Revenue Manager! You Are Now In Charge of Conversions.

NB: This is an article by Robert Hernandez, Hotel Revenue Discovery Expert with Origin World Labs

One of the themes I often explore in this blog is that Revenue Management is simply the data and analytics side of Marketing. As data-driven tactical analysis and decision making have spread throughout the hotel industry, RM has steadily taken on responsibilities that were once the domain of the Marketing department.

Forty years ago, the first Revenue Optimization models used in the airline industry were built under the assumption that prices would be provided by the Marketing department. Today,  RM is in complete control of Rooms pricing and, in some hotel companies, it is taking on outlets and ancillary menu pricing as well.

The same is true for Packages and Promotions, which are now priced and published based on the timing set by the RM department.

Therefore, it is not a stretch to predict that within a few years Revenue Managers will also be responsible for one of the last data-rich obligations of Marketing – the hotel’s website conversion rates.

The conversion rate is simply the number of customers that book through your website divided by the number of unique visitors that used the site.  That said, conversion optimization is far from being simple. Just like rooms pricing, it is a multi-dimensional, brand-sensitive, math-based, data-intense process that involves both science and art.

Here are the top 5 concepts that RMs should be digesting.

1. It’s not about website design.  Some experts may tell you that conversion optimization is really about strong website design. While creating a great user experience can certainly make your web site more appealing to people, on it’s own, it is unlikely to improve your conversions. Conversion optimization is the systematic process of understanding what online experiences consistently drive sales so that you can emphasize those and downplay or eliminate what does not work.

2. It’s a lot more than SEO.  Search Engine Optimization can help you get decent traffic to your website, but it will not convert that traffic into customers. Many hotel companies spend thousands on SEO on a monthly basis with little year-over-year growth to show for it.  Conversion is about squeezing more juice out of the same orange, not getting a bigger orange.  If you can get your conversion rate from 1% to 2%, you will have doubled your website sales without any more traffic.

3. Just like room pricing, conversions are dependent on proper segmentation. In order to have an effective conversion rate strategy, you need to be clear about your target customer.  If you haven’t already done so, you should use a ‘guest persona’ to guide not only your website strategy, but your overall marketing strategy. To develop a ‘guest persona’, identify one guest type and gather as much data as you can about them i.e. who is your typical guest; what are their aspirations; what are their stay spend patterns; what are their desired experiences etc.?

4. Always be testing.  Most hotel websites have a similar look and feel which is probably the reason why the industry’s “private website” conversion rate is consistently around 1%. The websites that drive the best conversion rates are usually the result of a lot of testing. Just like rooms rate testing, the most effective conversion testing isn’t ad-hoc or random; it is done in a well thought out and methodical way e.g. A/B testing. In simple terms A/B testing involves randomly publishing two identical versions of a web page except for one variation that might impact a user’s behavior.  This will help you to identify what works (so you can do more of that), and what doesn’t work (so you can stop wasting your time and money on that).

5. Now is the right time to focus on conversions.  OTA sales have plateaued as more customers have become accustomed to shopping hotel websites directly.  Now is the time to exploit that trend with proper optimization techniques that can increase your conversion and help significantly change your channel mix and total cost of revenue.

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