Mr. Kohlmayr

Revenue Management

Searching for Long-term Profitability? The Need to Integrate CRM and RM

By Klaus Kohlmayr, Senior Director - IDeaS Consulting, IDeaS Revenue Solutions

In these economic times, hoteliers across the globe need to be more aggressive in pursuing demand in order to deliver profitability. Ensuring coordination between key hotel operational departments is paramount in targeting the right guests and helping to establish customer loyalty amongst profitable guests.

In this environment, hotel owners and managers alike need to be mindful that their marketing and revenue management departments are working together and it is important that open channels of communication are maintained. Both the marketing and revenue management departments are unfortunately siloed in many companies, but each holds an important key to the business, which, when used together, become a powerful tool for generating hotel revenue.

Revenue management is responsible for the demand forecast and pricing setting for the hotel. The Revenue Manager knows when demand is forecasted to be high or low, and he/she knows the value of the remaining rooms (and therefore can recommend discounts or offers that will not dilute expected revenues). Typically, the marketing department is responsible for Customer Relationship Management (CRM), managing the various marketing activities across the entire spectrum of past and future clients.

Industry experts see the integration of revenue management and customer relationship management as one of the key areas through which hoteliers can enhance their approach to maximizing total guest revenues. Rom Hendler, Corporate Vice President Strategic Marketing, Las Vegas Sands Corporation recently highlighted the corporation was successfully aligning CRM and revenue management processes across their properties to enhance their offering to profitable customers. He said, “We have stepped into the future of profit optimization by combining revenue management, sales and marketing, and CRM. By aligning all distribution channels with pricing strategy, we’re allocating inventory in ways that better serve our most profitable customers.”

Working together within a single hotel or even across an entire hotel group, the Marketing and revenue management departments can ensure that revenue is not diluted during peak periods by offering discounts at the wrong times, and help to identify the right offers for the right customers that will help to generate demand during off peak periods.

A robust CRM system helps to keep track of a hotel customer’s previous purchase history. While, room rates still brings in a highest portion of profit, retail, food and beverage, spas and entertainment are increasingly important sources of income, in many cases generating more revenues than from the sale of guest rooms. With disparate systems for each arm of the business, it is difficult to get a complete view of total guest spend without proper systems. A regular hotel guest may not be worth as much as a patron that may stay infrequently, but who spends freely on a variety of activities. The decision of which reservation requests to accept not only impacts the revenue of a specific hotel facility, but also company-wide profitability.

With a stronger push on the gaming side of hospitality, especially in Asia Pacific and North America, there has been an increase in both the uptake and the use of CRM systems across the wider hotel sector. The gaming/hospitality industry has always worked hard to understand the true value and profitability of their gaming hotel guests as well as the gamers who frequent the gaming area but do not stay at the hotel. Additionally, hotel guests in Integrated Resorts also present a certain spend value over and above room rates which needs to be considered when making revenue management decisions.

Coordinating CRM with revenue management allows hotels to start demand sourcing rather than simply reacting to existing demand. Working together, the two systems can maximize revenue by ensuring that discounts are not offered during peak periods, and identifying the right customers to extend offers to during off-peak periods. When the revenue management system recognizes periods of low demand, the CRM system can identify the customers whose history with the company indicates that they would be likely to book during those periods. Information on guest value from the CRM database can also help the revenue management system to optimize based on total guest value, not just the room rate guests are willing to pay.

Combining CRM, customer intelligence and revenue management gives a hotel the ability to understand the value of a guest or market segment and control availability (when capacity is constrained) to ensure that rooms are available to guests with the highest spend and or highest profitability. The highest guest profitability may take into account multiple spend platforms including room rates, food and beverage expenditure, meeting rooms booked and gaming and entertainment expenses.

The combination of revenue management forecasting and pricing, along with customer intelligence and CRM are invaluable in helping to deliver dynamic offers and hotel packaging in real time. Although dynamic offers and packaging require real time analytics with real time rate and room availability, they can help to increase the relevance of promotions to those customers most likely to have the greatest lifetime value. Instead of sending blanket marketing campaigns, dynamic offers enable a customer base to only receive relevant offers they are likely to be interested in, based on their product preferences and previous purchases. Dynamic offers can benefit hoteliers in boom economic times or if they are in tough times, as the package still has to suit what the market wants and the price has to be in line with the current market offering for the requested stay.

Hoteliers should also be aware of the latest CRM trends which can provide additional benefits to their operations. For instance, the market has seen CRM systems moving away from automation of sales, marketing and call centres, and shift towards value-add applications using predictive analytics (understanding factors that contribute to customer retention or predicting campaign response rates.)

Additionally, leveraging customer data for predictive analytics, as opposed to simply query and reporting on historical data and the integration of CRM technologies with data quality, business intelligence, and marketing automation tools are becoming especially important hotel operation trends. These CRM developments allow hotel groups to ensure accurate and credible data which can be shared across the organization and used for more sophisticated analytical applications

CRM systems also need to work with data in multiple formats (numbers, text, images, times series data, audio files, and spatial databases for example) given that data used within the hospitality sector continues to grow exponentially, particularly with the increasing prevalence of Web 2.0.

A vital tool in delivering data for combined revenue management, customer intelligence and CRM systems are hotel customer loyalty systems. Loyalty programs, when designed correctly, encourage guests to provide crucial details about their preferences and habits. The hotel can use this information to design new products and services, improve existing services and most importantly, tailor marketing messages to the specific interests of the customer base. Guests feel more connected to the hotel when they feel that the hotel knows who they are, understand their preferences and treat them as individuals.

A sophisticated loyalty database allows organizations to truly understand who their customers are, what their preferences are and who will be most likely to respond to specific offers with a purchase, providing an efficient and ROI effective means to increase revenue from the existing and potential customer base.

Importantly, by leveraging revenue management systems with CRM technologies to gain greater customer insights, hoteliers around the world can maximize their chances of not only winning, but keeping their best customers.

Klaus Kohlmayr currently holds the position of Senior Director - IDeaS Consulting for IDeaS Revenue Solutions, the global leader in Hospitality Revenue Optimization. (www.ideas.com) He is responsible for leading and growing the revenue management consulting and advisory division assisting clients in the Hospitality and Travel sector worldwide to develop, implement and enhance best practice revenue optimization, pricing and forecasting strategies and tactics. Mr. Kohlmayr can be contacted at 612-840-3301 or Klaus.Kohlmayr@ideas.com Extended Bio...

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