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Mr. Nagalia

Revenue Management

When an Unthinkable Duo Becomes the Unsinkable Duo

By Sanjay Nagalia, Chief Operating Officer & Co-Founder, IDeaS - A SAS Company

Hotels have been feeling the heat from OTA competition for several years, causing many organizations to double down on their efforts to drive more direct bookings. Revamped loyalty programs, refined marketing campaigns and improvements to brand websites have all become primary focuses for hotel brands looking to turn the tables on their online competition.

However, decreasing levels of consumer engagement - compounded with pressures to market strategically to a generation of up-and-comers with faltering loyalty rates - have been pushing hoteliers to concentrate on taking more holistic and innovative approaches to improving their profit performance.

With a reported 92 million millennials on the brink of entering into their prime spending years, there are both opportunities and challenges on the horizon for today's hotel brands. A Gallup study reports that just one in four millennials demonstrates brand allegiance, with that figure dropping down further to 20 percent for the hospitality industry alone.

A more fickle generation of consumers calls for hotel organizations to employ more innovative, data-driven approaches in both their revenue strategy and their marketing campaigns. This is, in fact, one of the contributing factors as to why hotel businesses are finally adopting the long-talked about organizational collaboration between their revenue management and marketing departments.

A close partnership between these two departments provides one another with mutual benefits that not only bolster individual department performance, but total profit performance for the hotel organization. By leveraging new data sources to better understand potential future demand - and incorporating these new insights into pricing and marketing strategies - hotels are able to compete more effectively, capture more market demand and optimize better profits for their business.

There are many elements that make this collaboration a financial success for hotels, with one of the most profitable being that improved communication gives hoteliers the ability to take intelligent actions within their business strategies.

Through the path to a shared vision, the strategic capabilities of shared technology and renewed commonality through shared data, here are three areas revenue management and marketing departments are collaborating their efforts on to drive higher profits.

The Path to a Shared Vision

Over the past few years, one of the largest organizational structure shifts to date has been an evolving relationship between the hotel revenue management and sales and marketing departments. Historically, the revenue management department may have reported into the sales and marketing team; now they may report to the hotel's general manager or the chief operating officer instead.

This shift is reflective of how the hospitality industry has strongly embraced the practice of revenue management as a whole. Its embracement not only improves bottom-line profits, but it emboldens a revenue culture that floats throughout the entire organization into other departments.

Many organizations have also been experiencing a role reversal between the two departments. Rather than revenue managers reporting into the sales and marketing department, some sales and marketing teams are seeing their reporting structure shift under the revenue management department.

With the complexity of distribution and digital marketing commanding a larger precedence than years past, hotels are seeing their revenue and digital teams growing, and some of their traditional hotel teams starting to shrink. This growth - coupled with higher volumes of data to leverage - has quickly paved the way to increased interdepartmental collaboration.

Another business advantage that may have lent itself to the semblance of a bridge between the two departments is the opportunity to leverage the relationship between a brand's online reputation and hotel revenue.

Thomas Landen of Revinate, a hospitality technology company that collects industry data and provides hotels with guest insights, recently shared findings on the direct relationship between online ratings and revenue. It has been reported that for every point increase in ratings, hotel bookings increase by 14.1 percent and average daily rate by 11.2 percent.

Hotel teams that work together to improve operational opportunities, as well as leverage positive online feedback, drive higher revenue and foster a business culture that promotes a shared vision toward optimal profit performance.

The Capabilities of Shared Technology

Emerging sources of big data offer the industry new opportunities to understand the hidden complexities of both their business and their guests to make intelligent and profitable revenue decisions.

The volumes of recent information for hotels to absorb and analyze has been vast and disparate, ranging from innovative technology capabilities to completely new data sources. A similar outpouring of data and subsequent benefits is pacing steadily ahead for the future.

For revenue management and marketing departments, especially, recent innovations on the technology front make achieving their profit goals a smoother process than before. Industry technology provides hotels with a way to evolve their forecasting practices to incorporate in market intelligence that drives higher profits with more targeted marketing campaigns.

Futurecasting is used in various industries to strategize for an organization's future. The practice evaluates underlying industry dynamics, predictive analysis, and a variety of business strategies to shape an astute vision of the future. In contemporary revenue management, it's been frequently described as the future of strategic hotel forecasting.

Hotel forecasting practices have traditionally focused on big data by evaluating it mathematically. When forecasting demand, hotels generally look at data sources such as historical results, pace and economic factors to anticipate future market demand.

Hoteliers and revenue managers alike rely heavily on these traditional data sources and their performance-based values to evaluate what establishes a lucrative business strategy. However, hotels have untapped abilities to dive deeper into their data to analyze the behavior-based facets behind it.

Strategic revenue futurecasting adds layers to traditional forecasting practices by looking past the numbers to evaluate how and why a specific outcome occurred. Its practice fuses revenue management with marketing to help hotels not only understand the factors driving and enticing potential guests to book direct, but to also determine the ideal price that makes them the most revenue at the lowest costs. This informed view of the future enables hotels to plan intelligently and make profitable decisions throughout the organization.

Many of today's organizations have access to technologies that track basic shopper activity on their website; however, when forecasting hotel demand, it's been fairly limited to high-level booking data and lost business data for their brand.com website.

While they can typically see date ranges searched, time spent on each page, and room types or packages shoppers were interested in, their shoppers still remained largely anonymous. This is where the availability of travel intent data - and its implementation through futurecasting - has become critical for developing a hotel's revenue strategy.

This specialized data uses search and booking data from third-party booking sites and OTAs to help quantify the demand a hotel can expect for future dates. This powerful market intelligence gives hotels human-focused insights to market strategically with refined ad placements, lifestyle packages and personalized promotions that convert lookers into bookers and attract more direct bookings.

By futurecasting, hoteliers can take the insights from travel intent data and layer it into their traditional data to execute the most powerful - and profitable - marketing and revenue strategies possible.

Industry technology plays an extremely critical role in helping hotels profit from this dynamic new practice. The ability to integrate information previously inaccessible to hotels (such as the relationship between intent to book and pricing) elevates a hotel's forecast and its subsequent revenue opportunities.

Technologies providing this extensive level of insight offer hotels a significant competitive advantage when pricing their properties, personalizing their marketing campaigns and aligning the overall consumer experience across all booking channels.

The advantages of this advanced and innovative technology also address one of the biggest challenges that hotels face in improving property performance: misalignment between their revenue management and marketing teams.

By delivering insights relevant to the business goals of both departments, hotels are finally seeing the misalignment between these two departments dissolve.

The Insights Provided From Shared Data

Hotel revenue managers and marketers have two different and distinct goals within an organization. While revenue managers focus on improving RevPAR, ADR and occupancy, the marketing department concentrates on creating market demand and strengthening the organization's brand.

However, each department relies on insights that provide immense business benefits to members of the opposite team. Campaign calendars, demand forecasts, booking trends, campaign revenue contributions, price, promotion and product fencing, and market and guest strategies at regional and property levels can all be assessed by each department to influence more intelligent and aligned strategies.

Demand forecasts, pricing, competitive set information, booking pace and transaction-level data used routinely by revenue management can be shared to contribute to the overall success of a hotel's marketing department, their campaigns and metric evaluation.

Even further, exchanging information on refined guest segmentation, in-depth understanding of guest demographics and psychographics, and demand-generating offers creates a common language between revenue management and marketing that leads to better revenue optimization and stronger bottom-line performance.

The hotel industry is continuously evolving - and this unremitting evolution sends out a strong call for organizations to evolve their interdepartmental collaborations in ways that enhance their business analytics and maximize their profit potential.

A close partnership between hotel revenue managers and marketers compounds the value of each department to proactively take their organization's revenue opportunities to higher levels.

And in doing so, the industry is finally experiencing the fruition of one of their most profitable relationships: The hotel's unthinkable duo has now become their unsinkable duo.

Sanjay Nagalia co-founded IDeaS Revenue Solutions and served as Vice President of Products and Services. Mr. Nagalia now serves as Chief Operating Officer. Mr. Nagalia has been instrumental in reinvigorating IDeaS innovation engine; launching multiple, first-to-market products. Earlier in his career, Mr. Nagalia co-founded and led a consulting company in New Delhi that offered management consultancy and custom in-shore and off-shore software development. The company was at the forefront of helping many small-to-medium--sized Indian companies with computerizing their financial systems and operations. Mr. Nagalia also co-founded Apex Decisions, Inc. and held the position of Chief Operating Officer. Mr. Nagalia can be contacted at 952-698-4200 or sanjay.nagalia@ideas.com Please visit http://www.ideas.com for more information. Extended Bio...

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Hotel Law: Issues & Events
There is not a single area of a hotelís operation that isnít touched by some aspect of the law. Hotels and management companies employ an army of lawyers to advise and, if necessary, litigate issues which arise in the course of conducting their business. These lawyers typically specialize in specific areas of the law Ė real estate, construction, development, leasing, liability, franchising, food & beverage, human resources, environmental, insurance, taxes and more. In addition, issues and events can occur within the industry that have a major impact on the whole, and can spur further legal activity. One event which is certain to cause repercussions is Marriott Internationalís acquisition of Starwood Hotels and Resorts Worldwide. This newly combined company is now the largest hotel company in the world, encompassing 30 hotel brands, 5,500 hotels under management, and 1.1 million hotel rooms worldwide. In the hospitality industry, scale is particularly important Ė the most profitable companies are those with the most rooms in the most locations. As a result, this mega- transaction is likely to provoke an increase in Mergers & Acquisitions industry-wide. Many experts believe other larger hotel companies will now join forces with smaller operators to avoid being outpaced in the market. Companies that had not previously considered consolidation are now more likely to do so. Another legal issue facing the industry is the regulation of alternative lodging companies such as Airbnb and other firms that offer private, short-term rentals. Cities like San Francisco, Los Angeles and Santa Monica are at the forefront of efforts to legalize and control short-term rentals. However, those cities are finding itís much easier to adopt regulations on short-term rentals than it is to actually enforce them. The December issue of Hotel Business Review will examine these and other critical issues pertaining to hotel law and how some companies are adapting to them.