At revenue summit, message is clear: the customer is king

NEW YORK—Revenue managers and others involved in the process of making hotels money convened at the Affinia Manhattan for the 2014 edition of the Revenue Strategy Summit to discuss ways and means to do just that, and one thing is clear: the focus must always be on the customer.

While the historic nature of revenue management has been about selling the right product to the right place, at the right time, at the right price and at the right cost, it, too, is about selling it to the right person. "It's about delivering the right message, to the right person, at the right time," said Tim Harvey, CEO of Core Ideas.

The times are changing, Harvey said. "Empowered buyers demand a new level of customer obsession. Companies must be customer obsessed," he said, adding that the customer holds the advantage and is in control because of transparency."

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Perhaps unfortunately for hotels, the industry has low barriers of entry, making it seemingly easy for anyone with a smart idea to enter the mix and disrupt. "There are new companies in the distribution space all the time. They can get right to what the customer wants."

A panel on disruption tried to parse it all out. The panel, "Distruption 2020: Vision & Implications for Travel and Hotels," was led by Mark Lomanno, partner and senior advisot at Kalibri Labs, who told the audience that hotels have a higher cost of cust acquisition than the airlines and car rental at 15-25 percent. He added that, in 2013, net income for hotels was only slightly higher than OTA costs. "ADR recovery is not as strong now from 2008 even in the face of record demand. We are paying more to acquire customers and can't charge as much," Lomanno said.

He then posed this question to the panel, which was composed of Ash Kapur, VP, hospitality revenue management and distribution, Starwood Capital Group; Tom Seddon, CMO, Extended Stay America; Minaz Abji, EVP, asset management, Host Hotels & Resorts; Shafiq Khan, SVP, channel strategy and distribution, Marriott International, "What’s single biggest challenge for the industry going forward?"

Khan made the case that it was staffing issues. "Potential unionization," he said.

For Kapur, it was about not being creative enough. "we have technology challenges," he said. "How the consumer shops and our systems need investment, constantly, but in a fragmeneted industry as ours, raising capital is tough."

Meanwhile, Abji lamented on the fact that the industry had lost pricing power. "We used to have it," he said. Now we don’t," pointing a finger at the OTAs and placing some of the blame on legacy infrastructure. "We used to not have disruption. Why do we do the stupid things we do?" he asked.

In a moment that took the audience aback, Abji actually said that the hotel industry could learn from the airlines. "What they do is when you make reservation, you pay up front. When you cancel or change, you pay a fee." He added that ancillary fees are 30 percent of airline revenue. 

Khan pushed back. "We don’t want to be like the airlines," he said. "Who likes flying? Unionization is why the airlines are bad. We don’t want that."

Seddon, again, invoked the customer. "A lot of innovation will come from outside the industry," he said. "The industry hasn’t done anything to create competition. There is better value through a different channel. The customer will tell us what they value. Hotels can control their own destiny with simple stuff, like Hilton’s move to let customers pick their rooms. That will increase direct business and it's not too complicated to do."

Kapur concluded with brevity: "Own and know your guest," he said.