As a hotel company grows, deciding what revenue strategies should be held at head office, or centralized, or what should remain in the hands of local management teams, is often tough.
Dimitris Hiotis, Partner and Global Head of Leisure, Travel & Tourism at Simon-Kucher & Partners, has over 20 years of experience in pricing and dynamic pricing through various roles in industry and consultancy. From his early days at TUI to now leading the Tourism, Transportation, and Leisure Practice at Simon-Kucher & Partners, he has watched, consulted, and assisted industry leaders to take on this transition. And with all his years of experience, he believes a hybrid approach is often the best answer.
“Every hotel has local competition and challenges and so you do need to have that local input. However, from an efficiency perspective, it is better to have revenue management specialists centrally with a team focused on revenue strategy and pricing,” he said.
“The ideal situation is to have a central team using data and sophistication to set up the revenue strategy and a process to involve local teams for exceptional pricing, such as when an event comes to town. But to do this you need to equip the hotel managers with easy information and involve them in the process. They are the best people to tell you what is happening in the local market. But it must be a hybrid; the science and the data have to sit in a central position with the local team having an input in the process.”
How To Centralize?
As a hotel business grows, how does its leadership team take the company from local to potentially global? Hiotis has plenty of tips for teams scaling their hotel business, but he does warn that there could be growing pains.
“When you grow as a chain you move away from a world where you are identified by location. You are building a brand identity,” he explained.
For Hiotis, companies need to ask themselves four questions:
- What are we as a brand?
- What do we represent?
- Where are we in the market?
- What is our proposition?
“You must form that identity first. Are you a no thrills or a premium five-star, do you want to be dynamic or remain static in your pricing structure? And from there, you can start to decide how complex you want your pricing to be. But it is vital to set out those principles early, otherwise, everyone will do their own thing. You need consensus,” Hiotis said.
Managing the Change
To execute a centralized strategy, Hiotis recommends gathering a team of people who are already aligned with the process and building a pilot from that.
“Start with a pilot with GMs who are more welcome to it, and then extrapolate it once you start to see success,” he said.
“Start internally, identify people who are interested in this, and then look for external talent, such as a consultant, to advise you on how you need to be set up,” he added.
But how do you overcome the challenges of team members reluctant to change? Those whose mantra seems to be: ‘We’ve always done it this way.’
“The pilot is to prove the story to these people. People are more convinced when they see it working. Carefully find the more willing, and work with them. Make sure you protect any revenue risk. Then, that success story team becomes your ambassadors, and they convince the others. It’s about creating that revenue culture and empowering team members,” Hiotis advised.
Once a centralized strategy is set, leadership can then empower local teams to work within the strategy to optimize profit according to local opportunities.
“In a world where things are more central, and you need to empower local teams, it comes down to communication and collaboration. It requires a lot of work. You need a system and reporting that can be accessible to all parties, with the central team being the keepers of that,” explained Hiotis.
The aim is to achieve one source of truth, with reporting that encompasses the entire hotel performance.
“Integrate this into something a hotel management team needs to look at every day, including review scores, local market RevPAR, etc., Then, when it comes to pricing decisions, most of them can be automated, but if local teams want to interrogate pricing changes they can, and it is easy to see why the price is being increased or decreased. You must make it an ecosystem with inputs from both sides.”
Building the Ecosystem
An integrated tech stack, that combines a PMS, RMS, CRS, and other elements, can help scale this centralized strategy.
“The benefit of an integrated tech stack is that it gives you the ability to find proxies quickly. You can see hotels that perform similarly. Then you can start with that structure and refine it over time. Pandemic or not, there’s always a need for historical bookings to start something. A machine learning method that learns from that setup and adjusts it quickly is very effective,” Hiotis said.
However, Hiotis is again favoring a hybrid approach.
“You need a process that involves people and machines,” he said.“Tech companies that were able to demonstrate the agility of the system and worked with clients to make systems less based on historical data fared well in the pandemic."
"For Hiotis, such systems need to be able to create forecasts that are dynamic and pace driven, to pick up surges in demand and adjust the pricing accordingly. This, for him, is now more important than ever."
“We’re in a strange period right now. Demand is back. Hotel teams are not thinking about revenue management if their system is yielding effectively. They are thinking about staffing challenges, and the chaos in airports, they are more operationally focused. However, a recession could be imminent, and the good times are not going to last.”
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Duetto delivers a suite of SaaS cloud applications for hospitality businesses to optimize every booking opportunity for the greatest overall revenue impact. The solution dramatically increases organizational efficiency, revenue, and profitability by simplifying hospitality revenue decisions and allowing properties to work smarter. The unique combination of hospitality experience and technology leadership drives Duetto to look for innovative solutions to industry challenges. The software as a service platform allows hotels, casinos and resorts to leverage real-time dynamic data sources and actionable insights into pricing and demand across the enterprise. More than 4,000 hotel and casino resort properties in more than 60 countries have partnered to use Duetto's applications, which include GameChanger for pricing, ScoreBoard for intelligent reporting, and BlockBuster for contracted-business optimization. Duetto is backed by investors Warburg Pincus, Icon Ventures, Accel Partners, Battery Ventures, and Spectrum 28.
In January 2022, Duetto was named the world's #1 revenue management system in the HotelTechAwards out of 52 RMS products reviewed and extensive end-user reviews. The Awards rank and evaluate more than 200 of the top hotel technology products worldwide to deliver the ultimate list of best-in-class software products, based on customer feedback from more than 10,000 customer reviews, integration compatibility, organizational health, partner network strength, and customer support quality.
For more information, please visit https://www.duettocloud.com/.