Revenue Management Tips for the Coronavirus Pandemic

March 17, 2020

This is the second in our ongoing series on managing the coronavirus crisis.

• Post One: Crisis planning for hotels: Best practices in communication, revenue management, and marketing

The travel sector could shrink by up to 25% in 2020 as a result of the COVID-19 outbreak. That’s according to the latest information from the World Travel and Tourism Council (WTTC).

In the hotel industry, occupancy levels have fallen dramatically in China and across the Asia Pacific region. As the coronavirus spreads, European cities are also experiencing a sharp drop in occupancy rates. At the week of March 2nd, significant drops were seen in London (-22%), Amsterdam (-25%), Paris (-31%), and Athens (-45%).

Turning attention to the US, year-over-year hotel occupancy rates were down 7.3% as of the week ending March 7th. ADR was also down 4.6%, and RevPAR down 11.6%. These figures look to drop even more drastically now that many countries have implemented tighter travel restrictions and virtually closed down public life.

The fallout from coronavirus could reverberate for many months to come. However, the industry is a resilient one, and we are optimistic that we will rebound from this as we have before. For hotels, this means preparing for the inevitable return of demand when the outbreak begins to subside. We’ve compiled a list of revenue management tips to help you better manage your rates for this crisis period.

Target domestic travelers

The fear of contracting and spreading the virus has led to a severe decrease in travel as well as drastic travel restrictions. In addition to the recent US ban on travel from Europe, we’re seeing country-wide lockdowns around the world.

As such, the idea of targeting domestic travelers is really intended for when lockdowns are lifted. When this happens, we should first see an increase in domestic demand before international demand returns. Marketing to domestic travelers will therefore be an important first step in any hotel’s initial marketing strategy. 

Take advantage of Pegasus Dynamic Pricing Rules

Our Dynamic Pricing Rules tool can help you target special offers specifically to domestic travelers on your direct channel. Use our country or city filters to limit visibility to the local market, or even define a geographic radius to target potential drive-in guests (as people may prefer driving to flying in this climate).

Paid search budget

To focus on domestic travelers, you may wish to re-evaluate your paid search budget allocations in geo-targeted campaigns. Using Google AdWords, you can target an entire country, state, city, or a smaller area around a location or location groups. By creating special rates and promotions aimed more at domestic audiences, these targeted campaigns are more likely to convert and lead to a higher ROI.

AAA/AARP rate plans

Consider making your AAA/AARP rate plans more visible by including them in the public search on your booking engine. During this crisis, you need to limit friction points by making special rate plans easy to find.

Parking Packages

If applicable, promote attractive “parking packages.” With huge reductions in air travel and more domestic travel, discounts on parking will help you entice a growing number of drive-in guests.

Meetings and events

Major corporations and small businesses alike are rethinking how and where they host meetings and events. This presents an opportunity to target local companies looking for venues on their doorstep. In addition to special deals, think how you can support meeting and event planners in these challenging times. This includes helping coordinate travel plans, facilitating risk assessments, and providing technology (such as live streaming and video conferencing software) so businesses can communicate with remote attendees in affected areas.

Target ‘staycationers’

In the current travel climate, we predict that leisure travelers will take far fewer overseas trips, leading to a potential boost in staycations. However, since people may be wary about booking travel now for fear their plans may have to change, make the pricing straightforward and simple, and ensure that the cancellation policy is flexible.

Be strategic with pricing

Travel prices are dropping as hotels and airlines scramble to attract people willing to travel. This means it’s essential to monitor your competitor’s prices and react accordingly. Given the rapid spread of the coronavirus, it makes sense to track your comp set rates daily as they adjust to swift changes in demand. In addition, keep a close eye on cancellation patterns to adjust your room prices where necessary.

As discussed in our recent post, dropping rates during times of crisis can have long-term negative effects on your RevPAR. So you might also want to find other ways to offer your guests value. Which brings us on to…

Special promotions

Consider creating length of stay promotions, with attractive packages for longer stays. This could include tiered LOS promotions, such as offering a discount of 15% off your Best Available Rate (BAR) for guests staying three nights, and 20% or even 30% off BAR for guests staying for 7 nights or more. Again, you can easily build these promotions using Pegasus’ Dynamic Pricing Rules tool.

You could also take inspiration from hotels getting creative with deals following the outbreak of coronavirus. For example, Hotel Esencia in Riviera Maya, Mexico has launched a promotion for May and June that lets guests either get a third night free or enjoy unlimited spa treatments during each day of their stay.

Despite nine cancellations because of coronavirus, the owner of Hotel Esencia, Kevin Wendle, told CNN Travel that these cancellations have been offset by new reservations after introducing this deal.

Cancellations and refunds

Many people will need some reassurances before they book a trip. To that end, we recommend you relax your rate policies and offer guests the chance to rebook or cancel with no penalties. Consider pausing or removing non-refundable offers and replacing them with more flexible offers during this time, and be sure to communicate this prominently on your website and within email marketing.

Helping your hotel through the crisis

We hope the tips above offer some best practices in revenue management and potential avenues your hotel can explore as the coronavirus spreads. Working with your web and marketing team to align these methods with your e-commerce strategies will be vital in the wake of this virus.

In the coming weeks, we’ll be posting numerous articles to help you deal with the fallout from COVID-19. For help with internal and external best practices in communication, revenue management, and marketing during a crisis, check out our recent blog post.

In the meantime, we’re here to help! If you require help implementing any of these practices in the Pegasus CRS, please contact your account manager directly.