What Happened To Rate Parity?
Dr. Sheryl E. Kimes, Singapore Tourism Board’s Distinguished Professor in Asian Hospitality Management, challenged participants of the recent Revenue Management Roundtable
The Cornell-Nanyang Institute of Hospitality Management (CNI), along with iDeas, a SAS Company, hosted the CNI Thought Leaders in Revenue Management Roundtable last May 20, 2009. Led by Dr. Sheryl E. Kimes, the roundtable consisted of an exclusive group of invited hospitality leaders practicing Revenue Management, including senior executives from Amadeus Hospitality Business Group, The Ascott Group, Carlson Hotels Worldwide – Asia Pacific, Banyan Tree Hotels & Resorts, Fairmont Singapore & Swissôtel The Stamford, IDA Software Group, InterContinental Hotels Group, Micros-Fidelio Asia Pacific, Millennium & Copthorne International, Raffles Hotels and Resorts, Royal Plaza on Scotts, Shangri-La Hotels & Resorts, Synxis Asia-Pacific, Temasek Polytechnic, and the Nanyang Business School. Together, the participants discussed the challenges they face today.
What happened to rate parity?
Ms. Han Ju Yeon of Raffles Hotels & Resorts articulated it best by saying, “Attaining rate parity at the moment is very difficult. Rate integrity is easy if you have a very clear strategy to maintain it. However, the economy is changing so fast it’s hard to control dynamic pricing along with changing management strategies.”
All of the Revenue Managers present at the roundtable commented on the relationship of Revenue Management for “upholding the brand as a selling point”, to quote Mohammed Hamzah, Director of Yield Management, of the Royal Plaza on Scotts Hotel.However, the market is contradicting that strategy. Any business is critical to maintain when occupancy is so low.
From the wholesale business, through agents and consumers, the market is intensely dynamic. Yet the corporate market wants flat rates and stability. What is working against dynamic pricing in the corporate market is the visibility of pricing via the internet.
Mr. Peter Gebhardt, Director of Revenue Management of The Ascott Group said that “When you go into supply outstripping demand in the market, [the power] bounces back to the customer.” Mr. Gebhardt further commented that, “Customers are dictating their terms. The tables have turned already. The customer has a lot more clout because we are all struggling to get the business.”
Mr. Jos Weejes, Vice-President Distribution, Marketing & Revenue Management, Asia Pacific of the InterContinental Hotels Group cited a case where a Korean customer recently negotiated an account of 4,500 room nights. The customer sought a 10% discount on their current pricing. The Revenue Management strategy was to hold on to their Average Daily Room rate as closely as possible. IHG lost the account even though it had been with them for a long time. The customer cared more about the price than the brand value that IHG represented.
“Driven by the education of the consumer,” said Mr. Weejes, “There are different pricing points by different regions. The consumer gets visibility over the internet. They are now comparing prices and have choices to make. This will feed into operations and procurement contracts and ultimately be better.”
The corporate market is changing, however. It looks like a hybrid model is emerging. Corporate accounts that do not have contracts have employees going online to seek out the best rates. Locally negotiated accounts are occurring.Mr. Gebhardt said that “This goes back to being consistent in your approach. You have to have a clear and consistent strategy and stick to it.”
About Cornell-Nanyang Institute of Hospitality Management
The Cornell-Nanyang Institute of Hospitality Management (CNI) is jointly operated and governed by Cornell University’s School of Hotel Administration and Nanyang Technological University’s Business School. Located in Singapore, CNI is strategically positioned to develop leaders, managers and entrepreneurs for the Asian hospitality and tourism industry. CNI offers three hospitality education programs designed to alleviate the severe shortage of qualified talent that is currently plaguing the hospitality industry in Asia and the Middle East.
Equivalent to an MBA, the one year Master of Management in Hospitality (MMH) program prepares students to be theory-based, action-oriented leaders of executive management teams and entrepreneurial ventures in the hospitality and service industry. CNI MMH students spend six months at Cornell University in Ithaca, New York and six months at the Nanyang Technological University in Singapore, thus taking advantage of educational and networking opportunities in both Asia and North America in a single year.
The Professional Development Program (PDP) offers three-day courses that cover different aspects of hotel management. PDP teaches cutting-edge management techniques, presented by internationally recognized faculty members and industry leaders. Participants can earn Cornell certifications in Financial Management, Food, Beverage, and Restaurant Management, General and Strategic Management, Human-Resource Management, Marketing, Operations Management and Property-Asset Management and Real Estate. CNI has hosted over 1000 PDP participants from nearly 40 countries in the last three years. The July 2009 PDP will be held from July 23rd to August 5th, 2009 in Singapore.
The General Managers Program (GMP) is designed for hotel general managers of full service hotels and their immediate successors. Participants in this ten-day program concentrate on strategic hospitality management issues, work collaboratively to expand the foundation of their knowledge, and produce new solutions to the challenges they face. The GMP 2009 in Singapore will be offered from July 20th to 30th, 2009.Please visit the Cornell-Nanyang Institute of Hospitality Management website for more information.
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