Put 300 like-minded professionals in the same room and your chances of solving industry challenges grow exponentially.
Speakers at Wednesday’s fifth annual Revenue Strategy Summit at the Renaissance Washington, D.C. Downtown Hotel wasted little time before diving into the industry’s biggest problems. Revenue managers, owners, operators, asset managers and technology suppliers each brought new perspectives on today’s issues, and many walked away with new approaches to adapting, evolving and driving profitability.
Here were the five biggest takeaways from RSS 2017:
The Cost of Loyalty
When the big hotel brands launched book direct campaigns in 2016, in many cases giving their loyalty members discounts through a closed user group on brand.com, it raised the eyebrows of many in the industry.
Owners were the most vocal about footing the bill for these discounts, recognizing the potential to erode ADR.
But a year later, even owners seem to recognize that loyalty rates are a good first step toward a long-term value strategy. Apple REIT’s COO Krissy Gathright said hoteliers need to continue to move in the direction of providing value for loyal consumers beyond just price.
Michael Bellisario, senior equity research analyst for Robert W. Baird, said the downside to loyalty member rates is that hotels are potentially cannibalizing their highest-value customers.
“You need to fundamentally change the booking process,” he said. “Instead of marketing toward your repeat guests, go after the guests who book on Expedia and get to the bottom of why they booked there.”
Rate Parity Ramifications
Today, many contractual agreements between hotel room suppliers and online travel agencies that prevent each from undercutting the other’s rate are still largely in place. While the practice of rate parity has come under regulatory fire in several locations throughout Europe, U.S. hoteliers continue to stick to their guns.
“I like the status quo, occasionally using closed user groups to skirt parity,” Gathright said. “I am concerned if we changed rate parity requirements, OTAs could reduce their commission to charge a lower rate and then we just reverse all of the ground that we have gained.”5 key @RevStrategy takeaways from 2017 #RSSummit Click To Tweet
But the proliferation of third-party booking sites makes monitoring your online rates extremely challenging. Because hundreds of wholesalers now have access to your rates, going to Kayak and checking your rates across the major channels is no longer good enough.
“Make sure you have that enforcement in place, even if it requires a full-time employee,” said James Gancos, founder and CEO of The Guestbook.
Not Time to Panic about Airbnb … Yet
While it’s beginning to look like the hotel industry and Airbnb are learning to coexist, many warned that the next shoe could still drop.
Today, Airbnb is mainly only eroding leisure demand from hotels in urban markets. But should the home-sharing company crack the corporate market and begin hosting business travelers and meetings and events, hotels could truly be in hot water.
Steven Nicholas, executive VP for Noble Investment Group, said Airbnb’s biggest effect is seen on high-demand days. As an example, he said 15 men who go to the Super Bowl every year and pay top dollar for hotel rooms might now rent a luxury house instead.
“While they might have to wake up, go downstairs and make eggs, it’s one-third or one-half the price,” he said.
To combat Airbnb, Gathright said hoteliers should focus on the consistency of their product.
“There are certain expectations from someone who checks into a Hampton Inn or a Courtyard,” she said, “and we need to continue to deliver on those expectations.”
China’s Staggering Numbers
Lee McCabe, VP of North America for Alibaba, discussed China’s emerging middle class and the staggering purchasing power it represents. Alibaba, a giant tech platform that serves many Chinese verticals from shipping to shopping to social media, aims to make it easier for companies in Europe and the Americas to sell into the huge and growing Chinese market.
Hoteliers in these regions should capitalize on a relatively new Chinese appetite to travel abroad, McCabe said. One way in is to use data to identify what Chinese consumers are looking for and when, and then personalizing the marketing message to them through Alibaba’s many channels.
“The burgeoning middle class in China is hungry for global products, including travel,” McCabe said. “If you don’t have a China strategy you definitely should be thinking about how to attract the Chinese traveler.”
Setting New Benchmarks
Cindy Estis Green and Kalibri Labs continue to push for change surrounding traditional hotel industry measurements and metrics. A movement to benchmark against revenue figures after removing costs of acquisition is well under way, and more hoteliers today are evaluating and discussing Net RevPAR.
Now the aim is at the traditional competitive set. Estis Green argued comp sets as they’re designed currently no longer make sense, and in an age of Big Data hoteliers should have a more customized way of benchmarking themselves against the competition.
“Don’t just look at the guy next door; run your own race,” she said.
Kalibri suggests benchmarking against your own optimal business mix. Regarding competition, she said a hotel could have 12, 15, even 20 hotels nearby that each compete in a small segment of business. For example, you may compete with one hotel on leisure business, another hotel on meetings business and yet another hotel on the OTAs.
The suggestion remains to remove cost of sale before evaluating, she said, but now instead of comparing yourself to your competitors, you could benchmark your performance against an ideal mix of business.
“Instead of thinking about RevPAR Index, maybe we should start thinking about things like revenue capture, Net RevPAR, and sales and marketing efficiency,” she said. “Set targets based on your optimal business mix, not just what everyone else has done.”
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