Total Customer Value Contribution: Do You Know Your Guest's True Worth?

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | October 02, 2011

How often have hoteliers around the world faced a scenario where your marketing department begins to complain that: “Our high value customers are not being taken care of – we’re going to lose them”? And, your Revenue Management department comes back with: “Too often we are giving our product away when it’s not necessary”. Or, the Marketing department is griping: “Our spa is either empty or overbooked”. While, Revenue Management is baffled that: “They filled up half the property with low value guests.”

Well, it may be surprising, but you are not alone. While there have been many advances in revenue management throughout the years and market segmentation and channel management strategies have become more targeted in identifying and reaching guests who could add revenue to a hotel, the full integration of intelligent demand forecasting with campaign management strategies is still yet to be realized by some in the industry. In today’s highly competitive hospitality market, a heightened understanding of a guest’s preferences and total worth will enhance a guest’s experience, maximize revenue and ensure loyalty, while establishing market share for your company. Asian hotels and integrated resorts need a true holistic view of their guests.

For the sake of ongoing revenue optimization and to enhance customer loyalty, it is vital that hoteliers gain a holistic view of its guests from all of their interactions with the firm, not just their room spend. Data from all transaction systems need to be integrated to provide a true picture of a guest’s preferred activities and their overall value considering all ancillary spend, from: online reservations to check-out, from food service to spa services , from guest rooms to gift shop and more.

In addition to making more profitable decisions about which guests’ reservation requests to accept, a deeper understanding of guest preferences leads to better decisions about promotions, service offerings, inventory levels, food and beverage options, and spa layouts. Furthermore, this integrated customer behavior data supports wiser pricing decisions, supplier choices and financial strategies. Forecasting and optimization then provide controls to ensure that revenues are optimized and costs are minimized.

The path to sustained profitability and growth has taken a turn for hotel organizations. Room rates still brings in a healthy portion of revenue, but retail, food and beverage, spas and entertainment are increasingly important sources of income. With disparate systems for each arm of the business, it is difficult to get a complete view of total guest spend. A regular guest may not be worth as much as a short stay patron that spends freely on a variety of activities within the hotel or resort. The decision of which reservation requests to accept not only impacts room rates, but also property-wide profitability.

The importance of knowing a guests’ true spend also means that revenue optimization practices usually reserved primarily for hotel rooms, must also be applied across whole properties and all service or products offered to guests. To underline this point Siv Forlie, Director of Corporate Revenue Management at Shangri-La Hotels commented that, ‘Pricing is and will always be an extremely important aspect of revenue management. The question is whether you want to do it the easy way or the hard way. Pricing is not only about fluctuating your BAR rates according to demand and the competitive landscape – but it encompasses every aspect of optimization; all segments, room types and products.’

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.