Aligning Pricing and Operations for Personalization
By Kelly McGuire Vice President, Advanced Analytics, Wyndham Destination Network | September 27, 2015
Many hotel companies are beginning efforts towards personalizing the guest experience. Hoteliers are banking on personalized treatment being the differentiator that will drive guests to interact directly with the hotel, bypassing third party distributors and their expensive commissions. For most companies this means they plan to use guest's expressed needs and preferences as well as their behavior to create individualized communications, offers or experiences. From the website through pre-stay planning, on-property activities and post-stay communications, guests should be treated as though the hotel "knows" them. Presumably, information gathered about their reactions to this treatment will be than used to improve the guest experience for future stays.
While on the surface, personalization seems to be strictly in the domain of marketing, when you dig in, it will clearly require a cross-functional effort to properly execute. It would be very easy for marketing, without access to crucial information about demand patterns and operational conditions, to over incentivize guests, put unreasonable pressures on operations, or dilute revenue through excessive discounting. Personalized offers and experiences must not only be relevant and meaningful to the guest, but they have to be profitable for the company. Without a view to demand patterns and pricing opportunities delivered by revenue management, and alignment with operations that have to deliver on the experience, that crucial balance between experience and profits could be in danger.
Clearly, revenue management and operations have a critical role to play in personalization initiatives. Revenue management can ensure that all offers are priced appropriately, and timed according to demand patterns. Operations can ensure that the guest experience is both meaningful for the guest, and profitably executed by the company. Operations can also help revenue management and marketing identify opportunities to drive incremental revenue throughout the guest experience.
The only way this can happen efficiently and effectively is through revenue management efforts to move the organization towards total hotel revenue management. While it may not seem that personalization and total hotel revenue management are closely related, the fact is, when the entire hotel is managed holistically as a revenue generating asset, the hotel is well-set up to engage in any initiative that crosses functional areas. Total hotel revenue management has benefits beyond revenue maximization for the entire property. Proper implementation of total hotel revenue management requires the entire organization to work together more closely with an eye toward profitable revenue generation. With this foundation of synchronized decision making and an integrated revenue culture, personalization efforts will not only be more effective, but also more profitable.
Most hotel companies are still struggling to understand what total hotel revenue management actually is, and how it should be best implemented at their hotel. For this article, I will first define total hotel revenue management, and then I will describe how successful implementation of total hotel revenue management will ensure that both pricing and operations are aligned together and with marketing to support personalization initiatives.
Total Hotel Revenue Management, Explained