Article on Revenue Management strategies
The hotel’s long-term strategy – Five best tips from a Revenue Manager
The current pandemic has major consequences for the travel industry worldwide is not news. Now it is even more important to have a long-term strategy. That and good application of Revenue Management can help you.
Most countries start to release the restrictions this month (May), but some restrictions will remain longer than that in order to avoid a new virus wave. In Sweden, the restrictions have been a little less stringent in comparison with other countries, with the consequence that mobility in commerce and entertainment has been less affected in Sweden than in other countries.
However, summer will not be what we are used to and the occupancy and guest mix will probably change. We probably won’t be able to count on travellers from the US and Asia. It will probably be offset to some extent by the fact that we can expect more guests from Sweden and Scandinavia. It is primarily about guests who do not want to travel that far or who will not be able to travel far because of the restrictions. Furthermore, there is also a great risk that the US and Asia will not allow European travellers to the same extent as before, which means that we should be able to expect more domestic guests.
With an increased number of Scandinavian guests, we will also receive more types of guests. There will be a mix of price-sensitive guests, who usually vacation in their home country for financial reasons. This group can get a little bigger as there are more people who have lost their jobs. However, there may also be more in the less price-sensitive segment as they will not be able to travel far due to restrictions abroad. It is thus a group of travelers who save on an expensive air ticket. I therefore believe that there may be a greater gap between the price-sensitive group and those who are enjoying a luxury vacation nearby. However, they will not be able to fully compensate for the loss from travelers from Asia and the United States.
Here are my top tips.
1. Smart and creative pricing
Current travel has declined significantly, however, there is some demand nevertheless and this means that the pricing strategies have an effect.
An alternative to going down in price too much might be to work smarter with the room types you have available. By working with more prices on the higher room types, you can increase the volume and keep the average price at the same time. As these room types are more expensive, the hotels can still afford to offer a certain discount. The standard products can be sold on other channels, such as your own website, Facebook, Newsletter, Friends & Family, etc.
Be ready for the “post-Corona-Virus period” and make sure you have a good pricing strategy for the summer and future. As I wrote, we can expect another type of guest and I predict that demand will start very quickly when the restrictions are released. Many have had to stay home and have longed to be able to travel again. Make sure you match the prices with expected demand.
2. Invest in Revenue Management
Revenue Management is very effective in that a Revenue Manager analyses itself for the optimal strategy. Contrary to the rumour, Revenue Management is a creative work and it now turns out more than usual. We can’t wait until life gets back to normal, but we need to test what strategies are working now. It’s about finding the right price point, but also trying to load different campaigns on different channels and on different room types. Now is the time to try to see the consequences of not holding Rate Parity and offering price after cost of a channel. It’s about having technology that supports the ability to charge different prices on different channels as well as being able to make small price adjustments. That leads to my next tip:
3. Have the right technology
We have a great experience of many different plants and always work in the system’s own systems. I can thus say from experience: it does not cost to have the right technology. I know it doesn’t sound logical at this time of reduced revenue, but now may be the right time to invest time in finding the right technology. It will provide an opportunity to increase profitability in the future. Unfortunately, many hotels live in a world where a lot of hands-on work is still needed to handle bookings, prices and availability. In addition to the Property Management System, hotels need not only have a good connection to a Channel Management and / or Central Reservation System, but they must ensure that the mapping to these systems is optimal. We ourselves have had to become experts in mapping. Other systems that save time are Shopping Tools and / or Revenue Management systems.
It is also a matter of course to invest in an excellent booking engine. It goes hand in hand with the next item
4. Digital Marketing
Investing in a website and an excellent booking engine that allows guests to easily make their bookings is an expensive business unless there is a good marketing strategy behind.
Choose the markets that are important to you. For this year, we recommend to have extra focus on the Scandinavian market.
Make sure you are visible on the various social channels and increase followers. Be interesting and relevant. So post what you think may interest your followers. Pictures of the restaurant, recipes, furniture, Behind-The-Scenes always work very well. From time to time you can put up a campaign. Be visible on the channels used by your customers
5. Make sure your contracts are at the right rate
Companies will probably be a little more restrictive even after the restrictions are released. In addition, corporate travel, in general, has slowed down in recent years and it has to do with the technology of online meetings having improved. Companies have been able to actually reduce travel costs because of this. The current period will probably mean that we will see a stronger downward trend where more companies have learned that it is very good to meet online instead of traveling. One sign of this is that the Slack chat service and the video conferencing site Zoom have grown tremendously in recent times ].
Will it slow down completely? Of course not. People will still have a need to meet and it will continue. It is important to continue to work on answering all RFP (Request For Proposal) requests that you receive from the larger companies.
Arranging lower contract prices will not help hotels get more business guests. We therefore recommend that a general increase be agreed as the costs for the hotels increase. Make sure not to contract all room types, so that you have the opportunity to control the number of contract prices in times of high demand. Remember that, at dynamic contract prices, the discount should be around 10% and also here; do not write agreements on all room types.