Revenue Management in Today

1
Revenue Management in Todays Online World
Online Revealed Toronto May 2007
2
Introductions

• Victoria Edwards
• Over 25 years travel, tourism, hospitality
• Hotelier, entrepreneur
• University of Victoria, University of British
  Columbia, DuBrulle French Culinary Institute
• Board of Directors HSMAI
• Advisory Board AHLA certification program
• Co-founder/co-owner Buckhiester Management
• Creator of REVRoadMap

• Buckhiester Management
• Founded in 1995
• Client base - hotel resort companies
• N. America, Europe, Caribbean
• Offices - Seattle, Vancouver, Washington, DC
• Products REVRoadMap REVolution (rooms, FB,
  Golf, Spa)

3
Who is in the room today?

• Role
• Sales/Marketing?
• Corporate level?
• Property level?
• Revenue Manager?

• Industry
• Hotel
• DMO
• other

4
Objectives

• Better understanding of the interdependent nature
  of demand creation/capture/management
• Overview of how evolution of the online world has
  impacted RM
• Provide some suggestion tips for your RM
  practice moving forward

5
Topics

• Functional areas business process
• Evolution of Distribution
• Impact on RM practice
• First line of defense your website
• Measuring Performance
• If I were in your shoes.

6
Three Inter-dependent Disciplines
7
Revenue Management as aBusiness Process
REVRoadMap
8
Traditional Reservations
9
Distribution Management - Present
10
The Mechanics of Onward Distribution
Four ways that Internet sites receive hotel
information rates.
GDS
Switch
Extranet
Reservations
Smaller websites
E-Mail
11
GDS Powered Websites
Booking Engine
Onward Distribution
Travelocity, GetThere, Site59
Trip, Cheaptickets, Lodging, Orbitz, ebookers,
Collegetravelnetwork
Hotels.com (retail version) Expedia, Hotwire,
Lodging, Priceline
OneTravel, Vacation, opodo
12
Switch or Data Base Powered
Booking Engine
Onward Distribution
TravelWeb, Hotwire, Travelscape, TravelHero,
CNNtraveller, Lastminute.com (over 1,200 sites)
Hoteldiscounts, Yahoo, AOL, 180096hotel,
Travelnow, Lowestfare
Placestostay, Gotrooms, yahoo, USAhotelguide
13
Technology

• External
• CRS
• GDS connectivity
• IDS connectivity
• Group/meeting websites
• RFP websites
• Rate Shopper systems
• CGM Customer Generated Media

• Internal
• PMS
• POS
• RMS
• Sales/Catering
• CRM
• Hotel website
• Web booking engine
• CMS (channel management systems)

Source HSMAI De-Mystifying Distribution
14
Reservation Sources Major Hotel Brands 2006
26.1 -1.5 05
38.3 20 05
35.6 5 05
Source TravelCLICK April 2007
15
Internet Source Breakdown - Major Hotel Brands
2006
81.4
Source TravelCLICK April 2007
16
Hospitality Revenues Generated by the Internet

• In 2006, 27-29 of all revenues in hospitality
  would be generated from the internet.
• Another ¼ of hotel bookings will be influence by
  the Internet, but done offline.

17
Hospitality Revenues Generated by the Internet
(cont)

• In 2006, 54 of all internet bookings in
  hospitality are projected to be direct to
  consumer (B2C) via hotel owned websites.
• By 2008, the direct portion of online bookings is
  expected to reach 62.
• Are you ready for this dramatic channel shift?
• Source Hospitality eBusiness Strategies

18
Evolution

• Tech Impact on hotels
• Seamless /Transparent distribution
• Rate Integrity
• Economy commoditization
• Education has not kept pace
• Lack of technology integration and data integrity
• Segments begin to blur

19
Evolution

• Tech Impact on Guest
• Better educated/well traveled
• Commoditization sets dangerous price references
• Poorly defined value prop mismanaged fences
  lack of rate integrity
• Increased use of 3rd party providers
• Distrust set stage for social networking

20
Travel 2.0

• Evolutionary stage of internet development in
  tour travel segment
• Shift from supplier-side control, static content
  to consumer driven/controlled dynamic content
• Includes consumer driven content social
  networking, highly interactive content,
  interfaces mash-ups

21
Travel 2.0

• Emphasis is on value experience rather than
  price
• Seamless combination of content from multiple
  sources in a single experience
• Examples Gusto.com, Trip Advisor, Travel Zoo,
  triphub.com

22
Travel 2.0

• Types of T2.0 Sites
• Blogs travel blogs include video and written
• Wikis consumer driven guides or reference info
• Reviews primary purpose is to over marketing
  unbiased review of hotel, restaurant, attraction
• Mashupscombines content from more than one
  source into integrated experience

23
Site Sample

• Mash-ups Gusto, Travelbud, Triporama, TripHub
• Blogs YouTube Travel, Travelistics,TheLobby.com
• Reviews tripadvisor
• Wikis wikitravel,turn here, IgoUgo
• Groups groople, meetingsonline

24
Demand Creation

• In 2007, a remarkable 68 of hoteliers will be
  shifting their budgets from offline to online
  marketing activities, representing a huge shift
  from traditional methods.
• The top three Internet marketing formats
  hoteliers believe produce the highest ROIs are
  website optimization, Search Optimization
  Organic Search, and website re-design.
• Source Hospitality eBusiness Strategies December
  2006

25
So why should you care?

• Potentially impacts all aspects of RM business
  cycle
• Product definition
• Competitive benchmarking
• Pricing
• Forecasting
• Mix manipulation

26
Product definition

• Matching User needs to Product
• Defining Hotels Segmentation
• Inventory Stratification
• Product Utilization

27
Competitive Benchmarking

• Market supply demand
• Qualitative Quantitative
• Positioning by segment
• Positioning by channel

28
Pricing

• Rational identify most valuable segments
• Shift from traditional models cost to market and
  market to value
• Drivers of Price reference
• Consistent application of fences
• BAR derivative pricing

29
Who Determines Price?

• 1 Truth Customers drive prices
• Price References
• Product line price influences
• Past price influences
• Purchase context influences
• Prices of similar items
• Cost-based influences

30
The Price Triangle
Premium Demand Customers willing to pay
higher than fair market price e.g. Incentive Group
405
Fair Price (Rate of the Day) Corp Meeting no
rooms
Price
Discount Demand Customers seeking lower than
fair market price e.g. Association Dinner
Retail Demand Customers seeking fair price
0
Volume of Sales (duration of day parts number
of covers)
295
31
The Price Triangle

• Customers determine where they fall in the price
  triangle
• Based on demand, different every night
• The fair price for each segment of demand is the
  price that yields the maximum revenues from the
  balance of occupied function space (or outlet
  seats) per day part and average check for that
  segment

32
Why create BAR rates?

• Move from opaque to transparent channels
• Poor understanding of Rate Parity vs. Rate
  Integrity
• Commoditization of product through poor rate
  structure management
• Blurring of market segments online

33
Forecasting

• Unconstrained rather than constrained
• Micro-segment
• Forecast accuracy by day of week
• Trend analysis
• Role of history

34
Forecasting
Free and Accurate Airfare Predictions Find out
if you should buy now or wait.  Learn More
35
Mix Management

• Quantify performance
• Look at Index Balance
• Leverage opportunities based on segment demand

36
Trends in Group Business

• Leisure group travel segment fastest growing
  segment will be small gatherings of up to 9 rooms
• By 2008 total small leisure group segment will
  grow at twice the rate of other groups
• Corp meetings with less than 25 attendees
  projected to increase by 13 between 2006-2007
• Sarbanes-Oxley continues to force companies to
  tighten controls on travel

37
Trends in Group Business

• Components of large meetings (e.g. RFP, housing
  management) will continue to move online
• New entrants into market as well as
  intermediaries will push need to consolidate
  portions of group meetings lifecycle
• Big gap between supplier perceptions of needs of
  buyer and consumer/planner expectations

38
Why is Mix Manipulation So Important?

• Asset management versus business management
• Diversification of risk
• Managing yield from the bottom up
• Return cycle to equal levels of profitability
  much easier

39
Distribution

• Distributed work force Travel 2.0 continue
  morph the distribution landscape
• 3rd parties intermediaries new entrants such as
  groople getting into group game
• Lowering distribution costs capturing
  demographic data

40
Hotel Website

• Purpose
• Attract targeted traffic to your web site.
• Retain keep traffic on your site returning to
  your site. Eliminate opportunities for
  disconnect.
• Convert succeed in having visitors take a
  desired action.

41
Proprietary Website

• Key Considerations
• User experience/design especially w/ booking
  engine
• User needs vs. Site objectives
• Navigation and architecture
• Search engine optimization
• Link popularity
• Meta tag review
• Content review
• Web traffic analysis

42
User Experience Design

• When reviewing your sites look and feel
  consider visual application of text, graphic page
  elements and navigational components.
• In a website, user experience is governed by the
  users interaction within the website.
• How successful is a user in fulfilling his/her
  goals? Is the experience difficult? Or is it
  smooth?

43
User Needs vs. Site Objectives

• Ensure that the users needs and the sites
  objectives correspond
• Externally derived goals for the site usually
  determined via user/demographic market research
  are not in conflict with the business, creative
  and other internally driven goals for the site.

44
Search Engine Optimization

• A web site efforts to be ranked high on a listing
  by virtue of appropriate copy writing and links
  to from other complimentary links
• Search engines such as Google yahoo! Use
  spiders to look for site based on the keywords
  used by an individual

45
SEO Tools

• Google PageRank - Page rank is an indication of a
  pages popularity and relevant content. It is
  established by the number of quality pages with
  links targeting the site pages.
• Link Popularity - indicates how many links are
  targeting the site. Linking is critical to page
  rank..
• Reciprocal Linking Program - increases the number
  of links pointing into the site.

46
Website Metrics

• Marketing
• KEI key word effectiveness index
• Page Rank
• Link Popularity
• Traffic Analysis
• Revenue Management
• Visitor to Book ratio
• Visitor to Look ratio
• Look to Book ratio

47
Metrics

• Then
• ADR/RevPAR/Occ
• ADR/RevPAR/Occ Index
• GOPPAR
• EBITDA
• Comp Rank

• Now (all of the Then )
• Contribution/segment
• Contribution/guest
• RevPASH
• RevPSF
• RevPACV
• Look to book
• Key word density
• Page Rank
• Forecast accuracy per segment per day

48
Strategic Mistakes

• No clear eDistribution strategy
• No trained distribution expert (viewed as
  clerical work)
• Lack of knowledge of connectivity (how CRS
  talks to GDS, how GDS talks to Internet)
• Lack of knowledge of functionality

49
Strategic Mistakes

• Senior management underestimates complexity,
  labor intensity of managing sources (just do it
  mentality)
• Underestimating impact of staff turnover
• Unaware of distribution options
• Rev. Mgr. tactically strong, strategically weak

50
Tactical Mistakes

• Rate loading errors loaded but not active, rates
  not loaded, wrong rates, inappropriate rate
  display order
• Inaccurate property data, not checked (HOD)
• Improper use of stay controls turning business
  away
• Contribution reports tossed, source under
  performing

51
Tactical Mistakes

• Not understanding what travel agents or consumers
  see
• Adding too many sources at once
• Not completely understanding product line
  difference between self and comp set

52
If I were I GM Today.

• Ensure that team is working together to obtain
  balance between demand creation/demand capture
  and demand management
• Review current product offering in term of user
  needs
• Check for inventory stratification opportunities
• Check Review sites/Blogs to see if guest
  benchmarking aligns with your comp set

53
If I were I GM Today.

• Ensure that team can articulate the difference in
  value proposition per product compared to comp
  set
• MUST fully utilize 3rd party reports STR,
  Hotelligence,Future Pace
• Ensure pricing structure recognizes most valuable
  segment

54
If I were I GM Today.

• Is relationship between BAR rates and derivative
  pricing understood by team?
• Chart segment pricing against comp set to ensure
  reasonable positioning
• Are forecast based on unconstrained demand? Are
  they granular enough?
• Do you measure forecast accuracy trend by day
  of week and segment?

55
If I were I GM Today.

• Are indexed balanced? If not what shift in mix is
  required to achieve balance?
• Make distribution plan part of annual business
  plan process
• Ensure team is aware of segment versus source
  costs
• Have website audit conducted by outside source to
  look at design functionality web optimization
• SEO measure look 2 book, KDI, page rank,
  traffic analysis monthly

56
Reference Sites

• www.websidestory.com
• www.alexa.com
• www.wordtracker.com
• www.hitbox.com
• www.seochat

57

• Questions?
• Comments?
• Thank you for your time