The Art of Revenue Management: Correlation to Marketing

By Michael McCartan Managing Director Europe, the Middle East, and Africa, Duetto | October 13, 2013

The internet Tsunami has changed how consumers buy and hoteliers operate. Increased adoption of technology means revenue managers are more easily able to “make the right room available at the right price at the right time”. However, facing a multi-channel customer who will switch channels ( computer to mobile to tablet ) several times a day, identifying the ‘right guest’ at the ‘right price’ at the ‘right time’ is the secret sauce that every hotel is trying to find the recipe for.

Before the advent of internet the revenue success of a hotel largely depended on the success of its sales and marketing team, and the revenue teams took help of marketing insights when making rate decisions. Following the explosion of the internet and the emergence of revenue management as a crucial discipline, the roles have been reversed. Revenue management systems access numerous rate and occupancy reports as well as guest related data to produce rate strategies, which become the foundation of marketing promotions, packages and even publicity.

Marketing plays the role of the demand generator. In order to appeal to the customer, they need to know the customer demography, their preferences and purchase behavior. Revenue management department sits on the other side of the coin, managing demand through rate and inventory manipulation. To optimize revenue, they must have a deeper understanding of potential guests such as their price elasticity, their seasonal behavior and their likes and dislikes. In other words, revenue management and marketing complement each other, and when working together in a coordinated fashion, they can produce winning results. In recent years, leading hotels have built a culture where both departments work together to create a compounding impact on organizational profitability. There is no short cut to this and it all begins with the two departments talking to each other.

Talk, Listen, Share

So what does the marketing department know that the revenue managers are not aware of? Guests! They know who the customer is, where they come from and what interests them. They also know the finer nuances of each customer segment – leisure travellers can be over 55 or family with two kids or honeymooners and business segment include destination, in-transit, conference attendees or incentive travelers. For revenue managers, detailed information on customer preferences should be a gold mine, as it can help them to diversify their product offering and rate structure to attract the right people with right value proposition. One of our customers, Warwick Denver Hotel has successfully integrated their marketing and revenue management teams, and has created customized romance and drive packages for specific market segment which has brought them immediate results.

On the other hand, revenue managers have access to reservation reports which will help the marketing team to understand customers better with details –such as how they booked; where they come from; how long do they generally stay; etc. Answer to each of these questions lies in your historical customer data. By sharing this information, revenue management team will help the sales and marketing team to understand the hotel’s high value guests. An enlightened marketing team can create personalized campaigns relevant to different target markets and drive demand that is not solely based on price.

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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.