7 ways to play the revenue management game in online travel
Much has changed in the field of RM and today executives need much broader skills to be able to compete.
By Pamela Whitby, Editor, EyeforTravel Ltd
1. Profitability is the name of the game
It's becoming increasingly important for hoteliers to focus on profitability. "Top line revenue is sometimes easier to get because you can expose a hotel to lots of distribution channels but the cost structure for say booking.com is different compared to your own brand website," says Chinmai Sharma, VP Revenue Management and Distribution at Louvre Hotels. What revenue managers today need to understand, is that all channels are not the same and all have a different impact on profit and loss.
2. Pricing: it's complicated
The person responsible for pricing has a tough role. Why? Because it impacts all top line revenue channels and so requires a focus on OTAs, brand websites, e-commerce platforms and so on. Revenue managers must also get involved in many different parts of the business such as pricing for corporate or group accounts. As Carlos Sánchez, Senior Manager Big Data Analytics at Carlson Wagonlit Travel points out, merging the data streams from multiple data sources can be tricky.
For small and large chains alike and even independent hotels, the internet channel continues to grow and that impacts pricing too. "In our business 30-35% of the business comes from online channels which include the brand website as well as the OTAs and that has a direct impact on pricing," says Sharma. While customers may end up on the call, Sharma is "pretty sure that more than half the firm's business starts online".
3. It's a mobile journey but people still like to talk
People are increasingly comfortable booking via mobile but Louvre Hotels call centre operations continue to grow at around 40% a year. "People may start the journey on a mobile device but will eventually hit the green button to call," says Sharma. Of course this varies from country to country. In France, for example, people definitely prefer speaking to a person, whereas in the UK and Germany people are more comfortable using a credit card online.
4. There are two sides to the coin
A lot is said about the importance of driving more direct bookings. Because Sharma has worked for Expedia he understands the power of distribution. The most important thing, he says, is to manage each channel and to understand where you can compete. "When the customer is in the hotel they are your captive audience and you can do more to encourage direct bookings in the future," he says. But at the same time he understands that he can't spend a billion on online marketing in the same way as Expedia and booking.com can. So, see where the OTAs are adding value and where you can get business yourself and then prioritse. "It's an ongoing game and you have to play it," he says.
5. RM can't function alone
Revenue managers today need to understand the nuts and bolts of the business – everything from distribution channels to e-commerce, sales and marketing and how paid search impacts traffic and conversion. "The whole company strategy today has to be aligned. "If you have a pricing strategy then you need to know what are you trying to sell and this has to match with your business plan and marketing plan and so on," says Sharma. According to Sánchez one of the biggest challenges for revenue managers is that they need to convey the insight in a way that is clear, relevant and actionable so the best possible business decisions can be made.
6. Analytical skills need work
Today you can track a lot of initiatives and understand where and how they are delivering a return on investment. So if marketing is working on a TV ad campaign, then you can actually track increased hits on your website. So aside from a focus on profitability, RMs also need to hone their analytical skills. "In our hiring process it's becoming harder and harder to find people who have all the skills we need," says Sharma. Interestingly, he prefers to hire someone who has had some exposure to sales and marketing rather than someone who has been purely pricing in silos. In Sharma's view, sales and marketing people "are a bit more robust".
7. New tools mean greater transparency
Sharma says it's encouraging to see new RM tools – like those from Duetto Research and Price Match - that make the industry more transparent and are relatively easy to learn. According to Sánchez there is both an upside and downside here. "With the proliferation of inexpensive technological tools, it can be easy to focus on lots of different things at once and this perhaps yields lesser results than when focusing on a few key areas," he says. It will, therefore, be important to remain focused on the solutions that will produce the highest impact.
To hear more insights from Chinmai Sharma, VP Revenue Management and Distribution at Louvre Hotels and Carlos Sánchez, Senior Manager Big Data Analytics at Carlson Wagonlit Travel join us in Amsterdam for Smart Travel Analytics & RM 2014 (Nov 24-25)