How hotels can realign revenue management to capture bookings

Hoteliers will have to prepare themselves for a fierce battle over bookings that could see rates pushed even lower. (Getty Images)

Hotel distribution strategies haven’t had a chance to solidify into a coherent creed during the hurricane of volatility brought on by the pandemic, and hotels are running out of time to prepare before Americans hit the road en masse. 

Hoteliers need to be alert and ready because properties are opening and travelers are not shopping for rooms the same way they were before the pandemic. Consumers are more educated, technically savvy and vigilant in seeking out the best deal with little commitment. The competition over online bookings has never been more intense.

In this environment, operators must find ways to exert control over the cost of bookings by taking a hard look at their channel acquisition costs and seeking out new ways to redirect bookings from online travel agents. Since distribution strategy thrives on information, it makes sense to align the practice with revenue management. Both areas of the hotel thrive when they have access to as much information as possible about guest booking and spending habits, and both would benefit from aggregating analytics from across the hotel experience to find the greatest share of insight.   

Data in Hand

While occupancy is expected to rise as the economy recovers and traveler confidence increases, the real battle taking place across the industry will be over rates, which continue to lag in recovery compared to occupancy. The rate is going to get worse before it improves as properties reopen or increase availability. 

Analysts estimate demand could come rushing back as vaccines continue to roll out across the nation, but during that process hoteliers will have to prepare themselves for a fierce battle over bookings that could see rates pushed even lower.

The state of hotel distribution has spent the last year or so in constant flux. As markets kick back into gear, they will be guided by the distribution strategies hotels enact today, rewriting the rules on profitability as new trends take hold across the industry. The complexity at work in this process cannot be understated. Data science and revenue management are working hand-in-hand to simplify the underlying drivers of today’s trends, but doing so will always remain a struggle if they are forced to work in isolation.

Every hotel is going to need to prepare itself for a new level of competition during the coming business cycle, regardless of segment or chain scale. Controlling the cost of bookings has never been more important with the volatility at work in today’s room rates. With OTA commissions as high as 30 percent today, every booking made from outside these platforms can be considered a victory for hoteliers. However, this may not be a sustainable way of thinking in the hotel recovery process. 

While OTAs should never constitute a majority of a hotel’s bookings, these digital giants make shrewd partners when the only thing that matters is filling rooms. Once guests are on property, hotels have the opportunity to convert them into lifelong customers—and big on-property spenders. Operators can achieve this thanks to their direct relationship with guests, and by using historical data, hotels can maintain these relationships through direct communication and marketing following initial OTA booking. 

Trust What You Know

This is not a new concept for the industry—data analytics have already been used to great effect within hospitality to improve direct bookings and create repeat guests. The difference today is that these tools have become a necessity for every property. The pandemic has shown hotel real estate expands beyond the physical property, beyond even Brand.com, into travelers’ devices. Hotels already own the guest experience when in close proximity; now they have to maintain that quality experience from a distance.

Fortunately, technology exists to make this possible. By uniting seemingly disparate departments within hospitality and breaking down the barriers that currently divide the hotel tech stack, it is possible for operators to access and understand impactful elements behind guest booking preferences. This allows operators to effectively extend their reach beyond Brand.com into Google hotel ads, metasearch websites and more as they become a greater priority. 

The level of online “noise” is set to be deafening as travel ramps up in the coming months. It’s every hotel’s job to find ways to stand out among that noise. Through data science and revenue management, operators can understand how their channel mix has shifted since 2019, and what they need to do to assert themselves in their newly changed market. These tools are illuminating the darkened corners of the industry ruled by trial and error, creating an environment where diligence, strategy and tenacity can thrive. 

Gayle Ehrean is managing director, account management for IDeaS.