How to use all the pricing data available
23 JANUARY 2014 9:34 AM
While the amount of pricing and forecasting data might be overwhelming to revenue managers, experts suggest simplifying it and making data-driven decisions.
REPORT FROM THE U.S.—Hotel revenue managers today have a plethora of data and information available at their fingertips to help forecast and make pricing decisions. However, the challenge, according to a panel of experts on a recent webinar, is culling all the data, analyzing it properly and acting on the appropriate verdict.
“One of the challenges we’ve had in regard to analytics is you’re faced with all these numbers and, depending on the market, some make sense and some don’t,” said Josh Henegar, corporate revenue director at 1859 Historic Hotels, which manages a dozen independent properties throughout Texas, Colorado, Kentucky and Virginia. “OK, there’s all this information in front of us, now what?”
Henegar, speaking on a webinar titled “Employ smart travel analytics to maximize your revenue” hosted by EyeforTravel, said some hoteliers, especially those at independent properties, often make the mistake of biting off more than they can chew. Independents are looking at what they can do to remain competitive with the big brands and often that leads them to “break out the spreadsheets,” he said.
“We get zealous because we get fascinated with all the data you can use,” he said.
For example, at 1859, Henegar relies heavily on agency tracking tools, which help obtain global distribution system business. GDS business is crucial for independents, he said, and it’s a tough market because they don’t have same leverage as brands.
“It’s something we’re getting better and better at over time,” he said.
While it might be easy to get overwhelmed by all the available data, it’s important not to discard it, said Sameer Mehra, chief revenue officer at Hersha Hospitality. Revenue managers will be best served by simplifying the data, he said.
Mehra said in the past Hersha has made pricing decisions at its New York hotels based on what they thought was going to happen with demand rather than what the data was forecasting. Ultimately, revenue was left on the table.
“Make data-based decisions and keep emotions out,” Mehra cautioned.
For example, during a recent U.N. General Assembly conference, Hersha’s belief was the conference demand would provide a compressed period where they could hold strong on rate. The indicators Hersha used to forecast demand were overall city demand pace, city forecasting, hotel demand pace and what Mehra called an “adjustment indication for the hotel.”
While all the indicators monitored leading up to conference showed occupancy was growing slower than expected, Hersha continued to raise rates as the conference drew closer.
“We were not going by the data but going by emotion and the thought that it would be compressed,” Mehra said.
One week out Hersha was forced to drop its prices at one particular hotel by $150. “Overall the property lost heavily,” he said, noting a 26% decrease in year-over-year revenue per available room. “No one looked at the data.”
Because so many tools are available to aggregate data—not only historic but forecasting data—some hoteliers are calling for a rapid evolution of the revenue-management discipline.
Marco Benvenuti, co-founder of Duetto, said the addition of multiple online travel agencies with various pricing and commission models are changing the channel-management landscape. In addition, a shorter booking window makes forecasting and pricing more difficult, he said. And social media and guest reviews also are impacting what price consumers are willing to pay, he said.
“Traditional revenue management, in my opinion, has failed,” Benvenuti said. “If all you’re looking at is historical rate and competitive info, that’s inadequate.”
Therefore, Benvenuti suggested hoteliers “should evolve from revenue management to revenue strategy—a new discipline that now touches every single analytic along the booking flow.” He said the movement should include new decisions on who to hire and how to structure the revenue team.
“Hotels don’t even have the tools right now that say, ‘Hey, a guy was just coming to my website from London looking to book these dates based on this rate and didn’t book,’” Benvenuti said. “That’s absolutely paramount to forecasting and pricing and it’s basically missing in the toolbox that most hotels have. Distribution partners have that data.”
He said a new revenue-management discipline would carefully look at customer acquisition cost by channel, determine how much it costs a hotel to acquire a customer and then how much it costs to retain the customer.
“Revenue strategy can be the hero of the hotel,” he said. “This comprehensive approach doesn’t leave the sales, marketing, keyword-purchasing teams all fighting with each other and going in different directions. We have a unified approach.”