Balancing your mix
Dear Diary,
What a day! As I was reviewing a new property setting on their Channel Manager, I couldn’t help but wonder, are we ready to tackle the new challenges this “new normal” is bringing on?
Looking at their segmentation report, this property was selling almost half its rooms through the Opaque channel present in most Online Travel Agencies (OTAs). As a result, their ADR (average daily rate) for the month came down quite a bit compared to 2019. RevPar (revenue per available room) was lower than the properties in their comp set too. Even though other segments (such as corporate, local, etc.) were producing healthy room revenue for this property, the overwhelming amount of opaque bookings brought the total rate average to the ground. It looked like there was no intention or strategy behind this at all, but a “heads in beds” philosophy.
When we think about it, in the face of budget cuts, staffing reductions and shifts in demand this year lots of hoteliers are being pushed to making the hard choice between:
1) Abandoning marketing and revenue strategy efforts relying solely on the OTAs and other intermediaries, or
2) Balancing the property’s distribution mix by investing smartly in digital marketing and utilizing the third-party channels.
The first choice is the easy though detrimental approach to distribution and revenue management that could lead to irreversible OTA dependency and potential loss of brand equity.
The second choice could allow properties to maintain a healthy distribution mix of direct and intermediary channels leveraging their intimate knowledge of the product, destination, short-haul & drive-from feeder markets, and their knowledge of past guests. This expert knowledge, plus adequate investments in technology and digital marketing, could help improve occupancies and the bottom line, outshine the competition and reap long-term benefits. Goes without saying this is harder than it sounds, due to the complexity of the task and data requirements. Properties that do not work with a seasoned Revenue Manager, either in-house or outsourced, will find a true obstacle on conquering this as an option.
As a Revenue Manager, in pursue of doing what it’s best for your property, going about this second approach can be done in several ways. However, taking full advantage of your tools & technology should be step one. Efficient Channel Managers (CM) and Revenue Management Systems (RMSs) provide specific configurations that can help you balance your mix. A good example of this is the set-up of selling limits for aggressive channels such as Opaque, Advance Purchase and Promotions. These limits protect you from going to far in the amount of rooms you are allowing to be booked in a lower rate per day. These systems will grant you the option to adjust the limits in alignment with your weekday seasonality and even your overall revenue management strategy.
Another interesting example is using your CM’s availability to modify your cancelation policy on high demand periods such as weekends or special events. Even if your property is looking to maintain a flexible overall policy to entice guests during recovery from COVID, there can be high demand periods where you get to be (and should be) more restrictive.
Once we made sure technology is on our side and taking into consideration how the lines have blurred between Revenue Management and Marketing, as RMs we need to start thinking of other ways of helping properties balance their mix.
Research shows more people are going directly to hotels websites during the pandemic because they feel that’s where they can find the most updated information. So how can you take advantage of this?
Using marketing creativity with “It Pays to Book Direct” messaging and offering perks or value ads to close the deal; such as: “Book Direct and Get Free Wi-Fi” or free parking, etc. is always a good idea.
OTAs are the masters of selling on price, hoteliers have no chance outwitting or outspending them in their marketing efforts. But how about selling on value? This is where we can truly outwit the OTAs and provide real value to our customers.
Do you have cooking classes, weekend specials, coronavirus de-stressing packages, spa packages, family packages, activity packages, special occasion packages, wine tastings, F&B packages and promotions, work-from-hotel packages, etc. that you can use to target your local, short-haul and drive-in feeder markets? If yes, then use it!
Following the same train of thought, communicating with your past guests, loyal customers, group planners, tour operators, distribution partners, etc. its crucial. A lot of marketing teams are employing localized and personalized marketing strategies to help capture more leisure and b-leisure (business + leisure) travel, as the lines between work and home continue to blur. As a revenue manager, you should be fully informed of these actions, and work along with the Marketing team to adopt these strategies and drive more revenue from these segments.
During this chaotic yet positively trending hotel landscape, we cannot help but feel that being a part of this industry has never been harder. However, this is not the time to give up! On the contrary, it’s time to raise the bar! Think outside the box, work closely with your sales and marketing colleagues and take full advantage of the technology you have in hand. After all, at least there’s finally demand to manage! Rest assure that our beloved industry will stabilize, we just need to get through this next few months to understand what the new normal will bring and make it our own.
