The Hotel Management Thailand Summit 2015, held at Bangkok’s Banyan Tree on May 21st, promised ‘top line and bottom line management strategies for hotel leaders’ and the discussion panels comprising leading industry figures set out doggedly to deliver.
The afternoon opened with Stefan Wolf, the Senior Vice President of Revenue & Distribution Strategy at ONYX, and Ben Emery, the Area Director of Revenue Strategy at Marriott. Over the course of the debate – and paraphrasing slightly – we duly learned a number of things:
– 200 rooms is probably the threshold where you should start thinking about revenue management software.
– If you want software, you’ll need to convince senior managers who inevitably won’t understand it. Therefore you need IT staff with fantastic communication skills to persuade them.
– Complex revenue management systems are only as smart as the people who use them. See the point above about senior managers, don’t buy anything too elaborate, and make sure you get strong after sales support.
– There is a general trend to move away from discounting retail rates.
– If nobody is paying retail anyway there is no point discounting retail rates.
– It would be good to get more people paying retail rates because that way a retail rate cut would actually have an effect.
– If you cut your rates, everyone else will cut theirs, and everyone ends up with the same occupancy as before but making less money.
– Forget rates, improve the mix. Move away from wholesalers and towards OTAs. These put you on the shelf, and also in the window.Then persuade your OTA customers to switch to paying retail.
– People use OTAs because the booking process is simple. If your own website booking process is more complicated then you can’t expect anyone to use it.
– If you change your revenue management strategy, it can take at least 6 months to see the results in a resort, but only 6 weeks in the city.
What we also learned was that Marriott are executing a strategy which is relatively simple and perfectly clear. Ben explained that although revenue management can be extended to all areas of a hotel’s operation, the benefits might not be worth the time and effort involved in analyzing the data. Instead, a focus on rooms can be sufficient, and discounting is not part of the plan. Marriott have achieved this by raising the proportion of customers paying retail rates to around 40%, while 10% go through the OTAs. A refusal to cut those retail rates builds trust with customers who know the hotel won’t make last-minute offers at lower prices, while parity with the OTAs is essential in trying to draw business to the hotel’s own booking channels.
Shifting the mix away from wholesalers is also part of the strategy. One problem faced by Marriott is that rooms sometimes appear online at rates which undercut anything officially available. The culprits are wholesalers who attempt to cheaply offload rooms which contractually ought to be sold as part of a package. Obviously Marriott do not take kindly to this, so any strategy which reduces the reliance on wholesalers is seen as a particularly positive move.
Of course, if the emphasis is not to be on price, differentiation from the competition must be based on something else, and for Ben this was the creation of value for customers. He pointed out that social media was the major driving force in altering customer perceptions, especially when things go wrong because hotels are judged on how they react to problems. Stefan agreed – and pointed out that other properties might not even be perceived by customers as competitors if the differentiation strategy is effective. Get that right and Ben’s simplest words of advice might even become a reality: “*Raise your rates! *”