How to Use Data to Impact Your Bottom Line: Crucial Tips for Revenue Management
By Gino Engels Co-Founder, OTA Insight | September 08, 2019
Revenue management and data are becoming more and more intertwined in hoteliers' quest to find the right pricing strategy to boost their bottom line. Being able to leverage knowledge of demand and competitor movements, all while remaining in parity across different distribution channels is a tall order.
The good news is that in the age of Big Data there is now a range of ways to get up to speed on the components needed for a strong pricing strategy. The more unsettling news is the sheer amount of data available, making it easy to suffer from analysis paralysis.
The best news is that helping hoteliers to visualize and leverage data is our speciality at OTA Insight. We'll give you some tips on which data sources are key to positively impacting your profit margins, the best tools for leveraging those insights, and what issues you'll be equipped to solve after reading this article.
Which data should I be looking at?
Let's first remind ourselves of the KPIs that allow us to evaluate revenue success:
In order to move these key metrics and positively impact your bottom line, consider these following data sources:
General PMS Data
This data is key in not only keeping track of reservations, but in shedding light on business segment trends and promotion performance. Business segments are essential to your bottom line because questions such as why your guests are traveling, how long they stay, and what days of the week they book on, all affect your demand forecast. Due to the level of data a PMS holds it's important to ensure it comes with robust reporting functionality.
Hotel Guest Data
Usually stored within your PMS, guest data is one of the most invaluable resources a hotel can utilize. Guest data mirrors your PMS data in telling you who your guests are, how long they tend to stay and the purpose of their travel. However, you can take this further with more detailed data on guest preferences. This knowledge can shape your marketing and distribution strategy as it allows for more targeted emails or social campaigns, which should have a positive impact on your conversion rate, thus adding revenue. This data can also be helpful not just to your revenue team, but to your marketing team; creating yet another opportunity for profit.
Utilizing guest data is also important when looking at the distribution landscape and changing the relationship between hotels and OTAs. Whilst personalization is a tactic being wielded by both hotels and OTAs, hotels can really drive their direct bookings by using the data to create a personalized experience from booking, right the way to tailored offers for future trips.
Along with examining the data sources you have at your fingertips, you should also be keeping an eye on the level of demand in your market, as these insights inform how you set your rates and adjust strategy.
Local events in your area have an impact on demand. You should factor in:
Major events: Large-scale events like the Olympics, Tour de France or the Superbowl. These are highly publicised so high demand can be forecast well in advance.
Minor events: Smaller, local events such as concerts, industry conferences or government assemblies. These take slightly more effort to look out for, but are likely to affect demand so should be factored into your pricing strategy. To save time, there are some rate shopping tools that signpost local events for you.
Unforeseen events: Sometimes there will be events that can't be planned for that will require travellers to stay for extra nights - or not book at all. Examples include adverse weather or naturally occurring events like volcano smoke clouds. While you can't predict when these things will happen, retrospective analysis of the effect on prices is telling; the image below shows the rate evolution of prices in Toronto for the Game 6 date where their very own Raptors faced off against the Golden State Warriors. (This data is also useful when looking at year-on-year performance).
Valuable Data Needs Clarity
Powerful data is nothing without tools that enable you to act on your findings. Luckily, there are a number of tools that will allow you to visualize your data and manage it efficiently, meaning that building an optimized pricing strategy doesn't have to be time-consuming.
The following products belong in any revenue manager's toolkit:
An effective hotel business intelligence tool integrates with your PMS data and allows you to understand your business distribution by analyzing booking patterns, lead times and a variety of key factors, including KPIs. The best of these products will present the data in a way that is easy to understand and pass along to your teams.
As well as being able to provide access to all relevant factors impacting demand, a rate intelligence solution lets you monitor whether your OTA promotions and marketing campaigns are paying off. Good rate intelligence provides benchmarking integration with well-known suppliers such as STR and Benchmarking Alliance. This is key to comparing the pricing strategy of your competition across all key OTAs. There are also rate intelligence providers that come with parity information, allowing you to track where you might be losing revenue across your OTAs and metasearch channels.
A channel manager allows you to efficiently manage your inventory across all your booking channels in one place. A channel manager integrated with your PMS is useful because it will also include your direct channel, so when someone books over the phone and the booking is created in your PMS, the inventory is automatically reduced across all your online booking channels.
An online booking engine is attached to your website and manages your direct online channel. It works much like the booking function on OTA websites, so travelers are comfortable booking through it. A booking engine that integrates with both your PMS and channel manager is helpful because it means that your direct online business's inventory is automatically managed and updated, and you don't sell rooms that you don't have. Having that data in one central location means that you can pick up on any violations of rate parity, and update your rates accordingly - all in real-time.
We've equipped you with the most relevant data sources and the most efficient tools to analyze your findings with, but what questions can you answer with your data?
As mentioned above with market intelligence data, having a pricing strategy that responds to demand is crucial. Although hoteliers need to be responsive to events and the pricing changes of their competitive set, it's equally important to not just focus on making last-minute rate alterations. Having a solid understanding of what affects rate changes will have on pick-up demand means that revenue managers can make predictions with relative certainty and have more confidence in setting a strategy and forecasting results.
A further consideration when looking at demand is that of price elasticity.
Price elasticity is the notion that consumers react to price in an individualized manner. Rather than only external demand factors such as seasonality and event, price elasticity puts consumer behavior at the centre of pricing decisions. In other words, consumer behavior is not always rational; a lower room rate doesn't always increase bookings.
For example, travelers at the lower end are more price-sensitive than those at the higher end. Dropping the price of the low-to mid-market hotel will generally result in increased demand, while lowering the rate at an upscale hotel doesn't always have the same effect.
Since a lower price may signal lower quality, hotels must be especially careful to understand the correlation between price and demand at the property, market and category level.
A survey carried out by OTA Insight revealed that around 60% of revenue managers are unsure of their property's rate parity. Rate parity continues to increase in importance as many hospitality chains have started to offer 'best rate guarantees' with the aim to build a reputation from doing so. Not delivering on this promise on their own website can lead to a loss of trust for this and future bookings. This can hurt both the brand's image and the bottom line in the short or long run.
With the right business intelligence tool hoteliers can access live information that can pinpoint parity issues, saving time, energy and revenue.
There we have our breakdown of the key data sources that can positively impact your bottom line, the best tools for visualising those insights, and the issues you can now address. This quick tips should show that working with data doesn't have to be daunting, and by applying these hints you'll be able to analyze and use data in a smarter way that can drive your revenue and profits.
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