Revenue Management in Today’s Online World
Online Revealed – Toronto – May 2007
Introductions
Victoria Edwards Over 25 years travel,
tourism, hospitality Hotelier, entrepreneur University of Victoria,
University of British Columbia, DuBrulle French Culinary Institute
Board of Directors HSMAI Advisory Board AHLA
certification program Co-founder/co-owner
Buckhiester Management Creator of REVRoadMap™
Buckhiester Management…
Founded in 1995 Client base - hotel & resort
companies N. America, Europe, Caribbean Offices - Seattle, Vancouver,
Washington, DC Products: REVRoadMap® &
REVolution® (rooms, F&B, Golf, Spa)
Who is in the room today?
Industry Hotel DMO other
Role Sales/Marketing? Corporate level? Property level? Revenue
Manager?
Objectives
Better understanding of the interdependent nature of demand creation/capture/management
Overview of how evolution of the online world has impacted RM
Provide some suggestion & tips for your RM practice moving forward
Topics
Functional areas & business process
Evolution of Distribution Impact on RM practice First line of defense – your website Measuring Performance If I were in your shoes….
Three Inter-dependent Disciplines
Demand Management
CRM (Demand Capture)Demand Creation
Revenue Management as aBusiness Process
Product Definition
Competitive Benchmarking
Strategic Pricing
DemandForecasting
Distribution Management
BusinessMix
Manipulation
REVRoadMap®
Traditional Reservations
CRS Connect to GDS +
800#
CRS Connect to GDS +
800#
PMSProperty Voice Reservations
PMSProperty Voice Reservations
GDSTravel Agent
GDSTravel Agent
Reservations Manager
Reservations Manager
Distribution Management - Present
CRSCentral Reservation
System
CRSCentral Reservation
System
GDSGlobal Distribution
Systems
GDSGlobal Distribution
Systems
Onward Distribution
Onward Distribution
Proprietary Website
www.yourhotel.com
Proprietary Website
www.yourhotel.com
IDSInternet Distribution
Systems
IDSInternet Distribution
Systems
PMSProperty Management
System
PMSProperty Management
System
DORM Director, Revenue
Management
DORM Director, Revenue
Management
The “Mechanics” of Onward Distribution
Four ways that Internet sites receive hotel information & rates.
Switch
Reservations
Smaller websites
GDS
Extranet
GDS Powered Websites
Travelocity, GetThere, Site59
Trip, Cheaptickets, Lodging, Orbitz, ebookers, Collegetravelnetwork
Hotels.com (retail version) Expedia, Hotwire, Lodging, Priceline
OneTravel, Vacation, opodo
Booking Engine Onward Distribution
Switch or Data Base Powered
Hoteldiscounts, Yahoo, AOL, 180096hotel, Travelnow, Lowestfare
Placestostay, Gotrooms, yahoo,USAhotelguide
TravelWeb, Hotwire, Travelscape, TravelHero, CNNtraveller, Lastminute.com (over 1,200 sites)
Booking Engine Onward Distribution
Technology
“Internal” PMS POS RMS Sales/Catering CRM Hotel website Web booking
engine CMS (channel
management systems)
“External” CRS GDS + connectivity IDS connectivity Group/meeting
websites RFP websites Rate Shopper
systems CGM Customer
Generated Media
Source: HSMAI De-Mystifying Distribution
Reservation Sources – Major Hotel Brands 2006
Internet
GDS TravelAgent
Voice
38.3%+20% ‘05
35.6%+5% ’05
26.1%-1.5% ‘05
Source: TravelCLICK April 2007
Internet Source Breakdown - Major Hotel
Brands 2006
Brand Sites
Retail Sites
Merchant Sites
Opaque Sites81.4%
Source: TravelCLICK April 2007
Hospitality Revenues Generated by the Internet
0%10%20%30%40%
2003 2004 2005 2006* 2008*
Internet Revenues
• In 2006, 27-29% of all revenues in hospitality would be generated from the internet.
• Another ¼ of hotel bookings will be influence by the Internet, but done offline.
Hospitality Revenues Generated by the Internet
(cont’)
• In 2006, 54% of all internet bookings in hospitality are projected to be direct to consumer (B2C) via hotel owned websites.
• By 2008, the direct portion of online bookings is expected to reach 62%.
Are you ready for this dramatic channel shift?
Source: Hospitality eBusiness
Strategies
Evolution
Tech Impact on hotels Seamless /Transparent distribution Rate Integrity Economy – commoditization Education has not kept pace Lack of technology integration and
data integrity Segments begin to blur
Evolution
Tech Impact on Guest Better educated/well traveled Commoditization sets dangerous price
references Poorly defined value prop &
mismanaged fences = lack of rate integrity
Increased use of 3rd party providers Distrust set stage for social networking
Travel 2.0
Evolutionary stage of internet development in tour & travel segment
Shift from supplier-side control, static content to consumer driven/controlled dynamic content
Includes consumer driven content social networking, highly interactive content, interfaces & mash-ups
Travel 2.0
Emphasis is on value & experience rather than price
Seamless combination of content from multiple sources in a single experience
Examples – Gusto.com, Trip Advisor, Travel Zoo, triphub.com
Travel 2.0
Types of T2.0 Sites
Blogs: travel blogs include video and written
Wikis: consumer driven guides or reference info
Reviews: primary purpose is to over marketing unbiased review of hotel, restaurant, attraction
Mashups:combines content from more than one source into integrated experience
Site Sample
Mash-ups: Gusto, Travelbud, Triporama, TripHub
Blogs: YouTube Travel, Travelistics,TheLobby.com
Reviews: tripadvisor
Wikis: wikitravel,turn here, IgoUgo
Groups: groople, meetingsonline
Demand Creation
In 2007, a remarkable 68% of hoteliers will be shifting their budgets from offline to online marketing activities, representing a huge shift from traditional methods.
The top three Internet marketing formats hoteliers believe produce the highest ROIs are website optimization, Search Optimization + Organic Search, and website re-design.
Source: Hospitality eBusiness Strategies December 2006
So why should you care?
Potentially impacts all aspects of RM business cycle
Product definition Competitive benchmarking Pricing Forecasting Mix manipulation
Product definition
Matching User needs to Product Defining Hotels Segmentation Inventory Stratification Product Utilization
Competitive Benchmarking
Market supply & demand Qualitative & Quantitative Positioning by segment Positioning by channel
Pricing
Rational – identify most valuable segments
Shift from traditional models –cost to market and market to value
Drivers of Price reference Consistent application of fences BAR & derivative pricing
Who Determines Price?
#1 Truth: Customers drive prices Price References:
Product line price influences Past price influences Purchase context influences Prices of similar items Cost-based influences
Fair Price (Rate of the Day) Corp Meeting – no rooms
Price
Volume of Sales (duration of day parts & number of covers)
0295
$405
“Retail” Demand – Customers seeking fair
price
“Premium” Demand – Customers willing to pay higher than fair market price e.g. Incentive Group
“Discount” Demand – Customers seeking lower than fair market price
e.g. Association Dinner
The Price Triangle
The Price Triangle
Customers determine where they fall in the price triangle
Based on demand, different every night The fair price for each segment of demand
is the price that yields the maximum revenues from the balance of occupied function space (or outlet seats) per day part and average check for that segment
Why create BAR rates?
Move from opaque to transparent channels
Poor understanding of Rate Parity vs. Rate Integrity
Commoditization of product through poor rate structure management
Blurring of market segments online
Forecasting
Unconstrained rather than constrained Micro-segment Forecast accuracy by day of week Trend analysis Role of history
Forecasting
Free and Accurate Airfare Predictions Find out if you should buy now or wait. Learn More
Mix Management
Quantify performance Look at Index Balance Leverage opportunities based on
segment demand
Trends in Group Business
Leisure group travel segment – fastest growing segment will be small gatherings of up to 9 rooms
By 2008 total small leisure group segment will grow at twice the rate of other groups
Corp meetings with less than 25 attendees projected to increase by 13% between 2006-2007
Sarbanes-Oxley continues to force companies to tighten controls on travel
Trends in Group Business
Components of large meetings (e.g. RFP, housing management) will continue to move online
New entrants into market as well as intermediaries will push need to consolidate portions of group & meetings lifecycle
Big gap between supplier perceptions of needs of buyer and consumer/planner expectations
Why is Mix Manipulation
So Important?
Asset management versus business management
Diversification of risk Managing yield from the bottom up Return cycle to equal levels of profitability
much easier
Distribution
Distributed work force & Travel 2.0 continue morph the distribution landscape
3rd parties intermediaries & new entrants such as groople getting into group game
Lowering distribution costs & capturing demographic data
Hotel Website
Purpose
Attract – targeted traffic to your web site.
Retain – keep traffic on your site & returning to your site. Eliminate opportunities for “disconnect.”
Convert – succeed in having visitors take a desired action.
Proprietary Website
Key Considerations
User experience/design – especially w/ booking engine
User needs vs. Site objectivesNavigation and architectureSearch engine optimizationLink popularity Meta tag review Content review Web traffic analysis
User Experience & Design
When reviewing your site’s “look and feel” consider visual application of text, graphic page elements and navigational components.
In a website, user experience is governed by the user’s interaction within the website.
How successful is a user in fulfilling his/her goals? Is the experience difficult? Or is it smooth?
User Needs vs. Site Objectives
Ensure that the user’s needs and the site’s objectives correspond
Externally derived goals for the site usually determined via user/demographic market research are not in conflict with the business, creative and other internally driven goals for the site.
Search Engine Optimization
A web site efforts to be ranked high on a listing by virtue of appropriate copy writing and links to & from other complimentary links
Search engines such as Google & yahoo! Use spiders to look for site based on the keywords used by an individual
SEO Tools Google PageRank - Page rank is an indication
of a page’s popularity and relevant content. It is established by the number of quality pages with links targeting the site pages.
Link Popularity - indicates how many links are targeting the site. Linking is critical to page rank..
Reciprocal Linking Program - increases the number of links pointing into the site.
Website MetricsMarketing KEI – key word effectiveness index Page Rank Link Popularity Traffic AnalysisRevenue Management Visitor to Book ratio Visitor to Look ratio Look to Book ratio
Metrics
Then ADR/RevPAR/Occ ADR/RevPAR/Occ
Index GOPPAR EBITDA Comp Rank
Now (all of the Then +) Contribution/segment Contribution/guest RevPASH RevPSF RevPACV Look to book Key word density Page Rank Forecast accuracy
per segment per day
Strategic Mistakes
No clear eDistribution strategy No trained distribution expert (viewed
as clerical work) Lack of knowledge of connectivity
(how CRS “talks” to GDS, how GDS “talks” to Internet)
Lack of knowledge of functionality
Strategic Mistakes
Senior management underestimates complexity, labor intensity of managing sources (“just do it” mentality)
Underestimating impact of staff turnover
Unaware of distribution options Rev. Mgr. tactically strong, strategically
weak
Tactical Mistakes
Rate loading errors: loaded but not active, rates not loaded, wrong rates, inappropriate rate display order
Inaccurate property data, not checked (HOD)
Improper use of stay controls turning business away
Contribution reports tossed, source under performing
Tactical Mistakes
Not understanding what travel agents or consumers see
Adding too many sources at once Not completely understanding product
line difference between self and comp set
If I were I GM Today….
1. Ensure that team is working together to obtain balance between demand creation/demand capture and demand management
2. Review current product offering in term of user needs
3. Check for inventory stratification opportunities4. Check “Review sites/Blogs” to see if guest
benchmarking aligns with your comp set
If I were I GM Today….
5. Ensure that team can articulate the difference in value proposition per product compared to comp set
6. MUST fully utilize 3rd party reports – STR, Hotelligence,Future Pace
7. Ensure pricing structure recognizes most valuable segment
If I were I GM Today….
8. Is relationship between BAR rates and derivative pricing understood by team?
9. Chart segment pricing against comp set to ensure reasonable positioning
10. Are forecast based on unconstrained demand? Are they granular enough?
11. Do you measure forecast accuracy & trend by day of week and segment?
If I were I GM Today….
11. Are indexed balanced? If not what shift in mix is required to achieve balance?
12. Make distribution plan part of annual business plan process
13. Ensure team is aware of segment versus source costs
14. Have website audit conducted by outside source to look at design functionality & web optimization
15. SEO – measure look 2 book, KDI, page rank, traffic analysis monthly
Reference Sites
www.websidestory.comwww.alexa.comwww.wordtracker.comwww.hitbox.comwww.seochat
Questions?
Comments?
Thank you for your time