While dedicating the last decade to examining, understanding and refining how revenue managers plan and execute their pricing strategy, the industry can learn some great strategies that are sure to assist revenue managers in achieving their desired results. Follow these simple rules and you too can transform your revenue results.
Tip #1: Create a long-term strategy
A thoughtful strategy establishing short- and long-term goals will help your revenue management team avoid becoming trapped in day-to-day pricing decisions. That myopic, short term view hinders your ability to clearly see a pathway to making smarter decisions. In the moment it may seem like the right approach, but it’s really a disservice to your hotel’s overall pricing health.
You can break that cycle and focus on a longer, more strategic approach. Follow these rules and find success:
- Determineyour property’s long-and short-term goals for the coming year.
- Set up and stick tometrics to ensure you’re meeting goals. It’s important to establish a set of evaluation metrics; meaning, create a schedule to regularly evaluate your strategy. Do this and you’ll notice potential problems or opportunities much earlier and then have opportunity to respond proactively to protect rate integrity or raise
- Evaluate high-level activities necessary to accomplish set goals. Perhaps that means expanding distribution channels in certain geographical regions to boost bookings in under-represented, but strong feeder markets.
- Develop tactical elements. Using the distribution example above, a tactical element could be selecting regional OTAs to help accomplish revenue, rate or occupancy goals.
- Organizational silos deter productivity. The revenue management department, sales, marketing, distribution and operations teams all need to be able to work in concert – speaking with one voice. Determine which departments/employees must handle each tactic, and set a timeline/deadline for executing each tactical element. Then share the completed strategy document with each person in all of the departments. And keep it up-to-date.
Tip #2: Focus on social as a distribution channel
Social media cannot be underestimated. It’s no longer a place for simply expressing opinion – it’s a distribution channel waiting for you to leverage it. Consumers, especially younger ones, adapt to new technology more quickly and use social media for all aspects of their travel booking experience. From research through final booking, this is a great audience to get connect with social.
Many brands and independent hotels are accepting bookings through social media, including Facebook, Twitter and a mobile TripAdvisor instant-booking feature. Integrating social media as an element into your property’s revenue management strategy is imperative.
Tip #3: Utilize data outside your hotel’s comp set
There are so many nuances in every market. Taking an outside-in approach to revenue management will allow you to better understand how many consumers are shopping for rooms and what they are really ready to pay for them.
Most consumers choose a hotel by subconsciously comparing feature sets that meet their needs and wants – including price, and many times aren’t consciously thinking about what tier the lodging business places a property within. That’s something hoteliers get too focused on; customers don’t readily recognize the difference between Upscale and Upper Scale, for example.
Rather, typical travelers look at all properties within the destination and condense the list to the ones falling within their set of needs at that specific point in time. Then customers drill down into location, amenities and pricing. To get the travelers to book your hotel (especially if they have never stayed with you before), make sure that all aspects of your property, including price, are in tandem and present the best value proposition.
Tip #4: Understand the impact of peer-to-peer accommodation sites like Airbnb
As well as considering rates of all hotels within your destination when pricing, revenue managers must consider rates available from peer-to-peer booking sites, such as Airbnb and HomeAway. This is especially true in major destinations such as New York City.
Many consumers now see these sites as providing access to accommodations they perceive to be a good deal. They’ll comparing pricing across both channels, even if they don’t plan to actually stay in a peer-to-peer accommodation when making their final decision. Choice Hotels sees this emerging category in the same way they saw an opportunity with soft branding. Now the company is the first major hotel company offering vacation rentals in select cities such as Orlando and Aspen, with more to come.
Tip #5: Leverage changing technology
The Internet supplies huge amounts of market data that can be leveraged to price rooms more effectively. Did you know that 90 percent of all online data was created during the last two years, and it’s expected to grow 50x during the next few years?
Leaps in technology, algorithms and data sorting capabilities are making revenue management tools more sophisticated than ever. Using a machine learning-based RMS gives revenue managers ways to identify and understand relevant data previously unseen, including the supply and demand of both hotels and vacation rental properties, room rates of direct and indirect competitors, historical room rates, flight capacity, meteorological patterns, local events, website traffic, regrets denials, in-funnel conversions, sentiment, and many other data sets. All this data creates a significantly more accurate market view leading to more strategic pricing.
Most compelling is how a machine learning-based RMS “learns” from the data over time, adapting pricing recommendations and ensuring revenue managers are always offering the best rate, at the right time, on the right channel.
Tip #6: Leverage analytics to drive direct bookings
Monitor website analytics to determine activities most effective to increase direct bookings (i.e. SEO, SEM, geo-targeting, etc.). These analytics provide valuable insight to understanding potential guests. Through this methodology, revenue managers will have better tools, empowering them to react to every part of your booking experience – including options, sequence, pricing, content, images, etc. They’ll better recognize the factors driving conversion for different customer segments to hotels.
Tip #7: Don’t keave rooms empty
Don’t ever leave a single room empty when possible; it doesn’t make good business sense. Your goal is having more demand than can be accommodated. This strategy enables you to effectively yield pricing and optimize your business mix. To increase your property’s demand, it’s important to optimize your distribution mix. Use each distribution channel strategically with a well-balanced approach to yield the highest return and contribution to your revenue and profit.
By focusing an enacting each of these tips as part of your revenue strategy, you’ll suddenly enhance your ability to tap into yet unrealized financial potential. That sets you up for heightened success. More importantly – you’ll feel in control of where you want to take your business.
About the author
Lio Chen is the Vice President of Operations at LodgIQ, a hotel revenue management platform that incorporates advanced machine learning, modern design and user experience principles, and proven price optimization tools. His profound revenue management expertise stems from his analytical skills and natural aptitude for entrepreneurialism. While pursuing his M.S. in Hospitality Management at Purdue University, Chen received various academic accolades for extensive research in revenue management. Later, Chen was instrumental in establishing Nor1, a travel merchandising platform, with its first web BI platform. Spending nearly a decade at Nor1, Chen built and led a revenue operations team that successfully oversaw the growth of over 1,000 hotel clients in the Americas and Asia Pacific. Chen offers extensive knowledge in delivering end-to-end consultative professional services to both hospitality and gaming markets. He is based in San Francisco.