Prevent Revenue Leakages by keeping a Check on Rate Parity

By Bhanu Chopra CEO, RateGain | January 07, 2018

When certain actions or outcomes lead to loss of revenue, leading to a decline in your planned estimated revenue and actual revenue, you have revenue leakages. An example of that is fixing the price of a product and estimating your revenue based on it, but if one of your distribution channels sells it for a lower price, you face Rate Disparity. With the advent and popularity of online booking channels, the complexities of sourcing and managing your inventory have also increased. Hence, more will be the chances of revenue leakages. This is why industries with perishable product and services like airline and hospitality frequently face this challenge. To curtail them, we must learn where they stem from. 

Following are some common causes of revenue leakages- System/tool related errors in your revenue management software. Discrepancies due to lack of communication between departments and deliberate misuse of fare rules.

Some of these challenges are a part of a hotelier's day to day life. While you cannot eliminate all of them, you must focus on the 'big-eaters' because taming them will substantially lift your bottom line.

OTAs - The Big Eaters or the Much Needed Friend?

Hotels and Online Travel Agents share a love-hate relationship. While hotels always want to get rid of the bulky commissions they have to shell out for the online bookings OTAs bring you, they also do not want to miss the market penetration, reach and promotional benefits OTAs provide them. OTA popularity and massive customer reach remain unmatched to that of any hotel's online presence. However, OTAs often undercut hoteliers, making them a major contributor to hotel revenue leakages.

Let us look at some facts. According to Triptease- On an average 25% of the times, a direct hotel price is undercut by an OTA. As per estimates, this level of undercutting is costing hotel industry over $1Bn a year in direct bookings. Regardless of this, the direct price is on average $10.27 cheaper compared to all other platforms

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Guest Service: A Culture of YES

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.