Capturing guests needing overnight accommodation is a relatively simple task for hotels.
NB: This is an article from Demand Calendar
As the need for a place to stay is essential, potential customers are inclined to make a purchase. Sleeping on the streets is not a viable option for travelers visiting a destination. A hotel that comprehends what motivates people to visit a particular location can attract them to their establishment instead of allowing them to choose a competing hotel.
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The challenge is that demand for overnight accommodation varies with the reason to travel to the destination. The demand will be next to nothing if there are no travel reasons. Imagine a popular beach destination in the summer, and then think about what the same destination would look like in the winter when the temperature is minus 5 C. There is no reason to go to the beach and no demand for overnight accommodation.
Hotel revenue managers call these fluctuations seasonal and day-of-the-week demand variations. The simple truth is that there is no reason to visit the destination and, therefore, no need for accommodation. So if a hotel depends on travel reasons to the destination, which is the role of marketing and revenue management? Let’s examine how the different roles have distinct responsibilities and where they need close collaboration.
Clarifying the job
The job of the commercial team, which includes marketing and revenue, is to bring in revenue to the hotel. The number of visitors that need overnight accommodation is set for any given day depending on the travel reasons to the destination. In other words, the job of the commercial team could be defined as capturing the visitors in need of overnight accommodation on any given day. The job could be refined to capture guests with the best fit for the hotel (the right target group) and capture the ones with the highest willingness to spend. This is a difficult job since many hotels are competing to attract guests.
Capture is the right word to use. The term “create” demand is often misused or misinterpreted to be understood as the hotel can create demand for overnight accommodation. This is rarely financially viable since the cost is prohibitive, and a message to travel to a destination just to spend time in a hotel is not attractive. The travel reason for a resort is to relax, so not even a resort can attract guests just to spend time in the resort for no reason.
The proper use of the word “create” demand is to create demand for the specific hotel once the guest must decide which hotel to stay at while visiting the destination. If the hotel only focuses on filling the rooms, a low price is an easy way to attract guests, but this rarely makes a hotel financially successful. Marketing is essential to position the hotel for the right target group so they will be willing to spend more on their stays instead of staying at a generic hotel. A close collaboration between marketing and revenue management is essential to capture the maximum guest spending on any given day.
Ten steps for success
Attracting the right guests can be broken down into a ten-step process. Here are some examples of tasks within each step and who is responsible or if collaboration is the best way of managing the step and tasks.
- Understanding Market Position & Competitors (Collaboration): The marketing and revenue management team must understand the hotel’s positioning in the market and the competition. This understanding forms the basis of all strategies.
- Identifying the Target Customer (Marketing Manager): The Marketing Manager is typically responsible for identifying the target customer demographic. This involves understanding their preferences, behaviors, needs, and wants.
- Creating an Offering (Collaboration): Once the target customer has been identified, both managers should collaborate to develop a unique and compelling offering. This should be based on the target customer’s values and the hotel’s unique selling points.
- Setting Pricing Strategy (Revenue Manager): The revenue manager will develop the pricing strategy based on the market position. This includes setting base rates, determining rate fences, and deciding on discount structures.
- Creating Awareness (Marketing Manager): The Marketing Manager will develop and execute marketing strategies to generate awareness and interest in the hotel’s offerings to attract the defined customer segments. This could involve traditional advertising, promotions, social media campaigns, etc.
- Revenue Forecasting (Revenue Manager): The revenue manager will forecast revenue for different periods based on historical data, market trends, and pricing strategy.
- Upselling and Cross-Selling Strategies (Collab/oration): Both teams need to work together to develop effective upselling and cross-selling strategies. The revenue manager can provide insights into which products or services can be effectively bundled, while the marketing manager can develop the tactics to promote these bundles to guests.
- Measuring and Analyzing Performance (Collaboration): Both teams should regularly measure and analyze the performance of their strategies. The marketing manager can look at metrics like campaign performance, customer engagement, and website traffic, while the revenue manager can look at revenue, occupancy rates, and average daily rates.
- Adjusting Strategies Based on Performance (Collaboration): Both teams should work together to adjust their strategies based on the performance analysis. This could mean changing pricing, targeting new customer segments, or using different marketing tactics.
- Data Quality Management (Collaboration): The marketing manager should manage customer relationships, which includes maintaining a customer database (preferably in the hotel PMS), managing customer communication, and using customer feedback to improve services. The revenue manager should optimize revenue management systems to ensure they provide accurate and valuable data for decision-making.
This timeline assumes that these tasks are recurring and will need to be revisited and refined periodically based on internal and external changes, such as changes in the market, competition, or customer behaviour.
While this breakdown provides a general idea of attracting and getting guests to spend, it’s important to note that the actual division of responsibilities can vary based on the hotel’s size, structure, and specific business strategy. In some cases, Revenue and Marketing Managers might collaborate closely on many areas above where the responsibility lies with one of the roles. For example, understanding guest preferences could be a shared responsibility, as it impacts both pricing and promotional strategies. Similarly, creating offers is a joint effort, with the Revenue Manager providing input on pricing and the Marketing Manager giving information on what would appeal to guests.
