Forecasting Techniques and Maintaining Market Share in a Multi-Dimensional Resort

By Natasa Christodoulidou Assistant Professor, California State University | December 30, 2012

In the past hotel revenue managers have used the rack rate as their foundation for determining daily room rates. They used to forecast rates based on supply and demand by using some revenue management techniques. A large part of their inventory would be offered to wholesalers at large discounts. As distribution technologies matured, more distribution channels became available to hoteliers. Electronic distribution channels and in particular online travel agencies (OTAs) and meta sites have urged hotels to seek new strategies for determining rates. Many hotel operators have signed contracts with online travel agencies (OTAs) such as Expedia, Travelocity, and Booking.com. Most hotels today do not permit OTAs to sell rooms for less than what the hotels charge on their own website in an effort to achieve rate parity. A successful revenue strategy for many hotel operators, and in particular operators who work in hotel chains, has been to offer a "best rate" guarantee if the reservation is made directly through the hotel's own website. In this way, they engage the customer directly, bypassing distribution intermediaries and OTAs wherever possible. As a result of this, often they are able to achieve a reduction in distribution costs and an increase in reservation volumes.

Hotel revenue managers are overwhelmed by the complexity that has evolved with the number of distribution channels that are on the market. Hotels now are using a number of channels to optimally distribute the hotel room inventory; currently no single distribution channel dominates the hospitality market. Some revenue managers choose opaque travel sites such as as Priceline and Hotwire to dispose of any last minute excess inventory. Another hotel rooms inventory distribution option is through meta sites. A travel meta site is a travel website that pools all travel related search engine results together and then relays that information to the user. These websites do not own a database of hotel room inventory like the OTAs; rather, they display the results on their website as they are obtained from other consolidator or hotel websites. Hence, these websites are used for comparing prices and features of different hotels simultaneously. Examples include Kayak.com or Fly.com, which usually charge a referral fee or a pay-per-click (PPC) fee. This has reduced costs significantly because a referral fee or a PPC fee costs little compared to a traditional commission-based fee that is paid to the consolidators. Some review sites also charge referral fees or PPC fees for directing traffic to a hotel's website.

Here are some methods that can be utilized by hotel managers for successful rate parity in selling the maximum number of rooms possible:

  • A hotel that states on its website that it offers the "lowest rate guaranteed", should be in agreement with the consolidators that it works with, that the consolidators cannot sell a room below the hotel's advertised rate on their website.

  • All agreed and contracted distribution channels need to obtain the hotel's rates from a central location such as the hotel's property reservation system. In this way hotel revenue managers have control over inventory and rates.

  • Some hotel operators, in order to encourage direct bookings with their property, are not allowing frequent stay points from being posted to the guest's account if the guest has made their reservations anywhere else besides the hotel's website or directly with the hotel.

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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.