28 January 2020 | BI and data analysis, Pricing strategy, Revenue management, Rate parity, Distribution
Revenue fluctuates as hotels experience changes in demand, but managers are able to exert their influence in the face of these cycles. With the right strategy, teams can maximise the amount of money coming in during off-peak times, according to Gino Engels, OTA Insight co-founder and Chief Commercial Officer, who wrote an article on the subject for PhocusWire.
The first step is to plan ahead for low demand, said Gino, who also addressed the topic in an interview with Hotel Management.
“While your plans will adapt and evolve, you can set the foundations for future years based on this work,” said Gino. “Business moves in recognised, repeat cycles, so think ahead so you don’t have to be so reactive.”
It’s also important to avoid the temptation to slash room rates, said Gino, as well as using data to identify demand bright spots and implementing a “test and learn” approach to evaluate a number of alternative strategies.
Filling your calendar with a channel-by-channel marketing plan is ideal but hold promotions in reserve to unleash if demand dips below a set threshold.
“For revenue managers, unbridled optimism spells disaster. Revenue targets shape annual budgets, from operations to capital investment,” said Gino. “If you set unrealistic targets, you set yourself up for failure.”
“General targets perform poorly because they do not provide specifics that teams can rally around,” he added. “Look at historical low demand and set measurable goals accordingly. Is it occupancy rate? Average daily rate? Or perhaps it's a goal for the number of positive reviews?”
Know what’s coming next and allow time for the tasks needed to make it happen.
Build your database and guest reviews during the high season.
Gino said hoteliers should monitor competitors’ rates but without getting sucked into a downward spiral of price adjustment, which is a shortsighted strategy.
“It’s not great for your brand, and it’s also not great for long-term customer retention,” he said.
Instead, justify the value of your prices with attractive packages that differentiate your rooms from your competitors’ without significantly adding to your costs. Use creative packages, including extras such as cocktails upon arrival and late check-out.
Group business and loyalty package rates can also help build demand without publicly discounting your rates.
The guaranteed revenue they bring will give you time to catch your breath, while also contributing to occupancy targets.
“Most destinations have events throughout the year. Identify certain events that might have untapped demand—for example, a smaller local festival that has the potential to attract more visitors,” said Gino.
Putting together unique packages to stand out from the competition can create demand, particularly with “staycationers.” One potential example is adding a special menu item to coincide with a culinary festival.
It’s also important to use your data to identify demand that might otherwise go unfulfilled. Are low-season searches failing to convert, or has there been a surge from an identifiable demographic you could leap on? Take action to capture these latent demand leads.
“If some of your initiatives are not performing as well as your plan, have enough backups ready to try next,” he said.
By adopting a “test and learn” approach, you can adapt any plans that don’t fully live up to expectations.
Rapidly react to highly converting booking channels. If you spot a surprise spike in transactions from a particular booking channel, consider an immediate release of extra inventory to capitalise on those advance bookings.
“Last moment” conversion optimisation on direct booking channels can help you capture as much existing interest as possible. When a would-be guest abandons an online cart, consider a pop-up offering champagne on arrival or free breakfast. These offer low-cost ways of converting existing demand.
Consider using HotelTonight and other last-minute channels for a limited period. You may see some success in a competitive, low-demand environment.
Use content marketing to show potential guests what they can do during a stay to create demand for off-season visits.
However with the right planning, good analysis of data on your own past performance, and an assessment of demand - in part associated with your competitors’ rates and local events - these last few tips will be optional extras to further boost your revenue, rather than the basis of your activity.
Click through to read Gino’s full article on PhocusWire, as well as his interview with Hotel Management.
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