There is no college course, playbook or precedent on pricing hotel rooms during a pandemic. So revenue teams have been learning on the fly over the past nine months, and leaders say there is a completely new skill set required. Revenue experts across the industry have been stressing flexibility – with shorter booking windows, cancellation policies and meeting new guest expectations.
In part one of a three part series, we highlight best practices from some of hospitality’s top leaders on pricing during a pandemic and preparing for the industry’s inevitable recovery.
“Hoteliers need to better understand the needs of their customers in order to adapt their revenue management strategies and tactics. Why are lead times shrinking? Are there new purposes for visits that have arisen from the new reality we face? How can we create compelling products that align with the new normal? How can we turn hotels with historically high business and group mix into leisure-focused properties when leisure represents the vast majority of demand? How can we make them comfortable booking and staying with us and to advance care along the way? Selling products with the right purpose, lead time, price, fencing and restrictions that speak to our guests’ needs will advance the care needed to convert on bookings in our new normal.”
“Hoteliers need to understand what their new booking pattern and mix of business is during this tumultuous time. Overall, the booking window has been truncated dramatically with most markets experiencing lead times less than 14 day in advance. This leaves little time to proactively yield and leaves little margin of error for pricing.
“There are several things a revenue management professional should look at in the short term to stay abreast of current demand: Lead time, market segmentation mix, length of stay (as well as extending a stay once the guest is onsite) and competitive pricing in the market. Historical data has been stated to be an obsolete benchmark; however, one needs to have some sort of “normal” benchmark that is utilized when analyzing the current business trends. By using historical business mix and booking patterns for long term success, a revenue manager can potentially start to see early returns of some business segments or even find the potential to discover new segments that are rebounding more quickly than the historical producers.”
“First, RMS systems and forecast methodology need to be heavily weighted on short term trends and be updated hourly. Time series forecast of last year is completely unreliable.
“Second, don’t miss the stair step recovery. Demand could come surging back in Q3 swiftly as the vaccine gets distributed. Do not get caught with low rates posted four to six months from arrival just because there is no pick-up now.
“Third, be aggressive in Group pricing and requirements in Q3 and Q4. There is a lot of pent-up Group demand that has moved to the second half of 2021.”
Firstly, I think the pandemic has highlighted the inherent strengths of the serviced apartment sector over its hotel counterpart. Over the years both sectors have coped with terrorist incidents, severe weather events and regional conflicts, and still bounced back. The current situation, however, will leave lasting scars. Operators of serviced apartments have managed to maintain reasonable occupancies since March this year by building on those market segments that are relatively inelastic. This includes a base of long-stay guests resident for 30 nights or more, individuals who are relocating for work or personal reasons, and high-net-worth students. Although most corporate business dried up in late March, there are still some innovative ways serviced apartments can attract companies to book, for instance by offering stable and super-fast WiFi that their employees cannot access from their homes.
“Although the pipeline of transient business has been throttled, there are still some tactics serviced apartments can employ. We found that the corporate business still out there books at the very last minute, so we set up short-lead mobile-only rates to capture this late demand. On the leisure side, we have shifted our focus to target families looking for secure multiple bedroom accommodation options, primarily in the domestic market. Of course, the situation is ever-changing, so flexibility is key. As soon as travel corridors begin to open up, operators should have messaging and incentives ready to go to tempt back business from some of their habitual source markets.”
“We have seen the booking windows shrink considerably in 2020 as people are much less certain about their travel plans. Therefore, while it is important to have more flexible booking conditions, you have to play the waiting game and remain confident that bookings will come in much more last minute. Instead of using previous years data and pace, you really have to look at the past few weeks instead. While the short-term picture remains unstable with local, state and federal restrictions constantly changing, the long-term picture is more positive.”
“Hoteliers should be flexible and able to react fast to changes and new trends. Be ready to discover new market and demand trends. Manage systems that may help you to highlight in real time market demand trends and new opportunities.”
“Resources are thin with a focus on one metric at least through 2021: cash flow. This means taking advantage of every opportunity that is out there and not resting on one’s laurels. For revenue management, this means rate parity is critical to creating consumer confidence and driving more direct bookings – at Preferred, we’ve seen a significant increase in direct bookings for those hotels practicing parity. Clearly, that not only means more revenue but also lower cost. Also, this means understanding the evolving competitive landscape to ensure you’re pricing appropriately, creating valued offers that are creative (to drive local drive demand – guest room day use, pool passes, etc.) and embracing technology and resources to help drive efficiency (outsourced revenue management, calibrated RMS systems, interfaces, etc).”
“It will be critical to have more and better technology to support the recent changes in demand and those that may be coming in the future. Revenue managers will be better off having a good RMS that can account for a switch in the way it takes historical data and maybe looking at 2019 and not 2020 at least for the first year, and then adjust again to self-learn from the most recent period.”
Hoteliers have a tendency to look back, to analyse historical data in an attempt to predict the future. Instead, in my view, we should focus our attention on the here and now. Analysing the business on the books, what business you are able to secure, finding price sensitivity and being able to predict consumer desires and behavior is critical. Remember to scrutinise the data, assumptions based on gut feeling alone, without the backing of the data, could be costly.
COVID has required revenue leaders to rethink how they approach pricing, marketing and distributing their hotel rooms. Fortunately, these new ways of operating will set hotels up for success not only now, but well into the future. With a more flexible approach to tracking supply and demand, revenue leaders will be primed to stay ahead of their competition and ensure they’re capturing the most revenue – and profit – on every booking. Next week, in Part 2 of OTA Insight’s revenue leaders’ interview series, we’ll look at how technology and automation are impacting how revenue teams are organized and how daily functions are changing.
We realize your typical day to day has drastically changed. You’re no doubt doing more with less, and every single booking counts. With millions of data points, Market Insight can help you uncover new revenue opportunities. Learn how here.