INTERVIEW: Working out how to position a brand as well as ensuring the revenue performance of a property or a hotel chain is more challenging than ever. Various categories continue to fragment which makes hotel profiling and classification as well as assessing the relative quality of individual hotels more complex.
To ensure that a property is performing to its full potential, a competitive set review should be done on an annual basis. The product, image and so on needs to be reviewed and an estimate of the segmentation mix needs to be updated, says Jurgen Ortelee, vice president revenue performance at Pan Pacific Hotels Group. In addition, the hotel would review monthly results versus its competitors and if there were any large deviations from what is expected, then this might signify a change in the competitive environment.
EyeforTravel’s Ritesh Gupta talks to Ortelee, who has also been associated with Shangri-La Hotels & Resorts and IHG, about how a hotel company should work out its performance strategy and what steps need to be taken in 2013.
EFT: How should hotel chains evaluate the performance of their properties for all the segments they are present in, or targeting in 2013?
JO: Hotels should look at trends. We tend to look at snapshots and then draw conclusions from that but we need to focus on trends. All segments should be reviewed together, as strategies for the different segments should work hand in hand and therefore can influence each other. Business doesn’t behave by calendar year, but rather by months or weeks or even days of week.
Trend monitoring of the segments should be a continuous process.
EFT: Given the growing fragmentation of categories and the emergence of new hotel brands, how difficult is it to improve performance analysis?
JO: The business environment is constantly changing; it always has and always will. Being in an always changing environment means you need to constantly monitor and be aware of these changes. Data analysis is essential for this and part of every revenue manager’s regular tasks. Although the number of channels that hotels work with today are many, and more complex than in the past, the data available to the revenue manager today has also increased tremendously. So using the right analysis tools, with the increased amount of data should give the hotel a clear idea of its competitive environment and its performance.
EFT: What sort of metrics do you use to assess the performance of each property?
JO: Metrics can be divided into three different categories.
• The first set would be related to customers and are around what customers think of the hotel. This is reflected in the customer satisfaction survey scores. These scores will more often than not reflect how well the property is doing overall.
• Next are the metrics in regards to associates. These can be metrics around productivity, but the most important one measure associate satisfaction in the workplace.
• If the customers and the associates are satisfied, then the third set of metrics, the financial metrics, will also look good.
EFT: Which is the best to ensure that properties are placed aptly against competitors?
JO: A competitive set should be carefully chosen since it reflects what we think is the business environment of the hotel. Based on this business environment the hotel will determine and execute a strategy. If the hotel follows a strategy based on an incorrect business environment, it will not be successful.
Determining the correct competitive set involves a few steps.
• First of all a list of ‘likewise’ products or hotels is drawn up. This could be based on product quality, brand image, size of hotel, location etc.
• Once this list is drawn up, an estimate is made of the segment mix for these hotels.
• Finally, an estimate is made on how much overlap there is between two hotels in a certain segment. This gives an overall competitiveness score which then helps determine the final competitive set.
EFT: How can one ascertain what share of revenue a property should get?
JO: Based on the competitive set we would look at the business coming into that competitive set. Then, based on the number of rooms of the hotels in the competitive set, we would determine how much the fair share is of that hotel. So if a hotel has 15% of the rooms in the competitive set, then their fair share of business would be 15% of the total business coming into the competitive set. If that hotel achieves more than 15%, then it is out-performing its competitors. Likewise if it does less than its fair share, then it is under performing.
EFT: Data-driven hotel profiling is a growing trend. How should hotels approach it?
JO: There are many tools today, many linked to the Internet and social media. It is critical to keep an eye on what is written or mentioned on various sites to get an idea of what the hotel’s position is versus its competitors. Various tools can be used to monitor how many times the hotel is mentioned in relation to its competitors. If the hotel is mentioned or compared to four other hotels on a regular basis on these websites, we can assume that we should look at those four hotels as our competitive set. The chain needs to then review each hotel by looking at the attributes that are most often discussed like physical product, service quality, brand image, location versus the price that is paid. We call this a rate or price value analysis.
EFT: Assessing the relative quality of individual hotels is a tricky business. How can hotels ensure the best possible performance analysis, based on product quality?
JO: The key is the return of investment made in the asset or property. If this return is at an acceptable level for the owner, based on the cost of capital invested and other factors, the hotel is considered successful. In addition the ability of the hotel to drive business versus its competitor is an important consideration. A hotel can over perform versus its budget, but still under perform within its competitive set, leaving opportunity on the table. If this is the case, the hotel needs to make a study of where it is losing out and determine a strategy on how to maximise opportunities in the business environment.
EFT: How can data analysis tap rate opportunities?
JO: Data is the basis for all revenue management and business strategy. The hotel needs to clearly understand the business environment before making a strategic decision or changing prices. There needs to be a clear understanding of the demand and buying behaviour of the customer, like booking lead time and willingness to pay, or price elasticity. Once adequate analysis have been made, often with the hotel of computer software, a correct decision can be made to maximise on rate and occupancy opportunities in the competitive environment.