“No Idea is a Bad Idea in this Economy” Hilton Hotels on Incremental Business and Price Integrity
Sharon Duffy, VP Revenue Management, Hilton Hotels Corporation, recommends that one should “constantly look for ways to generate “incremental” business without trading down” the business one has.
“Contract business that may not have been considered in the past, opaque business, targeted marketing, working with corporate negotiated partners that can direct travel and shift market share, going after inbound business from other countries, experimenting with online sites that you have not previously done business with before, etc (can be considered). In this economy no idea is a bad idea and if a hotel really wants to capture business it has not taken in the past the team will have to be willing to risk making a few mistakes,” said Duffy, who is scheduled to speak at EyeforTravel’s Revenue Management and Pricing in Travel USA 2009 Conference to be held in Chicago (September 16-17) this year.
Duffy spoke about the role of RM, price integrity and much more in an interview with EyeforTravel.com’s Ritesh Gupta. Excerpts:
It is counter intuitive to other disciplines, but RM tends to work harder in down markets. Many people think that because there is no excess demand to yield there is much less work to do in RM. What do you make of this viewpoint?
I believe RM works hard in all economies.
In down economies we do everything we can to stimulate incremental demand, ensure all channels are maximised, all segments are priced effectively, and all systems are set up appropriately to capture whatever demand there is to capture.
In a strong economy our focus tends to shift to displacement to ensure we slow or limit the business we book in favour of the business that is more valuable. But our focus on pricing effectiveness and channel maximsation never goes away.
In your opinion, to what extent is it acceptable to compromise on your price integrity during an economic downturn?
It is not acceptable to compromise on price integrity at any level of unqualified business. In any economy there are other ways to discount and to attract additional customers that do not compromise your core pricing.
It is said that there are segments of the market that can be stimulated by aggressive pricing over off-peak periods. How do you assess the same?
As the online space increases, there is a larger segment of the leisure market that can be stimulated with targeted e-mail and online marketing.
What do you think are going to the key issues which RM managers need to focus upon going forward – would it be customer rate resistance, contract renegotiations, competition or price wars?
Group and Corporate contract negotiations and price wars. Our hotels are often negotiating for group and contract business multiple years in advance. While we may be willing to accept significantly reduced group rates in this downturn in exchange for occupancy, we need to be very careful that we are not lowering the rate expectations for dates beyond the foreseeable future.
When the economy does turn up again, multi-year contracts and a lower base ADR, could artificially deflate achievable pricing for longer than is acceptable. Also, price wars within a market are a very real threat. When key competitors resort to guerrilla pricing for unqualified business, Revenue Managers are sometimes forced to do the same to retain a respectable market share. This does not generate any additional market demand, and simply drives down the revenues for all.
Revenue Management practices place a lot of emphasis on capacity constraints, time cycles, and price variables. If one were to go by this view alone, any reference to the "right consumer" is limited only to their ability to pay the optimal price. In some ways, this approach may be deemed to be short term, transactional biased and product orientated. Do you foresee any major change in this in the time to come?
As CRM practices and available data improves, there will likely come a time where the lifetime “value” of a customer will be considered in some facets of Revenue Management. Where that concept goes astray is in the fact the individual travellers, that truly have the lion’s share of traveller spend, are never completely brand loyal. Most frequent travellers have brand preference, but also belong to multiple frequent stayer programmes, and often make their buying choice based on company travel policy or convenience alone.
Duffy, along with other 25 speakers including ones from Continental Airlines, Wyndham Hotel Group and InterContinental Hotels Group are scheduled to speak at Revenue Management and Pricing in Travel USA conference, being held on September 16-17 in Chicago.
VP North America
Phone: +44 207 375 7582