Dynamic Vs. Static Segmentation: Who are Your Real Competitors?

By Ravneet Bhandari Chief Executive Officer, LodgIQ | December 04, 2016

Revenue managers spend considerable time observing and reviewing their competitive set. After all, they've had historical success looking at the hotels with similar pricing and amenities. It's been the stalwart approach to decoding the price forecasting puzzle. As an industry, we've commonly accepted this is the right way to do things.

But be warned, this approach is like looking at a spectacular mountain. Every angle around the mountain looks different to the observer, with each view revealing bite sized pieces of the overall picture. The reader starts with a full-page image, but when seen from another angle, an entirely different picture is revealed. Revenue managers are so busy looking at their competition through a 'partial' image, they cannot see the full picture.

Conversely, hotel guests see the full mountain, and with it, an entirely different picture emerges. When your potential customers are looking for a hotel room, they're not limited to one view, they work their way around the proverbial mountain. They see the full array of hotels in a wider spectrum of pricing, amenities and other offerings. That means, customer stay decisions are based on many more factors than what the typical revenue manager usually considers.

Customers might be unaware of the difference is between an Upscale hotel and an Upper Upscale hotel, or Upper Midscale vs. Midscale, or even Upper Midscale vs. Upscale. Therefore, the entire notion of chain scales is partially irrelevant to the potential customer, rendering the idea of static segmentation moot. Yet, we are hyper focused on the category in which our hotels have been subjectively placed.

By formulating a revenue management strategy with a static segmentation mindset, you're inadvertently tricking yourself into believing you're making decisions based upon accurate and complete information. That's a red herring distracting decision makers from the truth; to deliver the most revenue to the hotel, and flow the most dollars to the bottom line, revenue managers must stop making siloed decisions and take a more fluid approach through dynamic segmentation. That means rethinking conventional revenue management approaches. A well-conceived revenue management strategy is about finding the right mix of business for a specific period of time and that mix of business is guaranteed to change often, because the number, and types of customers coming to your town at any given time is continually in flux.

Who is Your Competitive Set?

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In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.