IN-DEPTH: As behaviours and trends change rapidly, revenue managers need to understand how each segment is behaving across all channels. Going back to basics and studying booking curves and LOS for each day of the week, each segment via each distribution channel; is the key in order to understand lead time and behaviour.

Published: 24 Aug 2011

IN-DEPTH: As behaviours and trends change rapidly, revenue managers need to understand how each segment is behaving across all channels. Going back to basics and studying booking curves and LOS for each day of the week, each segment via each distribution channel; is the key in order to understand lead time and behaviour.

By Ritesh Gupta

It is being increasingly propagated that the role of revenue manager in the hotel industry has graduated from being a yield manager to a channel expert and now to an e-marketing guru.

Today revenue managers are equipped with loads of data across channels and segments which help them in forecasting and measuring results.

Hoteliers are now looking at the total spend by segments much more closely followed by measures like GOPPAR. Also, the lifetime value of the consumer has gained ground and hoteliers are taking measures to quantify and evaluate the same. One of the most critical business processes that increases the benefit of total customer value optimisation and applies to all types of hospitality operations is ensuring that the property is capturing the total value for each guest.

It’s clear that not all guests have the same potential profitability and it’s also clear that no all the bookings have the same cost, says Jeremie Catez, director of Revenue and Reservation, Novotel New York, Accor. “That’s the reason why at Accor, we do forecast demand and revenue by segment,” said Catez, who is scheduled to speak at the forthcoming Travel Distribution Summit North America 2011, to be held in Las Vegas (19-20 September) this year.

Different hotel distribution platforms cater to the need of different sets or groups of customers. Hotels don’t have to make a decision between growing their direct channel and working with other channels. Rather they need to evaluate the costs and benefits associated with every channel they have the opportunity to distribute through. It is ideal for suppliers to maintain a fine balance on going direct to consumers, as well as working with reliable channel partners. It is not necessary for hotels to work with every channel out there, but ideally build a partnership to ride the good and bad times together.

EyeforTravel’s Ritesh Gupta spoke to Catez and Alexis Remy, director of RM, Sofitel New York about the current issues for RM professionals. Excerpts:

Can you elaborate on some of the critical issues which RM has had to face in the recent past and how do you think the industry needs to gear up for the same in 2011?

Jeremie Catez: The main critical issues that we’re currently facing in revenue management are distribution, evolution of the segmentation, the difficulty to measure the responsiveness of guests to price changes and a lack of confidence/ leverage when negotiating contracts.

These days, a reservation can be made using 10 different channels of distribution, from mobile to brand website…therefore, from both revenue management and financial standpoints, it’s crucial to assess the cost associated to the acquisition of a customer: we are now looking more for the profit of each guest and their total value.

Alexis Remy: With the downturn, we have also experience severe decreases in contract pricing (FIT, corporate, and crew). While public and group pricing are driving ADR growth, contract pricing has not reached a similar growth. It becomes a real challenge for the RM to be able to increase with confidence and risk taking of its sales team when negotiating new contracts that will ultimately have to target steeper rate increases. This phenomenon is amplified by the risk of losing business to competitors.

Can you provide an insight into initiatives being taken by the industry to maximise profits by accurately forecasting demand by segment, and setting price and availability restrictions to ensure access for the most valuable customers?

Jeremie Catez: The value (or profit) of a customer is defined as revenue generated by this guest (room, F&B etc...) minus the cost of distribution.

It’s clear that not all guests have the same potential profitability and it’s also clear that no all the bookings have the same cost. That’s the reason why at Accor, we do forecast demand and revenue by segment.

We are working on an optimisation process since all guests are different in terms of profit (cost of acquisition and spending).

When looking at maximising profit, we accurately forecasting demand by segment, and we set prices and availability restrictions to ensure access to the most valuable customers.

Since we mainly focus on room revenue, we mainly look at the cost of acquisition of the customer, meaning which channel of distribution is being used as well as the lifetime value of our customersOur data warehouses capture spending data from different revenue centers (room, F&B, spa and extra) which is then analysed accurately in order to understand enterprise value of each segment and each customer.

How has the sector gone about predicting consumer lifecycles? What do you recommend when it comes to segmenting customers according to their value, preferences and purchase behaviour?

Alexis Remy:

It’s true that the union between CRM and RM represents a huge opportunity. Today, thanks to customer loyalty programmes (A|Club for Accor) and predictive modeling techniques, it’s possible to identify and retain the most profitable customers.

I consider that it’s crucial to fully understand the consumers, how does he book, why, when…It is critical to understand the customers’ preferences, buying behavior and what motivates them. Thanks to this data, we can now anticipate future trends and behavior patterns.

Now, when looking at the real picture within the New York market (upper scale to Luxury); we have not seen much understanding in consumer behaviour and effective mix management. This is proven daily by constant pricing drops closer to arrival or by deep discount on OTA without understanding of lead time and LOS components.

The modern RM is no longer the record keeper of the past and instead is far more reactive to market conditions, in tune with sales plans and the RM professionals are being described as decisive forward thinkers who are innovative and creative. How do you think this all is reflecting the approach of RM professionals today as far as forecasting is concerned?

Jeremie Catez: The forecast of demand is the one of fundamental of Revenue Management; accurate forecast will allow a hotel to outperform.

Recently, we have reviewed our market segmentation to be line with the recent changes in trends and consumer behaviors.

We have changed the way we have been forecasting and we’re now even more looking at the previous months because it’s becoming more difficult to accurately forecast since the past isn’t always repeating itself. A solid forecast needs to look at each segment and how to optimise the highest yielding channels. RM needs to go deeper into understanding other factors such a LOS and lead time. This will enable RM to optimise mix and gaining coherence in its pricing strategy without depending on pricing changes within the market place.

Alexis Remy: Moreover, it will allow the RM to influence the sale organisation and give the proper direction based on the hotel’s needs. It is also a crucial element in order to gain confidence from various stake holders (GM, operations, and owners).

Finally, I truly think that the role of the Revenue Manager has changed; we’re now even more looking at channel of distribution and total customer spending. In our today life, we’re yielding by manipulating the different channels of distribution (brand.com, OTAS, call centers) as well as by controlling our market mix.

Whilst RM systems go a long way in identifying opportunities and maximising revenues they are not capable of business forecasting and this still remains an area where Revenue Managers have to improve. What’s your viewpoint regarding the same?

Jeremie Catez: RM is both a science and art therefore the RM still brings a high value in the decision process.

RM systems help but the input from the Revenue Manager is a crucial mainly for business intelligence purpose.

Revenue managers need to use deeper analysis provided by the system in order to challenge its forecast and be able to anticipate trends while adjusting pricing and planning. As behaviours and trends change rapidly, revenue managers need to understand how each segment is behaving across all channels. Going back to basics and studying booking curves and LOS for each day of the week, each segment via each distribution channel; is the key in order to understand lead time and behaviour. A good RM need to be at the forefront of these changes in order to be the RM forecast. Relying on the RM recommendations is not enough to perform at an optimal level within the market place.

In my prospective, a Revenue professional should always be able to beat the forecast done by the RMS system.

How can one optimise initiatives focused on up-selling or cross-selling ancillary offerings?

Alexis Remy:We’re always looking at new way to offer our customers relevant options to enhance his experience at the hotel.

We have implement room upgrade programmes which allow the guest to stay in a higher room category at a reduced price if the room type is available at check-in.

Finally, we have also partnered with some destinations management company. A couple of days before their arrival, our guests are receiving an email offering them the possibility of booking hotel transfer, tours and other local attractions.

 

Travel Distribution Summit NorthAmerica 2011   JeremieCatez and AlexisRemy are scheduled to speak at the forthcoming TravelDistribution Summit North America 2011, to be held in Las Vegas (19-20September) this year.   For information, click here:   Or contact: Rosie Akenhead Global Events Director rosie@eyefortravel.com Toll Free 800 814 3459 ext. 7229   Or   Marco Saio Global Events Director marco@eyefortravel.com Toll free 800 814 3459 ext. 7219