While a revenue manager’s mission is to sell as many rooms as possible at the best rates conceivable, their ultimate focus remains a healthy bottom line.
There was a time when revenue management was a fairly straightforward task in the hospitality business. It was about getting the right customer at the right price from the right channel for the right product at the right time. Hotels were focused on increasing the room occupancy, irrespective of the price positioning or the channel. Then arrived the digital era, where reservations started coming through numerous channels. These included online travel agencies (OTAs), negotiated contracts, direct bookings, walk-ins, etc. Each had a certain cost associated for customer acquisition and management. Revenue management, thereby, evolved to getting the right customer as per their purchasing power and their stay needs from specific channels.
Complicated much? Well, Rahul Tondon, cluster revenue manager of Hilton Jaipur simplifies this with an example. A corporate hotel in key gateway cities like Mumbai or New Delhi will rely heavily on GDS and the hotel’s website for clients. On the other hand, a leisure hotel in cities like Jaipur or Agra is heavily dependent on the hotel’s website and OTAs for business.
“Out of all the three channels mentioned above, the hotel’s website is the most profitable channel of business. This has led to many chains promoting their brand website, attempting to shift customers from a third party website to their own site,” he said. The reason is simple – it reduces the cost of the booking and customer acquisition, thereby increasing the profit for the hotel.
Taking OTAs Head-On
While a revenue manager’s mission is to sell as many rooms as possible at the best rates conceivable, their ultimate focus remains a healthy bottom line. According to Archana Bhawan, revenue manager at Alila Fort Bishangarh, a significant way to drive profitability is to steer guests away from OTAs and encourage them to book directly with the hotel. “This increases brand recall, loyalty and generates repeat business. It also offers the hotel a platform to market its products via direct communication with the customer, offer deals and upsell additional services or room upgrades,” she opined.
Once the revenue manager is through with number crunching and analysis, the success of channel optimisation relies on three key factors – best rate guarantee, digital marketing and loyalty programmes. Gagandeep Hanjra, director of revenue, Novotel Hotels & Resorts Goa stated, “All three have one objective – to get the customer to book direct with the hotel given that revenue managers maintain rate parity across all channels, rewarding customers booking direct via value add-ons and working closely with loyalty teams to ensure acquired customers continue to book direct. And digital marketing creates the reach and visibility across platforms.”
Anil Swain, director of revenue at The Westin Kolkata Rajarhat presented another perspective to the story. In his opinion, the increasing traffic towards OTAs is not a good indication for hotels and smaller brands, since it allows for coupon discounts. “OTAs shell out a lot of money into offering these discounts, which make their brand stronger and they are purchasing loyalty at this point of time. At a later stage, this could be used against the hotels to increase commission percentages,” he warned.
