Data-Driven Revenue Management

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Putting data and analytics as key drivers of revenue management strategy and investment will yield dividends.

Data-Driven Revenue Management

By Renée M. Covino, Contributing Editor - 07/09/2018

A majority of hotels (62%) have identified revenue management as the top priority area to mine for more deeper business insights, according to Hospitality Technology’s 2018 Lodging Technology Study. Uncovering the “why” behind guest behavior is typically described as being equal parts art and science; however, the science part is becoming increasingly important for hotels to get a handle on, with 31% telling HT that improving analytics is a top technology objective. Operators that don’t transition to an insight-empowered focus for revenue will be at a disadvantage. Putting data and analytics as a main driver of revenue management strategy and investment will yield dividends.

Problem: Elusive or dwindling direct bookings.
Solution: Internal data provides the perfect prescription for driving direct bookings by ensuring that hotels are tracking their customers from first interaction to repeat stay. Direct bookings are the holy grail of hotels; the traditional thinking is that they avoid high acquisition costs and are the most lucrative source of revenue. So, by simply knowing who its customers are, a hotel is able to target potential repeat guests and get more 
direct bookings.


But hotels can and should be going beyond that simple data leverage. Some experts recommend they compare how they are doing versus competitors on Brand.com. Are they above or below the performance curve? If they are below, do they need to get a new website or invest in video that’s going to drive more traffic and engagement?


Hotels should also make sure rates are competitive 24/7, in parity across all channels, and use the best booking engine and website technology with user-friendly design, which needs to match or surpass online travel agency (OTA) interfaces in terms of user experience. Other important considerations are download speeds, booking engine quality, merchandising and personalization opportunities.


What Hotel Astor in Miami Beach (www.hotelastor.com) has found very useful are “price comparator widgets” on the hotel’s own website, according to Christelle Tropina, general manager. “Hotels are required to maintain rate parity on all OTAs, but not on its own website,” she tells HT. “So, by adding a ‘book direct discount’ on your hotel’s website, the online shopper can see directly from your homepage that he will get a better deal if he books directly with you than with an OTA.”


The ultimate goal, according to experts, is to incorporate a combination of data strategies, including: digital marketing, having the lowest price on their website or parity, institute a re-engagement strategy, be in the same marketplaces as the OTAs (i.e. meta searches), understand which search terms are most popular, and then, observing the data to see if there has been a shift to the direct channel as expected. All of this needs to be tracked and adapted to make sure it all works together to provide the highest return.

Problem: Identifying most profitable channels.
Solution: Lily Mockerman, founder of Total Customized Revenue Management, cautions hoteliers to know which booking channels are truly the most profitable. “In my experience, 75% of hotels will find their direct booking channel to be the most profitable, but for 25%, it is actually the OTA that’s the most profitable,” she says. 


“First, they need to understand what piece of demand, not business, is coming from each channel,” she advises. “Then, they need to understand all the related fees that are involved, including commissions, but also pay-per-click solutions for their own bookings, which is the type of thing many people overlook, but still should be accounted for. In direct bookings, maps or marketing campaigns tend to increase, so you need to attribute that expense as well.”
Independent hotels have even higher expenses for direct pushing, she cautions, because “They don’t have the benefit of the national marketing campaigns that the big brands are able to engage customers with.”


Tropina is savvy to this. “Customer acquisition has a cost, and while it may benefit a hotel greatly to grow its database organically, the costs of a direct booking campaign must not surpass an OTA’s cost,” she says.


Once you determine the fees and costs calculation, the next step would be to compare that to the demands in step one. 


“You cannot necessarily change the demands significantly, so it’s best not to assume you can get significantly more bookings from one channel than your own constraints from what the calculations show,” Mockerman reasons. “By using demands each channel has and looking at profitability, you can get an optimal mix to set a goal for your hotel.”


Problem: Too much data, not enough management.
Solution: Look to integrate the data horizontally; begin with consistent data collection practices. 


A typical problem with revenue management today is data management. There is so much beneficial data being collected, but because the data sources come from varied places, there is little integration with each other. 


Technology integration is “extremely important,” to Tropina, who uses RevPar Guru (www.revparguru.com) as her RMS “because it integrates directly with the PMS and updates rates and inventory throughout our multiple channels in real time. It yields prices in real time based on the market conditions and my competitors’ rates.”


Tropina tells HT that she’s always felt Hotel Astor was ahead of the curve in that regard. “I’ve been using this system for seven years and am surprised to see that real-time, dynamic pricing has only become the trending topic for the last couple of years.” 
Experts agree that while more suppliers have been providing RMS to hotels, most of these technologies remain very fragmented and disconnected. Additionally, most systems remain fairly complicated for the hotelier end users, which is slowing down the mass adoption. A powerful system with a user-friendly interface will be the key to success in this industry, according to suppliers.


But once again, Mockerman suggests backing up on cross-data automation and evaluating data collection practices as a first step. “Make sure data processes of collection are in place across all departments in a consistent and fully operational manner, not bypassing those data steps because of [lack of] training.”


She then encourages broader and franchise hotel operations of at least 10 hotels or those with gross revenue of $10 million or more per year to start the data collection practices and integrate whatever cross-referencing solutions are needed “to be able to holistically review guest behavior and spend within the organization.” This includes being able to attribute a restaurant-in-hotel spend from a hotel guest who may not have charged the meal spend to their room.


While the full data picture in cross-referencing is likely to depend on better technology in the future, she thinks it is imperative for larger chains to gather what they can now to be ready for when the technology hits. 


Even from an independent perspective, Tropina agrees that the future lies in interconnection. 
“Total RevPAR will become the new norm as revenue management is becoming less and less about just room rate and more about total spending,” she says. “The notion of customer lifetime value will be an important component in RM strategies moving forward.”

Problem: GDPR confusion and impact on business. 
Solution: The European Union (EU)’s General Data Protection Regulation (GDPR) took effect on May 25, 2018, and is intended to strengthen and unify data protection for individuals within the EU, while addressing the export of personal data outside the EU. Take note of GDPR and how it might specifically impact your business.


What constitutes personal data? Any information related to a natural person or “data subject” that can be used to directly or indirectly identify that person. It can be anything from a name, a photo, an email address, bank details, posts on social networking websites, medical information or a computer IP address. 


Naturally, GDPR will have its greatest impact on marketing to European consumers. Tropina considers that in her Miami market, “We know the summertime attracts mainly European tourists. We typically start targeting this segment and rolling out promotional offers four to eight months in advance, because we know they have a longer booking window and a higher price sensitivity.”


But with GDPR regulations, she recognizes that hotels or OTAs that are not compliant will no longer be able to use data collected to target this segment with prices and promotions that apply to them specifically. 


“The rigidity of the regulation will impact greatly how we interact with this specific segment and will make it more complicated to efficiently analyze their behavior and patterns,” Tropina says.
Experts recommend that every hotel that has EU guests needs to ensure that systems are GDPR compliant and that they have consents from every EU consumer that they keep in their databases. The hotels that will win here are those that are proactively taking measures to affirmatively gain consent from consumers to be able to continue to market to them. 
The storing of customer information is critical to hotel success as they want to target repeat customers and track loyalty. While GDPR restrictions may be tough for some hotels, systems that are designed for data and analytics will help hotels to manage their compliance.