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Latest trends in the fast changing world of revenue management
In June, Travel Tripper, IDeaS, and OTA Insight joined forces to host roundtable discussions on current trends in the fast changing world of revenue management.
Meeting in Orlando and Miami, the distinguished groups of industry leaders and experts covered a wide range of hot topics, including artificial intelligence (AI), machine learning, and the emergence of Airbnb as a distribution channel. Here are some of the key takeaways and highlights from the events.
Airbnb as a distributor
Airbnb has been making a concerted effort to attract hospitality providers to its platform. Travelers can now book boutique hotels on Airbnb, which charges commission fees at 4-5%. As we discussed last year, the platform has experimented with dedicated pages that only feature hotel listings.
In terms of stay length, corporate travelers are leaning towards short stays of one to two nights, a preference that is in favor of hotels instead of Airbnb. However, longer stays are starting to shift towards Airbnb.
Another key point of discussion was that while Airbnb offers a broad spectrum of experiences, hotel customers know what they are getting, and there will always be a need to capture this customer segment.
The changing distribution landscape
The distribution model is expected to change drastically with the emergence of vacation rentals and properties that offer a variety of rooms and experiences. This will create a unique blending of vacation rentals and standard hotel rooms. Just recently, Marriott entered the vacation rental space
with a six-month trial in the UK, adding 200 homes available to rent across London.
In Asia, markets are growing and guests tend to book through tour operators and agencies. In contrast, North American travelers act like their own travel agents and make direct bookings.
Disruption is occurring everywhere across the industry, leading to greater segmentation. For example, cruise ships are beginning to diversify by offering different experiences from the traditional family-orientated cruise. Virgin Holidays is also offering everything from luxury backpacking to glamping adventures in an effort to expand its addressable market.
Overall, the importance of innovation has never been higher—driven by intense industry competition and the importance of standing out from the crowd. Guest loyalty also remains a hot topic, and the need to capture guests for the long term and secure repeat business has never been so crucial.
OTAs vs. hotels: who owns the customer?
We’re beginning to see global chains crack down on the OTAs commission structures. Last year, lobbying efforts by the U.S. hotel industry were planned against OTAs in an attempt to shake up the duopoly of Priceline Group and Expedia.
Given that Airbnb is welcoming hotels onto its platform (and charging significantly lower commission fees than the OTAS), there’s a good chance that OTA giants may start having to reassess the fees they charge.
The topic of who owns the customer was also of major interest, with the observation that whoever owns consumer data controls the narrative. For hotels, getting a direct booking means controlling the narrative because they get access to all of a guest’s data. This direct access to the guest allows the hotel to contact a guest pre-arrival to learn about the guest’s preferences, build rapport, and market upgrades and additional services that would not have otherwise been possible.
Metrics to measure revenue management performance
A key focal point was a discussion around the continued dependence on historical performance instead of forward-looking data, such as pace and pickup. The discussion centered on how technology and analytics can be leveraged so that hoteliers can be proactive rather than reactive with their revenue strategy.
The key metrics for hotels remain the STR/REVPAR Index, history, pickup, and pace performance.
Personalization: the next big thing?
Currently, pricing is not developed for an individual person. At least not yet. But there is some growth in building the capability to narrow down guest demographics, including geo-targeting, analyzing buying seasons, and identifying trends such as previous bookings, on-property purchases, and online shopping behavior.
By segmenting customers in even more refined ways, hotels will be able to create more personalized experiences that are tailored to the unique needs and preferences of the individual.
Artificial intelligence and hospitality
AI is already incorporated into revenue management in the form of automated algorithms. Meanwhile, there is development towards Voice Recognition (VR) for data inquiries, rate changes, and booking behavior.
In terms of interesting new applications, AI is also being used by brands to monitor the landscape for parity. As a result, we’ve seen hotels being fined by brands when their prices are not consistent.
Alongside all this innovation, there are concerns that AI detracts from the core foundation of hospitality: the human touch and engagement. While AI offers significant benefits, it needs to be used selectively to enhance the guest experience, instead of replacing personal service.
Independent and brand hotels
A number of global brands are now expanding into the boutique world to offer more unique and authentic experiences. Along with Curio by Hilton and Autograph by Marriott, we’ve recently seen Tapestry Collection by Hilton and Wyndham’s Trademark Hotel Collection come to market. These “soft brand” options are also designed to appeal to independent hotel owners who want to benefit from a major chain’s distribution without being restricted to their strict “hard brand” standards.
Independents continue to battle against global brands and OTAs, which offer easy booking experience. In order to compete successfully, smaller chains and independent properties must invest in websites and booking engines that offer a slick and streamline booking experience.
In addition, independents face ongoing difficulty in driving brand loyalty. There’s little loyalty among millennials, a demographic that tends to search for different experiences. So hotels have to continually spread the net wider to maintain (and not necessarily gain) market share.
Data, analytics, transparency and GDPR
One participant noted that website and pay-per-click (PPC) performance, as well as booking engine data, should be treated with the same level of importance and transparency as that of a personal bank account.
Another key point raised was a concern regarding the EU’s General Data Protection Regulations (GDPR). These new laws were brought into force across member states in May this year, and are designed to limit how companies collect and use personal data. As a result, U.S. hotels that target EU residents need to ensure that their website and digital marketing adheres to the new regulations.
Revenue management is changing fast
From the continued rise of artificial intelligence and machine learning, to the emergence of Airbnb as a distribution channel, the world of revenue management continues to evolve at lightning speed.
The latest trends outlined above reveal just some of the ways the entire industry is changing, posing new challenges alongside some exciting opportunities for expansion.
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