Revenue managers adapt distribution strategies
 
Revenue managers adapt distribution strategies
21 AUGUST 2013 7:52 AM

More accurate forecasting and improved technical automation are helping hotel revenue managers adapt to an evolving distribution landscape.

GLOBAL REPORT—While new distribution channels are emerging seemingly every day, more accurate forecasting and improved technical automation are helping hotel revenue managers stay sane.

Few hotels, unless they’re large full-service properties with a significant amount of meeting space, have a dedicated manager assigned to only that property, sources said. Many hotels share a revenue manager with a small group of properties and, in most cases, a general manager also acts as the revenue manager.

At Greenwood Hospitality Group, which has a mix of ownership and operating responsibilities at 11 hotels, the revenue management structure varies. There is a regional revenue manager who oversees yield management at three properties within the portfolio. A 184-room Hilton with 17,000 square feet of meeting space in Oak Lawn, Illinois—outside of Chicago—has a standalone revenue manager.

“With the meeting space capacity (at the Hilton) it’s a much more dynamic environment,” said Paul Wood, VP of revenue management at Greenwood.

Wood said he has structured his team so the managers who oversee multiple properties do so within the same brand. Also, managers who oversee multiple properties are afforded a longer-term strategy and aren’t changing rates multiple times a day. Each of these solutions helps ease the evolving channel mix conundrum, Wood said.

“Today, with the amount of automation, if you’ve got a highly intelligent revenue person spending less time on forecasting you can have them  taking care of six or seven hotels,” he said. “He or she can oversee 10 to 15 hotels if they’re all one brand and can share reports.”

Brian Garvan, director of sales at Choice Hotels International U.K., offered insight into the Choice-franchised revenue management structure:

  • 23% of Choice-franchised hotels in the U.K. utilize a shared or cluster revenue management resource;
  • 19% of Choice-franchised hotels in the U.K. employ a dedicated revenue manager on property; and
  • At 58% of Choice-franchised hotels in the U.K., rate and revenue management is handled by the GM or salesperson.

“This illustrates why a core part of Choice’s value proposition to franchisees revolves around delivering leading technology and software solutions that render optimal management of their asset in a way that’s easier and less cost intensive,” Garvan said.

When to yield
Wood said how often a revenue manager will change rates across distribution channels depends on the marketplace. Rates depend on demand and seasonality, he said.

Therefore, in January when the booking window is a bit extended, Wood will advise his revenue managers to hold rate longer. In high-demand season when Wood is confident a hotel will sell out, he advises the revenue manager to move the rate hourly.

“Be proactive, be strategic and understand what your trends are,” he suggested.

Expedia’s market managers work with hotel revenue managers closely, and Amy Severson, senior director of industry relations, said changing rates “is a daily process.”

Garvan said Choice’s rate management technology will automatically update rates and inventory in real time as the demand shifts.

“Rates Center allows for hotels to effectively manage when and where inventory is sold in such a way that the availability of rates will fluctuate automatically in function of the demand pickup,” he said. “Otherwise, frequency of hotels’ changes to rates and inventory varies in function of the property and location; in London many Choice properties are changing rates two to three times a day. In the provinces, it might be once every few days.”

Garvan said Rates Center, which is Choice's proprietary rate management software, will automatically close more expensive or lower-rated business as demand builds.

Why yield?
Typically, branded hotels don’t have as much flexibility when it comes to shifting channel mix for profitability, Wood said. Because brands have multi-property negotiated contracts with online travel agencies, revenue managers at branded hotels aren’t able to completely shut out certain channels even if they wanted to.

“But where we do have a lot of control is the hurdle point,” he said. “Here, I’m not establishing a rate, I’m establishing a value. While we can’t just go, ‘I don’t want to sell through them anymore,’ we can set thresholds for, say, opaque channels and not accept bookings until they meet our threshold.

“That’s effectively how we’re able to shift our channel mix.”

Severson said revenue managers will shift channel mix depending on what kind of demand they need at their respective hotel. Each channel has different qualities and characteristics, she said.

Technology helps
Technology helps revenue and reservations managers in a number of ways.

First, channel and revenue management tools simplify the process of allocating and pricing inventory across a variety of channels. Additionally, “big data” applications help reservations and revenue managers identify their best customers and their best distribution channels.

“These tools, whether delivered as dashboards, reports, attribution models or full-reporting suites, likely will drive the decision-making process for hotel personnel in the coming years,” said Tim Peter, managing director of Tim Peter & Associates, an Internet marketing consulting firm. “Hotel management continues to improve its understanding of the costs and benefits each distribution channel offers. And, as they learn more about these costs and benefits, they will be able to make more informed decisions on what to offer their customers, through which channels, and at what price.”

Wood said technology is both evolving to aid and handicap hoteliers.

“The more cool stuff we get the more restrictions there are,” he said.

Severson said the marriage of technology and travel results in more demand for Expedia’s hotel partners. “Whether it be through innovating on a newer channel like mobile or optimizing how regular online bookings are paid for through Expedia Traveler Preference, technology innovation is about meeting travelers where and how they want to shop,” she said.

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