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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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.