Revenue Management & Digital Marketing!

Hello Everyone,

I know you all have waited since long for this, many followers asked me about my next blog. …. finally I got a chance to write a new blog!

In my past two blogs, I tried to cover Basic Fundamentals of Revenue Management and Functions of a Revenue Manager (RM). The discussed Revenue Management techniques are very detailed and the blogs elaborate each attribute separately with the process as listed below.

• Product Knowledge
• Services Offered – Categories & level of satisfaction
• Market Demand Supply Ratio
• Market Competition / Market penetration Index
• Market Segments for your product Vs Comp set
• End Customer – his behavior & booking pattern
• Rate Analysis – Demand Forecasting
• Cost Analysis – Operating Cost

In this blog we will study the opportunities to optimize Revenue by exploring relevant sources & how does it help in developing a Brand.

To succeed in our life we always need support from our family, friends, colleagues and well-wishers. Similarly, Revenue Management alone cannot achieve the desired goals to optimize a hotel’s Revenue. It is necessary to have a good connect with the following factors:

 

Brand Reputation Management (ORM – Online Reputation Management):

Today’s world has witnessed a very fast upgrade in technology with superfast connectivity. The world has come closer and various platforms are now open to share your views about a product / place. Thus, the term Online Reputation Management is now getting famous in the hospitality industry. The most important aspect of getting business is your Market Reputation in hotels. It gets defined by the Guest feedback / Reviews on various online channels. The value of a hotel brand is also counted by the efficiency to resolve issues by directly contacting guest and how quickly you revert with management response for each guest review (counted as Response Rate & Time). In few cases, A guest can register an online complaint even during his stay in the hotel and a few hotels are very prompt in resolving these issues immediately in order to create a better Guest Satisfaction Standard. It’s all about the coordination of Revenue Manager with hotel Operations team and the SOPs followed at the hotel level. A Corporate Revenue Manager ideally keeps a track of response ratio and ratings on various online channels including Tripadvisor, HolidayIQ, Google, Social Media, and various OTAs. Today there are some good Reputation Management softwares available in the market which also gives an alert on the GM’s app immediately as soon as a new review gets published. In case of a few OTAs, Reputation – Review Score / Response time is one of the factors of algorithm for ranking. Not to mention better the review score, better is the conversion rate.

   

Role of Brand Website:

It’s recommended to have a user friendly, e-commerce based website for the hotel. Apart from the reason of giving details about the property to the visitors, the main objective of having a hotel website is to generate revenue. No point in having a fantastic website and spending a bomb without any revenue generation. Any hotel website should give as much details as possible. It is a place where a non-verbal sale is taking place. The pages need to be updated regularly. It should also have a booking engine which should be quick, user-friendly, secured, and which helps in optimizing the booking conversion rate. Hotel website is also required for Marketing your hotel online. As per latest technology, it is recommended to have CMS (Content Management System) linked to hotel’s website. It simplifies the task of updating the website pages / content regularly. It’s proven that over 53% of the visitors on your hotel page on other online channels search and visit your website for more details. If you have a good website with Internet Booking Engine it’s likely to materialize guest revenue better than other channel saving commissions / transaction fees to OTAs.

 

Search Engine Optimization (SEO):

SEO is the process of getting traffic from the free or Organic search results on search engines to your website, Google is having over 90% of Market share hence the focus is always on Google Search Engine. SEO process is generally a lengthy and ongoing process, Google has its own search algorithm, based on which it crawls website data and also your website ranking for particular keywords is decided which is dynamic in nature. SEO is further classified as On-page and off-page SEO. On-page SEO is based on Content, Title Tags, Meta Tags, Alt Tags present on your website whereas Off-page SEO is based on directory submission, articles, media, blogs, 3^rd party links etc.

Selection of relevant keywords plays an important role in getting both website traffic and conversion. For example keywords like ‘Hotels near Mumbai Airport’ is more specific for Airport hotels than generic keywords ‘hotels in Mumbai’. The value of those keywords is mainly dependent on the search volume on search engine. Say in above case ‘hotels near Mumbai Airport’ has monthly search volume of 2000 unique searches versus ‘hotels in Mumbai’ has monthly seach volume of 30000 unique searches but for Airport hotels the conversion on ‘hotels near Mumbai Airport’ will be higher than generic keyword ‘hotels in Mumbai’ as in first case the hotel is getting only relevant traffic with higher probability of business materialization.

It’s always advisable to invest some amount of money in ongoing SEO, results won’t be quick but it will give you better ROI in longer run and thus better positioning on Search Engine for relevant keywords.

Below screenshot shows top 5 Organic search results for Hotels in Mumbai in Google.

Social Media Optimization (SMO)

Apart from connecting people, now-a-days social media is also being used to generate hotel bookings. Thus, becoming a new distribution channel for the hotel. Facebook which is the topmost Social Media channel gives opportunity to add hotel’s booking engine directly on your facebook page. For a Hotel Brand today it’s a necessity to be present and active on various social media channels like Facebook, Twitter, Youtube, Instagram, Google+, Linkedin, Pinterest etc. to showcase their Brand, Product, offerings & USP.  Each Social Media Channel has its own popularity and clientele. It’s also advisable to do various Marketing campaigns to optimize your direct and indirect sale through these distribution channels.

  

Digital Marketing:

Digital marketing is the marketing of products or services using digital technologies, mainly on the Internet, but also including mobile phones, display advertising, and any other digital medium.

 1. Search Engine Marketing (SEM)

Part of digital marketing, but restricted to keyword searches on various Search Engines. We have already discussed about importance of right keywords. Depending on the volume, the top 3 and bottom 3 positions on Google search engine are dedicated for paid links, refer to below screenshot.

To appear in this slot you need to bid for that keyword (Google AdWords). Depending upon Search volume, Pay per click (PPC) gets defined and it’s variable. Only way to appear in top 3 listing on Google is to bid higher than others for that keyword. Pay per click (PPC) varies from Rs. 10 to Rs. 500++. Even if visitor clicks on your website link, the conversion won’t be 100%, thus it’s very analytical and involves dedicated work to monitor the campaign closely for days of week, time slots, sources and keywords to ensure good ROI. Once you start doing PPC campaign, if your conversion rate is good then you will get an option for Cost Per Acquisition (CPA), means you pay only when acquisition (transaction / booking) takes place.

 2. Google Affiliate & Remarketing Campaigns

Google has huge affiliate channels who rent out their website space to Google and thus Google allows you to use such space on affiliate website to market your product. Again Google Affiliate Campaign works on Cost per click basis. But in this case you can showcase graphical advertisement in gif format to audience. The chances of conversion are also better. Its depends on hotel to hotel, In a few cases I have personally seen Google AdWords working better than Google Affiliate advt whereas in other cases Google affiliate works better than Google AdWords.  Refer below screenshot of zeenews.com – You will notice a banner of Piramal Housing Finance on top as well right hand side blue banner of Digital Training Hub.

Remarketing – is just to showcase the special offer to a guest who visited your website earlier. This is a very specific advertisement campaign and results are much better as the guest has already visited your web page and knows the product. Remarketing campaign helps those guests in taking quick decisions as it has product recall. It works with Google affiliate through cookie tracking mechanism by Google. The advertisement or banner is specific only for that user, other users cannot see the same advertisement unless he has visited your website. Remarketing, also known as ‘Retargeting’, can dramatically increase your conversion rates and ROI.

In below screenshot right hand side banner sponsored by Tripadvisor is a part of remarketing campaign. It shows me hotels I visited on Tripadvisor with best rates.

3. Social Media Marketing (SMM)

We have already seen Social Media Optimization which is a free activity. Nowadays Social Media Marketing – Paid Campaigns are getting popular in deriving customer to your website also to do Brand Marketing / Product Marketing and promote events, food festivals, F&B Promotions etc. You can specify targeted audience and your campaign involves only those users. There are so many filters including Geographic locations, Age, Sex, income range, Frequent traveler, Food lovers, people looking for banquet space etc.

Have a look at how Social Media Marketing Banners appears on Facebook. The following banner is sponsored by Tripadvisor.

Today because of high speed internet, many top hotel brands have chosen to invest in ‘Video Marketing’ campaigns to promote their brand / product on Social Media channels.

I am sure with use of latest Digital Marketin option, hotelier can optimize RevPAR.

 

Thank you!

Pramod Kulkarni

Group Vice President – The Ambassador Group of Hotels & Ambassador’s Sky Chef

Advisor – RateGain

 

Stay updated with me, follow :

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All about Revenue Management in Hotels

Hello Everyone, Welcome back!

In the last topic; we had discussed about the basic fundamentals of Revenue Management & what Revenue Manager (RM) should know while practicing Revenue Management techniques. In this blog I am elaborating each attribute separately with the process.

Product Knowledge

Whether you are in Sales, Service or in Revenue Department, it’s very essential for you to know the ‘Product’ thoroughly. You should be aware of Following:

1. Total Inventory of the hotel, Sellable inventory and category-wise number of rooms available in your hotel.
2. Differentiation between Room categories in terms of Area / size, View, Ambiance, Amenities, Exclusive use of services (like Club Lounge) etc.
3. Various view options from each Room Category ( for example extreme right hand side wing has Mountain view, 5 rooms of each floor are Sea facing etc)
4. F&B Outlets – You need to study each F&B outlet including Theme, Cuisine, No of Covers, Best selling dishes, Specialty etc.
5. Banquets & Conference Rooms – You should know basic details like number of Conference Halls & Meeting Room venues, Maximum Capacity in various styles (like U Shaped, Theater, Classroom, Roundtable etc)
6. Details about facility offered to guests like SPA, Recreational facilities – gaming zone, Gym etc.

Services Offered – Categories & level of satisfaction

Now as you know in-and-out of the product, next step is to categorize your hotel in the segment it fits in?

Check whether your hotel comes under Luxury, Premium, Mid-market or Budget segment so it will be easy for you to target the right audience. Further you can sub-segment it to Business or Leisure hotel. You should also be aware of your Classification (2* to 5* Deluxe) & positioning of the hotel in market.

Reputation Management – Find out the Guest’s Satisfaction level by analyzing GSI through comment cards / feedback reports / survey, Tripadvisor Reviews, Reviews on various OTAs, Meta-searches & Social Media. With this you will come to know exact where you are standing in terms of product as well as Services. Better Reviews always helps you in selling your hotel to customers. Ensure that hotel updates the ‘Management Response’ for each and every review. Review sites like Tripadvisor gives the facility like ‘Review Express’ to send out personalized email to all the guests stayed in your hotel asking them to post review. Please make use of it.

Market Demand Supply Ratio

You are now well equipped with all information about your product, services & hotel’s reputation in the market. Now it’s time to do a Market Survey to find out Demand – Supply Ratio in the City / Area. It’s essential to study past 4-5 years trend of Demand Vs Supply in the City.

Supply – Supply is hotel wise inventory available for the day in your City / Area / Market. In case any new hotel opens in close proximity, then you must add inventory of new hotel in the City supply list. Note YOY Growth in Supply

Demand – Demand is the hotelwise RPD (No of Rooms sold Per Day) in your City / Area / Market. Note YOY Growth in Demand.

Demand Vs Supply ratio will give you overall City Occupancy trend for past 4-5 years, now you have some ballpark figures to rely on. Plot a Graph of Demand Vs Supply for past 4-5 years you will analyze exactly how the market is fluctuating, whether you have over supply in the market? Is there increase in Demand Vs low Supply? Occupancy trend indicates healthy increase YOY? Accordingly you can decide Rate Strategy for the year. BAR Rate slabs, also get derived from this exercise.

Market Competition / Market penetration Index

Market Penetration is one of the Growth Strategy to see how much you had penetrated in market as compare to the similar product available in the market.

Market Penetration index (Occupancy index) is calculated by taking ratio of Actual Market Share to Fair Market Share.

Fair Market Share (FMS) – Ratio of Hotel Inventory to Total Inventory (in Area)

Actual Market Share (AMS) – Ratio of Hotel RPD to Total RPD ……(RPD – Rooms sold Per Day)

To start with, you need to select your Competition Set (Comp Set) – While choosing your Compset, you have to be very selective on the hotels which you feel comes in your close competition in terms of proximity, size, clientele, inventory, facilities etc. List out the hotels (Maximum to 7) with their Available inventory, RPD, Room Revenue per day, ARR etc. You need to maintain good reputation with Competition hotels so that they will share their figure in exchange of your hotel’s Occupancy / ARR figures. In earlier days say 12-15 years ago, hoteliers used to compare only Occupancies or ARRs with Compset, whereas today everyone talks in terms of RevPAR.

What’s RevPAR?

RevPAR – Revenue Per Available Room, that means Room Revenue divided by hotel inventory. You can also calculate RevPAR by multiplying Occupancy % with ARR.

RevPAR Premium – Going a step forward today’s RM do compare RevPAR Premium index, it’s nothing but Your RevPAR Vs City’s RevPAR. If RevPAR premium is more that 1.0 then we consider good penetration in market and hotel is doing well. If it’s lesser than 1.0 then someone else is eating your Market Share. Further you need to analyze which hotels has got better Market Share and why, also how do we increase our Market Share?

I suggest you should also refer to STR Report to get Market Statistics & to compare your hotel Vs. Industry (Area / City). You can get this report free of cost, going one step forward you can subscribe for paid STR Report which gives you insights such as Compset Report (as per your selection) Vs Hotel.

Study MPI – Market Penetration Index (Occupancy index), ARI – Average Rate Index (ADR Index), and RGI – Revenue/RevPAR Generation Index (RevPAR Index) STR is very helpful tool in deciding the Rates for coming season.

Market Segments for your product Vs Comp set

Broadly in the Hotel Industry, following Market Segments are accepted as standard ones.

FIT : (Free Individual Traveler) : All Walkins, direct leisure / family stay comes under this segment.

Corporate : Business Segment – All Corporate FITs & Groups comes under this segment, to track it better this segment further divides in to short stay and long stay. Long stay is defined as minimum 7 nights at a stretch (No of nights changes as per property varies to minimum 7 to 15 days to consider as long stay). Most of the Corporate works on the negotiated / contracted rates. Which are fixed for 6 month or for an year depends on the City / Hotel.

Resicon : Residential Conferences or MICE was earlier the part of Corporate Segment, it has been separated out for tracking purpose. Business comes through Residential Conferences gets accounted under this segment. This segment generally has lowest ARR considering bundled pricing with conference room, Meal plan etc.

Travel Agent : Business originates from Travel Agents both B2B and B2C sectors are tracked under this segment. In certain cases, we do form sub-segment as ‘TA-Groups’ especially leisure cities like Jaipur / Agra where there is high inbound Group movement.

Online Segment : Business Originated from Online Channels, further bifurcates in to Hotel’s website, OTAs and GDS business. It’s advisable to track each channel-wise productivity separately as sub-segment.

Airline / Transit : Business originates from the Airline sectors, further gets divided in to Crew and Layover. This segment is applicable mainly in Aerocity / Airport hotels where they get lot of transit business.

Wedding : Mainly to track room nights coming from wedding function in the hotel or in surrounding. This segment really works for the hotel with big Banquet halls and lawns which are suitable for wedding.

Once you track these segments for your hotel Vs Comp set, as a RM you can immediately start focusing on the high potential Market Segments for your hotel. For example,

Example 1 : If I am getting 25% business from Corporate Segment but as per location & as a business hotel overall Area’s potential is around 60% for Corporate, then immediately I will check what’s going wrong? How do we get more Corporate business? Do I have to relook at my Corporate Rate structure? Which are the top potential ‘A’ Corporate, which are giving business to other hotels?

Example 2 : Low online Contribution say only 20 room nights per month or @2% contribution, whereas FIT’s contribution is 22%. As a RM what are you going to do? ……..Crosscheck segment’s ARR, relook at online offers, go through the content part on all online channels including photographs, crosscheck BAR Rate slabs vs. Competition rates, stop rate discounting at Front desk, set authority with maximum % for discounting in case of low BOB.

End Customer – his behavior & booking pattern

Today there are multiple softwares available in the market which can give you exact data on the Consumer behavior and booking pattern. Some of the terminologies commonly used are given below for your reference.

 

MLOS : Minimum length of stay – Part of stay restrictions – you can define Minimum length say minimum 2 night / 3 nights while creating rate plan.

ALOS : Average length of Stay – Calculated as average of no of nights stayed per person. Generally in leisure destination ALOS is at higher side say 2.5 – 3.5 nights vs business destinations it comes to around 1.0 – 2.0 nights, ALOS varies hotel to hotel.

Lead Time: Time difference between booking date and check in date or in simple language how many days / hour prior the booking arise. For example 48 hours, 72 hours, 7 days, 15 days, 40 days prior to check in. Generally in leisure destinations Average Lead time is more than business destinations. You need to calculate Segmentwise – average Lead time for better Inventory and Rate management.

BOB: Business on Books for future dates in terms of room nights, ARR, and Room Revenue.

Rate Production: To track which rate plan sells better Online as well as on offline and increase / decrease discount, also to promote particular rate plan accordingly.

For example In some cases Rate Plan inclusive of Breakfast, wifi and Airport Transfer sells better than EP plan. In certain cases Last minute deals gives highest productivity, in case of leisure destination Advance Purchase Rate or special packages on MAP plan with MLOS of 2 nights sells well.

Rooms – Daywise Occupancy / ARR / RevPAR

Once you get aware of your Market Segments, it’s very important to track your daywise Occupancy report for next 2 months with BOB report (daywise rooms availability) before proceeding to Rate plans / offers. It’s equally important to check daywise ARR / RevPAR alongwith Room nights.

Allocation of Hotel Inventory

As in the first topic, I had mentioned Right inventory allocation to Right Customer at Right price and Right time to get optimum Yield is the Revenue Management.

Remember two terminologies Inventory Parity – Same inventory allocation on all channels & LRA – Last Room Availability – follow this religiously as RM to succeed.

Most of the OTA’s has one of the criterion as ‘Constant Availability’ for better ranking. Most of Corporate RFPs also ask for LRA guarantee from the hotel.

We had already discussed about the BAR Rate slabs based on inventory available for that day. In case you have only 3-4 rooms left in the hotel, try to sell those rooms at the premium price. But do check rates on all room categories, when you are revising rates for one category, proportionate effect must come on higher categories also. I had seen in one or two cases ‘Club room’ prices are lesser than ‘Base category’ price, as only base category’s price has been hiked up, this will create a confusion in consumer’s mind so be careful. You have to be very smart in allocating few last rooms at very high prize which might be 3-4 times than your normal BAR Rate.

Rate Analysis – Demand Forecasting

Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase in future. In other words it refers to the prediction of probable demand for a product or a service on the basis of the past events and prevailing trends in the present.

To do Demand Forecasting you must know Lead Time, BOB as on date, Lead Time, ALOS, Past 3 year’s historical data trend, Competition data & Socio-economic situation of State / Country to forecast Demand and accordingly decide rates for future dates.

Please note we are doing Demand Forecasting in very sensitive business which changes as per internal as well as external factors. Forecasting differs for each Market Segment as the Lead time and stay dates varies as it’s different for individual and Group customers. There are various methods for Demand Forecasting like probability forecasting, Cross impact analysis etc. With Demand Forecasting, you can decide on the probable sell rate for your Rooms for particular dates / future period. As its sensitive market you need to repeat Demand Forecasting exercise after regular interval to get more accurate forecast and thus improve yield for each segment.

For the bigger hotels, today there are some good Revenue Management softwares available in the market. The most important characteristic of RM is how frequently & accurately he can forecast the demand for future dates based on the 5 dimensional scales of historical data, BOB, Lead Time, ALOS & Competition prizing.

Cost Analysis – Operating Cost

We do understand hotel rooms are perishable product, but sometimes this creates temptation to RM / Hoteliers is to get more & more Occupancy & thus Revenue, when sometime he neglects the cost aspect of it & thus affects bottom line adversely.

To avoid this today’s RM must be aware of minimum operating cost per Room including variable and fixed cost attached to each room, so then he would understand the minimum Net Revenue required after discounts, OTA commission, Meal Plans & taxes. Accordingly he can set minimum Rate limits for himself and will not go below that benchmarked rates in whatsoever condition.

Conclusion : I hope by now you know the major attributes of Revenue Management. In this topic I have covered the RM’s job related to Rooms division only. In next topic we will discuss about Revenue Management in other areas to improve the yield for hotel as well we will discuss on various Case studies with solutions and practical challenges faced by RM. Also we will try to correlate RM’s functional area to Social Media, Online Presence, SEM, Remarketing, Cart abandonment of hotel websites.

I am listing 2 case studies, please try this exercise and send me the answers via email.

Case Study 1 : You are in the first week of June which is really bad season for your hotel / city, last 4 years occupancy trends shows that you were in the range of average 30-40% of occupancy for all years. You also found out overall city trend which is almost same approx 35-45% Occupancy in June. BOB report shows very low business on books not even @10% Occupancy for June. What’s the next step as RM???

Case Study 2 : You are a RM for Business Hotel, you have studied Daywise Occupancy trend, overall Occupancies on Monday, Tuesday & Thursday are almost sold out positions around 95%. Wednesday is doing average – 65% occupancy. Friday & Saturday are almost empty @45-50% as a typical business hotel. As RM you are assigned to do analysis and take appropriate action. What plans do you suggest?

Thank you!

Pramod Kulkarni

@Copyrights 2015

Revenue Management – Basic Fundamentals

‘Revenue’ the term which immediately attracts attention of any person. Every Organization likes to earn more and more Revenues in the shortest possible period, to achieve ROI and earn more profit.

‘Revenue Management’ techniques had thus arisen from above needs. The Best simplified example of Revenue Management is Airlines. I know everyone of you must have taken a flight for various reasons, be it a business or your personal trip. Have you ever inquired the air ticket price paid by the passenger sitting next to you? Try it next time, you will observe there is a significant price difference between his and your tickets. Why so? When you are boarding same flight, same class, same facilities then what’s the cause for this price difference? It’s nothing but ‘Revenue Management’ practiced by that Airline.

In my first issue, I will take you through all basic fundamentals of Revenue Management and then will elaborate each attribute separately in my next blog.

Revenue Management is also called as yield management in few sectors is basically getting the optimum Yield or Revenue in various situations by studying, analyzing given situation and then work out strategies accordingly. Let’s take an example of your Hotel Room; you know its perishable product & if you don’t sell for that day then you are lost. Selling these rooms at right price is also a challenge, to overcome both these problems new generation Revenue Manager Concept started in Hotel Industry.

Now, what’s the basic job of Revenue Manager – it’s nothing but ‘Allocating your resources right way to get optimum yield or Revenue in any given situation’.

What’s the first step in Revenue Management, what should I know?

• Product Knowledge
• Services Offered – Categories & level of satisfaction
• Market Demand Supply Ratio
• Market Competition & Market penetration
• Market Segments for your product Vs Comp set
• End Customer – his behavior & booking pattern
• Rooms – Day-wise Occupancy / ARR / RevPAR
• F&B – Venue-wise Occupancy / CTO / APC
• Hotel Inventory / Venue – allocation
• Rate Analysis – Demand Forecasting
• Cost Analysis – Operating Cost

Conclusion : Considering today’s situation, Revenue Manager’s job is not only restricted to Rooms Division or Online Revenue Distribution but going forward today expectation from him to Manage Revenue for entire Unit or hotel including F&B and Other Divisions to get best possible yield keeping Cost in control to optimize the ROI for investors.

In my next blog I will try to elaborate all above attributes and we will go deeper in Revenue Management process.