Monday, August 19, 2013

Adjusting to the Demands of Connected Customers: It’s All About Speed

The distribution landscape has changed rapidly in the last five years with the emergence of mobile as an important e-commerce channel. The advent of iOS and Android has changed the consumer behavior, and shortened the travel booking window. The popularity of same-day booking channels like HotelsTonight.com along with the dominance of traditional OTAs have thrown a major challenge for today’s revenue managers – i.e. how to stay in tune with the booking dynamics of each channel.

The opportunity that comes with the divergence of online distribution channels has also led to an increasing dilemma for hoteliers – how to manage channels profitably and accurately with limited resources. Throwing manpower at the issue is no longer an option. One small mistake and a hotel can face huge revenue losses as well as a downgraded ranking and a penalty from their distributors!

Facing a search-savvy customer, who will on average search 22 travel sites before booking, hotels have to stay visible at every touch point; and this is where superior connectivity becomes essential. In today’s multi-channel environment, keeping up-to-date with the distribution mix manually is not a daunting task, it’s virtually impossible! 

Understanding the role of social search
Over time, the growing power of web interaction, social media and mobile has changed the consumer’s shopping behavior, and hoteliers need to address them by taking advantage of technology to integrate social media into the distribution architecture. According to Expedia, hotels that scored one point higher in the guest popularity rankings were able to command a 9% higher average daily rate on Expedia. Several other studies have also pointed to the impact of user-generated content in the form of guest reviews as drivers of hotel rate and revenue. 

With Google, Bing and other search engines giving importance to social search, customer profiling has become important. Google has been making suggestions based on previous search and purchases for a while now. Major OTAs like Expedia, Orbitz and Booking.com have followed suite. This is where understanding the consumer becomes crucial. The more the revenue manager knows about the price sensitivity of a particular segment, the more he or she is able to price optimally. Social media provides hotels with vital inputs to map the customer’s state of mind and hence elasticity. Rate benchmarking tools help hotels to track the market dynamics and rate movements. Revenue managers also get an overview of how rates are positioned on different OTAs compared to their competitors for different dates on different channels. Knowledge of rate behavior along with price elasticity is the key to optimal pricing.

In the last couple of years, m-commerce has grown exponentially, and has the potential to contribute up to 20% of bookings through hotel-owned channels, according to PhoCusWright. For hotels, it not only means another channel to manage, but a channel to push the last available inventory. How fast you can react to the changing situation will have a direct impact on the revenue! But that can only be done if you are selling the right product to the right person for the right price on the right channel. Hence, it is important to understand consumer behavior and listen to what they are saying and address their concerns.

Future rate data provides revenue managers with the business intelligence important to creating rate strategy with the target to constantly increase product position and price and thus revenue. With prices set in sync with rate behavior, hoteliers have more confidence to manage last minute availability. This rate manipulation both for today and for tomorrow helps the revenue managers to begin improving the value of their product and its price. 

What is Enterprise Connectivity and why is it gaining prominence?
Equipped with sophisticated XML technology in the back-end, enterprise connectivity solutions deliver secure direct links between hotel systems like the CRS/PMS/RMS and the electronic sales channels including GDS, OTAs, IDS, Wholesalers, Tour Operators and other travel sales companies that process online hotel bookings. Hotels can take advantage of these pre-connected solutions reducing time to market thereby maximizing revenue opportunities and reducing distribution costs by efficiently increasing reach and visibility.

The seamless online booking connectivity guarantees real-time information flow, from hotel to third party channels and vice versa. Hotels can respond to market conditions and process ARI (Availability, Rates and Inventory) faster than ever before, while the system delivers reservations generated on the channel directly into the connected property management systems. Overbooking risks are therefore eliminated, as the available inventory in sales channels do not go beyond the defined threshold while the revenue manager can see all reservations directly in the PMS without having to make error prone manual updates. 

What’s more, superior systems can integrate information from all channels, and create a consolidated report in an easy to read format with bite size pieces of relevant information – this reduces the effort that revenue managers have to spend on collating big data and then extracting relevant information from it. Quality data is essential for producing meaningful analysis and accurate forecasts. Reservation Reports, available through advanced channel management systems, provide revenue managers with an overview of booking demand from all demand sources broken down into market segment. By analyzing the performance metrics, they can get a clear understanding of buying behaviors; what makes travelers book the property? Which channel delivers the most booking? Which OTA provides the highest RevPAR? And which delivers the longer lead-time to book reservations? What type of packages are people buying? This data helps hotels identify their most valuable guests, their demography and the channel they are using for booking, allowing them to adapt strategies accordingly to maximize revenue.

However, total revenue management will only be possible when they work together with the sales and marketing team. Today’s marketing promotions are built around rate strategy set by revenue management teams, and hence can only be successful through a cohesive approach. Marketing, sales and distribution departments have to work with revenue management to inform and advise on demand and pricing decisions. Hotels that tie their sales and marketing with revenue management strategies and find ways to incorporate this into their day-to-day revenue plans will lead their competitive sets and ultimately find themselves ahead on the bottom line.

The key to reducing distribution costs and improving profitability depends on how skillfully one can align one's marketing strategy with the right technology. Technology helps hotels determine new metrics to measure total revenue management. A single integrated enterprise connectivity system saves time, reduces costs, and enables revenue managers to focus on the data at hand in order to make better decisions to increase revenue. The future will start now if we could change the way we do our job differently. 

This article by Michael McCartan, CEO, eRevMax, is published on Global Hotel Network.
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