OTAs have a much bigger advertising budget, access to more traveler data and more success in drawing in online traffic are the main reasons hotels are choosing OTAs as online distribution partners.Of course, OTAs have a different attitude. i.e. Expedia, Inc.'s stance is that hotels can benefit from the $3.4 billion it spends on marketing each year, OTAs can entice a different kind of customer than a hotel can. To that end, Expedia gives client hotels access to revenue-management tools through Expedia Partner Central, The OTA spent almost $830 million last year on technology alone, moving toward this launch. Now, hotels have total control over their listing, including the ability to load photos and text, see competitors' rates and spot forecasted demand in a particular city.In today's highly fragmented marketplace, competition is intense and hoteliers are constantly on the lookout for better ways to optimize their revenue. With OTA dominance continuing to grow, revenue management offers properties the opportunity to take control of their profitability.Maximizing your hotel's revenue isn't a matter of simply focusing on selling out all room in your property - those days are long gone! In today's highly competitive marketplace, strategizing to maximize occupancy over revenue could actually be detrimental to your bottom-line. Indeed, hotels that undercut their prices to sell out could actually be earning less than similar properties that employ revenue management strategies.When OTA's realized how much influence they made on the hospitality industry and it became not only a booking and distribution channels, they started to involve more and more even in the daily hotel business starting from the hotel customers behavior up to the hotel rating, take a while and think of the below and how influence become the OTA's on the hotel industry:-Guest reviewHotel ratingHotel rankingRate strategyDynamic pricingRate parityMobile searchCommunicationMarketingThe list can be extend to reach to much more, however fulfilling the job of revenue manager has never been easy. As technology advances, more OTAs come on the market, and the sales distribution channel picture becomes increasingly more complex, this fact will not change. Revenue management will need to be at once more rigorous and more flexible, working in parallel with the changing nature of OTAs.This mean that OTAs is occupy a critical spot in the revenue management mix. It does mean that their role is changing in some key ways, and that the future will likely bring changes the industry cannot yet imagine.
Article by Ahmed Mahmoud

The future of Revenue Management leadership: What should Revenue Manager know?

Revenue Your Hotel 6 February 2019
While the hospitality industry has an ongoing need for managers at all levels, the need is even greater for revenue managers who possess the long-term mindset, capabilities and operational understanding.The revenue management role can be distinguished by the following behaviours:LeadershipCommunication skillsVisionLeadershipFor revenue managers it's about a continued team approach. The revenue leader must point the way and by doing so, demonstrate that success is worth the risk. A key trait of an effective revenue leader is that they must not only be good with analytics, but must also be effective influencers in sales, marketing and operations.Managers who are likely to move into true leadership roles understand the value of cultivating interpersonal relationships. These relationships exist between staff and guests and also among all staff members. This helps unite a team in the common goal of delivering the optimal guest experience based on service and mutual respect.Communication SkillsRevenue leaders of the future must be effective communicators:They need to be able to clearly communicate the revenue strategy to all level of staff in the hotel be they the operations team or the sales and marketing team.They need to be practical and deliver step-by-step plans that all hotel staff members will understand and embrace.They need to be implementers and push for change by their actions, and lead by example.They need to have the ability to motivate their staff and inspire them to achieve the hotel goals.VisionOn one level, revenue managers have a deep understanding of the industry, hotel services, competitor set, and hotel history. On the other hand, they create a clear vision of the future. They are in a position to inspire others and develop a shared vision, representative of deeper aspirations. Successful revenue management supports the attraction and retention of people who share a stake in the business' growth and success.A change is comingLike any business, the future of a hotel is in its ability to grow in performance year on year. We all understand that growth comes from the top line and there is no doubt that revenue management has a significant influence on the top line.While the evolution of revenue management will present many opportunities to today's revenue leaders, it will also bring many challenges. In addition, it will likewise call for the evolution of revenue leaders. Consequently, future revenue managers will have to progress far beyond the current, stereotypical "number-crunching" skill set often assigned to the revenue management role.One of the reasons that sales and operating departments so consistently produce top-tier leaders is because these individuals often possess the people skills and leadership experience required to engage an entire hotel. This need for such attributes is not going away.It appears there may be an imminent restructuring coming to the hotel world that naturally involves the practice of revenue analytics rising in prominence. This will likely result in efficiency and growth for companies that embrace it.Today's hotel revenue managers may be tomorrow's corporate and hotel leaders or even the next hotel general manager. But before that happens, revenue managers need to improve their leadership, motivational, analytical and communications skills.
Article by Ahmed Mahmoud

The Impact of AirBnb on Hotels and Hospitality Industry

Revenue Your Hotel 30 March 2017
Airbnb itself was founded in August 2008 and defines itself as "a social website that connects people who have space to share with those who are looking for a place to stay", and exemplifies a community marketplace. Airbnb hosts list their spare rooms or apartments, establish their own nightly, weekly or monthly price, and offer accommodation to Airbnb guests. Airbnb derives revenue from both guests and hosts for this service. They charge guests a 9 [?] 12% service fee every time a reservation is booked, depending on the length of the reservation, and they charge hosts a 3% service fee to cover the cost of processing payments. Airbnb's business model currently operates with minimal regulatory controls in most locations, and as a result, hosts and guests both have incentives to use signaling mechanisms to build trust and maximize the likelihood of a successful booking. To reinforce this behavior, Airbnb has built an online reputation system that enables and encourages each guest and host to leave a review upon completion of a stay. Guests use star ratings to rate features of their stay, e.g., cleanliness, location, and communication, while both guests and hosts may provide other information about aspects of the stay, including personal comments. Since its launch in 2008, the Airbnb online marketplace has experienced very rapid growth, with more than seven to eight million guests and over three million nights of cumulative bookings worldwide at the end of 2015. The site is now being used by over 50,000 renters per night and had a market cap of $2.5 billion after its most recent funding roundAirBnb has quickly become a threat to hotels as travelers choose to book with independent hosts on the website rather than with traditional hotels. While every hotelier is aware of the threat and stiff competition that is Airbnb, do you know the quantifiable impact the vacation rental site actually has on the industry as a whole? Recently, the Hotel Association commissioned a report by HVS Consulting & Valuation on the financial effect of Airbnb on the hotel industry. The report focused on the effects of Airbnb in New York City, so results may vary in different areas, but it gives strong indication about what is happening and the impact is great on the hotel industry not only in NY city, but it widely spreading allover USA city and other countries outside the USA territory.The Estimated lost Revenue and ImpactsHVS estimated that hotels lose approximately $450 million in direct revenues per year to AirBnb. Between September 2014 and August 2015, 480,000 hotel room nights were reserved while over 2.8 million room nights were booked on Airbnb. By 2018, HVS estimates that Airbnb room nights will reach 5 million per year. Clearly, the vacation rental site has diminished the demand for traditional hotel rooms. Additionally, many hotel employees are losing their jobs because of these decreasing demands. Airbnbs are less labor intensive than hotels because they do not require the same level of service. Over 2,800 jobs are directly lost to Airbnb, a loss of over $200 million in income for hotel employees.With lesser demand for hotel rooms comes an additional negative effect for hotels and their employees. When guests choose not to stay in a hotel, the money they would have spent on food and beverages at the hotel's restaurant and bar is likely spent elsewhere. Therefore, the hotel loses out on the revenue they otherwise would have received from that guest. In total, over $108 million of food and beverage revenues ($88 million on food and $20 million for beverages) are lost because travelers choose to book with Airbnb.The issue is not in food and beverage lost only, when looking one more time about the other services and ancillary revenue which can be utilized by the guest while staying at a hotel, i.e. SPA, Business center, late check out, early check in, last minute cancellation fees, no show fees, luggage portal fees, all those services and many other are also likely spent elsewhere or saved by not spending because the host would not offer such services, needless to calculate the lost revenue.The other impact comes when those guest choose not stay in hotel, so they lose the loyalty benefits they get if they stay in chain hotel i.e. SPG for Starwood, but in the other hand hotel chains losing a loyal customers to AirBnb, so potentially hotel chains to lose customers and Airbnb might think to have its own loyal program in the near future.Trying to say that each additional 10% increase in the size of the Airbnb market resulted in a 2-3 % decrease in hotel revenue.Lastly and since Airbnb base locate in the USA, Airbnb rentals fall under different laws and tax regulations than hotels , i.e. In New York City, the loss in hotel room nights costs local, state and federal governments $226 million in lost tax revenues per year. The total effect of Airbnb on the hotel industry and the government in NYC is about $2.1 billion annually. As Airbnb continues to grow at a rapid rate, these losses will only increase.Airbnb Performance vs HotelsAs per reported by STR, Inc the average rate paid for an Airbnb unit was $148.42, which is 25 percent higher than the average hotel rate of $119.11.Another report by CBRE Hotels compiled select information for hundreds of U.S. markets to assess the relevancy of this sharing platform to the traditional hotel industry. From this data, the firm has developed an Airbnb Competition Index. This measure incorporates a comparison of Airbnb's Average Daily Room rates (ADR) to traditional hotel ADR's; the scale of the active Airbnb inventory in a market to the supply of traditional hotels, and the overall growth of active Airbnb supply in that market, into a measure of potential competition. New York was identified as the number one domestic market at risk from the growth of Airbnb, with an Airbnb Competition Index of 81.4, followed by San Francisco, Miami, Oakland and Oahu.By comparing hotel revenue per available room to the number of active Airbnb units in a particular location, it appears that hosts respond to market incentives, such as a higher room rental rate and excess demand. The presence of these factors causes more Airbnb units to appear in the market This holds true at the macro level-where markets with higher ADRs and occupancy have the highest number of active Airbnb units, and on the micro level-where we see a spike in the number of active Airbnb units during major events such as the Super Bowl and New Year's Eve.ConclusionAs far as hotel managers are concerned, the competition their hotels face from peer-to-peer platforms has several unique features that differentiate it from competition with other hotels . First, the Airbnb platform has near zero marginal cost, in that a new room can be incrementally added to (or removed from) the platform with negligible overhead. Because of this, Airbnb can scale supply in a near frictionless manner to meet demand, even on short timescales. By contrast, increasing hotel room supply involves buildout, causing significant marginal costs for hotel chains. Second, Airbnb offers a much wider range of products and services than hotels: Airbnb users can rent anything from an apartment to a yurt. More importantly, because Airbnb leverages existing housing inventory, it can potentially expand supply wherever houses and apartment buildings already exist. This is in contrast to hotels, which must be built at locations in accordance with local zoning requirements. Therefore, competition by Airbnb is potentially harder for incumbents to adapt to, compared to competition by other hotel firms.Turning to consumers, we show that hotels in areas where Airbnb has an established presence have responded to increased competition by lowering their prices, which harms their revenue, but benefits travelers, even those who do not use Airbnb. In addition to reduced prices, consumers also benefit from increased variety provided through peer-to-peer platforms. Furthermore, consumers on the supply side benefit through additional income generated by providing goods and services via peer-to-peer platforms.Sources

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