Creating a Revenue Strategy as Unique as Your PortfolioBy Paul Van Meerendonk - Director - Advisory Services at IDeaS Revenue Optimization
The hospitality industry is the global provider of choice. All around the world, guests choose where to travel, how to get there, where to eat and sleep, what attractions to see. There are many factors that drive these decisions, of course, but every travel decision leads to another, and a myriad of subsequent choices will eventually be made. Hotels undisputedly understand the critical role that choice, and the appeal of endless guest options, plays in the travelers' decision-making process. After all, hotels make it their business to provide potential guests with as many choices as possible.
Hotels set themselves apart competitively by offering distinctive room types and lush amenities, dog-friendly atmospheres, Zen lifestyle packages with yoga mats and serene spaces, and gluten-free and vegan-friendly menus. These are available options guests can choose from to help minimize the disruptions caused by traveling. And when you look at innovation in the technology space, it takes guest options and competitive opportunities for hotels even further. Mobile apps, keyless entry software, digital newspapers and room service robots have become all the rage in recent years-and they are all geared to ultimately influence the guest's choice to book with the brand family.
In fact, choice is even one of the cardinal themes embedded in nearly every brand ethos. A quick look around the Internet and words like "unique," "memorable," "diverse," and "curated collection" are frequently used to describe any given portfolio of hotel brands. Company credos "No matter your travel style, there's a Sonesta to suit you" and "Brands to fit every lifestyle and occasion" from the likes of Sonesta and Hilton, respectively, further exemplifies just how much value hotel organizations place on appealing to every type of traveler. From high-touch luxury properties to low-touch limited service facilities to vacation timeshares, the choices are all there-and they fulfill virtually every possible guest need.
All of these aforementioned guest options, incentives and choices are ultimate reflections of an overall brand strategy. However, choice shouldn't be a message embodied only within the vivid description of a brand promise, its contemporary lounges or the high-tech amenities and ultra-modern guestrooms. For organizations with a unique portfolio of hotel brands, choice also needs to be a primary theme that permeates into every one of their properties' revenue strategies-and it needs to be supported by advanced revenue technology.
Here are some considerations for how hotel organizations can identify the ideal revenue technology for executing a cohesive, profitable and productive revenue strategy across their entire portfolio.
It Starts With Choosing the Right Technology
The first step in developing a unique revenue strategy that supports the needs of an entire portfolio is identifying the flexible technology capable of doing so. While many brands are recognized for their consistent brand standards and unique business vibes, every property-regardless of its branding-will have its own market environment and guests that differentiate it from its sister properties. For many hotel organizations around the world, selecting the right technology for one single property can be a significant undertaking. So when it comes to choosing the best technology for multiple hotels in different markets with different needs and different guests, it can become nothing short of a daunting and pedantic business decision. The importance of selecting the right technology for a portfolio of hotels has such far-reaching impacts, in fact, that Marriott CEO Arne Sorenson recently cited it as potentially the biggest risk in their industry merger with Starwood.
But what exactly makes this first step just so complex? Well, for starters, hotel organizations need advanced revenue technology that adapts to a broad range of markets, brand categories and guest personas to meet the different demands within their wide portfolio. Differences in market environments and brands means there are also differences in property technology requirements, hotel pricing and inventory strategies and staff. It is essential that hotel organizations evaluate any impacts of technology, whether nuanced or grossly significant, when looking for their ideal technological fit.
Thinking through existing technology requirements, it's critical to evaluate how revenue technology can integrate with current systems. If hotel technologies can't seamlessly integrate together, it often results in eventual financial implications down the line, which may require upgrading or changing technology. It's important that organizations select technology that communicates well with a variety of their other hotel systems, such as a PMS, CRS or channel manager. This is not only a critical component for sharing and communicating data back and forth between software, but it also significantly improves overall hotel productivity by reducing manual procedures and human errors.
There are also analytical aspects that help hotel organizations drive a unique and profitable revenue strategy. Some of these considerations include high-performance forecasting capabilities; granular data and decisions that can be broken out by different departments, segments, room types, day parts and rate codes for multiple hotels; predictive analytical tools for understanding how changes impact their revenue strategy; advanced pricing and inventory controls that maximize revenue opportunities; and emerging data sources such as reputation, competitive performance, rate shopping and value of demand that are integrated into unique decision outputs for each hotel within every portfolio. All of these different aspects lend themselves to the choices hoteliers have when evaluating their potential for analytical capabilities.
It Layers in Strategic Pricing & Industry Data
Profitable hotel pricing is a passionate topic of conversation for hoteliers at all levels of the organization, and when it comes to finding the right strategy for multiple hotels, there are different strategies for how hotels can effectively use rate to increase profits. This is important to remember when selecting technology for an entire portfolio because a one-size-fits-all pricing approach won't be the optimal option for every property in the portfolio. This is a large reason why revenue technology needs to offer hotels different pricing and inventory strategies. Here are some considerations hotels use to establish their ideal pricing strategy, and why the right technology needs accommodate all of these unique facets:
What are guests looking for at each hotel brand and in each market? Is there a specific type of rate that guests prefer? Some regions or audiences may be used to a certain pricing processes and changing it may cause dissatisfaction or lost clientele. For example, some guests like knowing how their stay breaks down in cost by each day. In this case, technology that can determine and automate daily pricing strategies would be an ideal choice. Other guests in other markets or hotel brands could largely prefer the simplicity provided by one rate for their entire stay. In these cases, technologies that deploy length-of-stay pricing strategies would be the best fit.
There are alternative considerations that also identify the need for different portfolio pricing options. For example, a hotel with airport transient guests averaging one-night stays is often a better fit for daily pricing strategies. Luxury destination hotels, on the other hand, often see longer lengths of stay. As a result, a flexible or length-of-stay pricing strategy would be a better fit for them.
If an organization's revenue technology can't accommodate all of the different pricing needs for their hotel segments, they might be forced to have different technology for different hotels, or use a one-size-fits-all pricing strategy that doesn't drive optimal profits.
Industry data also gives hotels a tremendous opportunity to refine and customize their revenue strategy for their brands and respective markets. Most hotels have some type of technology that tracks basic shopper activity on their website; however, it's been fairly limited when forecasting demand. This is where the availability of travel intent data - and its strategic implementation - has become a critical focus point for developing unique revenue strategies. This market intelligence gives hotels personal and human-focused insights, such as shoppers' ages and hobbies, so they can market strategically with better ad placements, customized experience packages and personalized offers.
To efficiently use this new data, hotels are incorporating the practice of 'futurecasting,' which encourages them to analyze how and why outcomes occurred. It fuses traditional revenue management data with demand intelligence for better insight into what drives people to book, and what their ideal price is in every selling channel. Using this powerful data in this kind of strategic fashion allows hotels to offer more attractive and personalized choices for their guests.
It Depends on Having the Right People & Processes
Having the ideal revenue technology, pricing approach and industry data are no doubt critical pieces of a profitable revenue strategy, but they all rely on having the right people in place to support and oversee the execution. Organizations also have to choose who's going to implement their revenue strategies-an onsite revenue manager at each property, a cluster manager overseeing multiple hotels, or perhaps even an outsourced team of revenue professionals that can take over the heavy lifting.
Thoroughly planning for potential changes in technology or revenue strategy requires a comprehensive development plan. Hoteliers can begin this process by focusing on improving their data collection, as well as planning and implementing better business practices. To execute effective revenue strategies for every hotel within their portfolio, organizations could also consider whether they need to add new leaders, redesign job roles and responsibilities, or develop higher standards of skills and capabilities.
When it comes to the embodiment of choice throughout organizational branding and culture, hotels all around the world are leading the charge and they're not going to be usurped from that throne any time soon. And when it comes to developing a unique revenue strategy to support an entire hotel portfolio, having different choices for technological capabilities, pricing approaches and organizational structures is another prevailing theme that continues to reign king.
Paul Van Meerendonk
Paul Van Meerendonk is Director of Advisory Services at IDeaS, a leader in providing the hospitality industry with the latest revenue management software solutions and advisory services, where he leads a global team of revenue management and pricing experts who are focused on hospitality revenue optimization projects. Prior to joining IDeaS, Paul was an Asset Manager with Jones Lang LaSalle Hotels, working on various assignments in the UK and Europe on behalf of investors, banks and financial intuitions. His work was aimed at ensuring property performance and return on investment through interaction with, and auditing of, hotel management. Paul holds a Bachelor’s Degree in Commercial Economics from the Amsterdam School of Business, and is a certified Six Sigma Greenbelt.