REPORT FROM INDIA—Though India’s hotel industry is still in its formative stages, the pricing strategies executed by its revenue managers reflect sophistication beyond its years, according to sources.
Hoteliers are very aggressive and respond quickly to ever-changing market dynamics—a far cry from the practices that drove pricing decisions even a decade ago, according to Rajat Gupta, associate director sales for Country Inn & Suites by Carlson Hotels India.
“Today the market has become very ad hoc with respect to pricing. It is constantly changing. There is no one rate. Earlier the rates were consistent (but) not now. It is like a share market where every day the prices change,” he said.
Year–to-date April 2013, average daily rate in India has decreased 3.1% in local currency, according to STR Global, sister company of HotelNewsNow.com. Revenue per available room is down 4.7%.
Revenue managers interviewed for this article insisted they can no longer afford to work in isolation but need to keep a close watch on competition, their pricing, demand and supply of inventory, occupancy figures and forecasts.
“Revenue managers adopt a hawk-eye approach to what the competition is offering,” said Megh Vinayak, manager of corporate revenue and online marketing for India-based Lalit Suri Hospitality Group.
“(Hoteliers) should frequently change the rates to take advantage of any opportunity, thus maximizing revenue for the property. Instead of being reactive rather they are proactive, frequently assessing and changing the strategies,” he said. “We are a chain of 10 operational hotels, each of which has a revenue manager. A team of five including myself works closely monitoring the ground reality on a literal daily basis.”
Systems and strategies
The major global chains are importing their revenue-management platforms and systems to help in the cause.
“Having expanded from two to 12 hotels in India in a short span of time, it has been vital for us to ‘Hiltonize’ team members to the best-in-class revenue-management practices followed at Hilton Worldwide,” said Anish Bhatia, the chain’s regional director of revenue management (India Region).
“We have several intrinsic tools in place to assess the market conditions and apply intelligence to our forecasting and pricing,” he continued. “We rely on the STR (Global) report for trends, Rubicon for future pricing by (competitive) set and rate parity and inputs from the sales team who provide live updates on customer-buying preferences. All this comes together to help us in positioning ourselves at the correct price point for the correct market segment.
“We find the STR (Global) trend reports useful for future forecasting as well, as the trends are a good indicator of how the market would behave in the short term. In today’s world, in spite of so much data/stats available, the human interface is invaluable in being able to decipher the data meaningfully,” Bhatia said.
Gupta employs similar data feeds to establish pricing guidelines at Carlson.
“In the beginning of each financial year, our budgets and earnings are drawn up. There is an ARR, or average room rate, which is decided in advance for each of the properties across the country. This is the rate which we have to achieve. At times our prices—especially during the off-season period—(are) much lower than this, but then we make it up during the season. On an average, it works out well. (The high-demand season) periods are vital where the earnings for the entire year have to be earned in the short spell of five months.”
Revenue managers at the Lalit Suri Hospitality Group keep a close eye on competitors when determining pricing at each of their 10 hotels, Vinayak said. Other factors include occupancy and future business on the books.
“Regarding information on prices of competition, we get daily reports. As far as occupancy is concerned, the higher the occupancy or demand levels, the higher the prices. The lower the occupancy level, the prices are lower,” he said.
Vinayak is also mindful of high-demand periods and major events, which allow managers to yield considerably higher rates. His team forecasts 90 days out on a daily basis and is able to accurately predict occupancy cycles within 10% variance.
Rate parity and discounting
One of the most revolutionary changes in India’s pricing landscape is rate parity across all channels, sources said. Whereas in years past prices varied online, offline and everything in between, today rates are much more consistent.
Discounting still occurs—often as an incentive to secure bookings further in advance to compensate for the country’s higher-than-usual cancellation rates and overbooking.
“Discounts are offered on advance purchase deals but then no cancellation is allowed,” Vinayak said. “That way our revenue is safeguarded. Where cancellation is possible, there are no discounts. Even here, the refund is done only if cancellation is done within the stipulated time, otherwise there is a cost of cancellation. The stipulated time for cancellation again varies from city to city. Such terms ensure that our revenue is secured.
“Corporate discounts are given only where there is a corporate contract for a year, otherwise corporate is treated on par with individual customers,” he added.
For Carlson’s Country Inn & Suites portfolio in the country, cancellations can claim 30% to 40% of occupancy on the books, Gupta said. That makes effectively yielding rates during peak periods all the more important.
“Our aim is to maximize revenue during the peak season to cover the money for the entire year,” he said. “The rates of competition are vital, as if there is a large inventory market rate drops. We have good discounts running on online promotions but then it is nonrefundable and nontransferable. Overbooking also takes place depending on the property and our working knowledge.”
Decisions to discount or overbook are made at the hotel level and are subject to market conditions, although Hilton maintains careful oversight, Bhatia said.
“Overbooking percentages vary by hotel based on historical data, booking and cancellation pace/trends and the business mix,” he said. “Similarly for ad hoc discounts, we fall back on our established price structures/packages as first choice. Any ad hoc discounting is closely monitored, and the decision is restricted to key commercial team members at the hotel. Deviations from existing price structures are monitored strictly.”
The bigger picture
Revenue managers in India also are starting to take a more holistic view of the business, Gupta said.
“The revenue manager looks at room inventory control, daily rates … and rate loading, packages for website, reservation control, yield management and market analysis, focusing on long-term goals, information on other hotels, selling the right product at the right price to the right customer, forecasting demand and online distribution,” he said.
When recruiting revenue managers at Hilton, Bhatia looks for candidates who “can see the bigger picture and work in close liaison with the sales and marketing teams to deliver the results.
“Gone are the days of a revenue manager being an excel champion and data cruncher only,” he said.
Vinayak shared a similar sentiment.
“Revenue management does not mean room rates alone. For us it also includes a large (food-and-beverage) segment. All the F&B—restaurants, nightclubs, etc.—for the various properties is managed by the group itself. So this also constitutes a major chunk of revenue, for which we have seen our proactive online presence has really helped.”