Revenue Ready Workshop. Matthias Dybing Singapore Oct 2018

Transcription

1 Revenue Ready Workshop Matthias Dybing Singapore Oct 2018

2 Matthias Dybing Our sole mission is to offer expertise, services and tech products, that improve day-to-day lives of hoteliers and make their businesses more sustainably profitable. Start-up developing hotel software solutions Revenue management outsourcing, consulting and coaching Hotel management company and brand for hotels, apartment style accommodation and single unit owners

3 THE KEY COMPONENTS OF REVENUE MANAGEMENT

4 Definition of Revenue Management (RM) Selling the Right Room to the Right Person at the Right Time on the Right Date at the Right Price (via the Right Channel). Revenue management is offering room prices and inventory controls that are most appropriate for the anticipated demand.

5 What is Revenue Management and What Does a Revenue Manager Do? Source: HSMAI Asia Pacific Revenue Advisory Board / Singapore Institute of Technology Hospitality School.

6 Revenue Management (RM) Think all revenue streams and profit optimisation. RM requires strong communication and teamwork among the appropriate departments. RM delivers the most value if it is fully integrated in the organisation, the business processes, and the mind-set of employees. RM must be incorporated into the culture of a hotel to take advantage of the opportunities that this function can bring.. Upsell opportunities

7 The Key Components of RM

8 Required Knowledge for RMs To define the right RM strategy, you will need Knowledge on: Macro and micro-economics Indicators: Market demand, submarket demand, events Market Intelligence (Comp. Set, Who does what and when?) Analysing Factual historical data (booking pick up, pricing, etc) How and where and when, consumers and companies book hotels Key customers accommodation requirements Distribution channels and distribution systems Pricing principles such as value-added pricing

9 UNDERSTANDING THE MARKET

10 Understanding the Market What is demand and supply? What influences demand and supply? How do demand and supply impact pricing and revenue management? Types of external, internal analysis and useful tools and indicators? What are the key performance indicators for hotels?

11 What is Demand and Supply

12 What is Demand and Supply? Demand The number of guests looking to purchase accommodation. Supply The total number of rooms available in the market for guest to book.

13 What influences demand and supply?

14 What influences demand and supply? Primarily Economics.. which is the study of human behaviour in the endeavour to fulfil wants and needs. Economics governs a person and / or a company s ability to purchase certain goods and services. <>

15 What influences demand and supply? When people have needs and wants, they are ready to purchase products and services to fulfil these needs and wants. Basic Needs: Shelter, Food, Water, Sleep, Health, Breathing Other Needs: Employment, Resources (Petrol), Family, Social, Internet Wants: Travel, New TV, New Computer

16 What influences demand and supply? For hotels, 3 principles of economics can have a profound affect revenue management strategy. They must be understood to better assess the market: Scarcity: Shortage of supply. Preferences: This allows people to assign value to the options they have, and to choose the option that maximises their satisfaction. Am I experience or deal driven (Selfie vs Bargain behaviour)? Restrictions: People face constraints that they cannot change, (their income, money available, external factors, etc,)

17 What influences demand and supply? External factors such as: Economic situation in geographical source markets Consumers disposable income Exchange rates Air capacity / access Infrastructure projects in the market Acts of god Health scare Security Events Seasonality / holidays

18 Equilibrium HOW DO DEMAND AND SUPPLY IMPACT PRICING AND REVENUE MANAGEMENT?

19 Demand, Supply, Pricing and RM Price is part of the definitions of both the demand relationship and the supply relationship and is a strong reflection of when supply and demand meet. Revenue management is offering room prices and inventory controls that are most appropriate for the anticipated demand. It is about finding the Equilibrium! Equilibrium

20 Demand, Supply, Pricing and RM There are 3 x essential conditions for revenue management : 1. Relative fixed capacity (supply): There must be a fixed number of resources available for sale. 2. Perishability (price influencer): The resources sold must be perishable and cannot be sold tomorrow. 3. Willingness to pay (changing demand): There must be different customers who are willing to pay different prices for the same resource. Consumers and pricing managers behaviours are influenced by all 3 x conditions and this influences pricing up or down!

21 Demand, Supply, Pricing and RM Concept 1: Perishability If you did not sell a hotel room for last night, you can t sell last night s room, even at a huge discount! Possible Outcomes: More supply than demand Lots of capacity left to sell in market Lower prices in low demand Hotels who have not anticipated lower demand accurately might lower prices even lower closer to the day of arrival to try to attract customers.

22 Demand, Supply, Pricing and RM Concept 2: Willingness to pay / changing demand Demand changes often, through different seasons, holidays and events that change how many customers are coming. Possible Outcomes: Lower prices in low demand, higher pricing in higher demand Hotels who have not anticipated demand correctly may have sold rooms too cheap and missed an opportunity. Some hotels may have missed occupancy for being overpriced! Demand can exceed the capacity, this is Unconstrained Demand

23 Demand, Supply, Pricing and RM High demand vs available capacity, often equates to high prices / ADR. Low demand vs available capacity often equates to lower prices / ADR. The success of hotel revenue management is the ability to accurately forecast demand equilibrium and willingness to pay.

24 Demand, Supply, Pricing and RM How do we measure willingness to pay? Pricing elasticity: When the amount demanded doesn't react much with a change in price, this is known as price inelasticity or "price inelastic". Mostly applies to products people need at that time (eg: Salt, petrol) When the amount demanded changes based on the price charged, the product or service is considered to be "price elastic. Mostly applies to products people want at that time (eg: Hotel room, airline seat, parking)

25 Demand, Supply, Pricing and RM

26 Demand, Supply, Pricing and RM Price is only an issue in the absence of value..but value is relative!

27 Demand, Supply, Pricing and RM Pricing positioning and value proposition are relative to: Demand and supply Competitors and market Pick up and booking pace External factors Consumers wants Ratings Reviews Perceptions / booking promise Budget Restrictions Management thinking ( and owner s perception)

28 What are the key performance indicators for hotels?

29 Key Performance Indicators for Hotels Revenue Management metrics are governed by Available Rooms (supply), Rooms Sold (demand) and Room Revenue (# rooms sold x price): % $ $ Occupancy = #Rooms Sold / #Available Rooms Average Daily Rate (ADR) = Room Revenue / #Rooms Sold RevPAR = Room Revenue / #Available Rooms

30 Key Performance Indicators for Hotels A hotel can measure its performance by comparing its metrics against the ones from competitors: MPI (Market Penetration) = Hotel Occupancy / Comp. Set Occupancy ARI (Average Rate) = Hotel ADR / Comp. Set ADR RGI (Revenue Growth) = Hotel RevPAR / Comp. Set RevPAR

31 GAME TIME! Enter Token

32 How this works? Game 1: Now Demand between 80% -100% A static competitor Prices BAR, Early Deal, and allocates X rooms Game 2-4: Later A dynamic competitor Round 1 Round 2 Simulator reacts to your decisions, assume they are the same in round 2

33 Types of external and internal analysis, and useful tools?

34 Types of external and internal analysis

35 Useful Tools and Indicators for Analysis Demand: Event Calendar, Holidays, STR Global, Competitor Pricing Supply: STR Global, New Hotels, Opening Dates, Refurbishments, OTAs Competitors: Rate 360, OTA Insight, Prophet, Expedia Rev+, Booking.com, STR Global Pick Up and Booking Pace: PMS Data, RMS Systems, Market Reviews, Forecast, Planning Grid External Factors: Event Calendar, Act of God, Security, Economic Outlook, Market Reviews

36 Useful Tools and Indicators for Analysis Reviews & Ratings: Star Rating, Trip Advisor, Review Sites, Expedia, Booking.com, Guest Surveys Perceptions: Social Media, Star Rating, Reviews, Cannot be seen in 5* hotel so book 4* Budget: Geographical Source, Spend, Product positioning Wants: Location, product positioning.lifestyle, boutique, budget, midscale Restrictions: Location, Time, Budget, Procurement, Refurbishment, Perceptions Management Thinking: Realistic or unrealistic? Owner s Involvement

37 UNDERSTANDING YOUR GUESTS PATH TO BOOKING

38 Understanding Yours Guests Path to Bookings Think like a customer! You need to know where consumers are shopping and where they are booking accommodation. Only then will you know how much money and effort to put into distributing your rooms to those channels.

39 Understanding Yours Guests Path to Bookings

40 The Customer Journey

41 Dreaming Phase

42 Dreaming Phase Leisure dreamers are different to Business dreamers. If you're going on a business trip, there will normally be a shorter dreaming phase. You might already know where you need to go and when you need to go. You might be dreaming about staying longer in the destination and what you could do if you had a few extra days. Or just dreaming of a very fast Wifi connection at the hotel.

43 Dreaming Phase Source: Google / Phocuswright / Travelclick

44 Researching Phase

45 Researching Phase Source: Google / Phocuswright / Travelclick

46 Researching Phase 38 Websites on Average! Increased Research Online! 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Online Penetration Hotel Booking Channels - Globally Online Travel Agents Supplier Websites Other Channels

47 Researching Phase Influencing factors are: Location, Pricing.I mean value for money, Marketing, Reach, Content, Recommendations, Reviews, ratings, Loyalty.people are loyal to value for money!

48 Booking Phase

49 Booking Phase Source: Google / Phocuswright / Travelclick

50 What Influences the Decision Making Process?

51 Booking Phase Many things have an influence on which accommodation a consumer chooses: Location Price, value for Money Reviews, ratings Brand Friends, partner Travel agents Corporate policy Reason for travel Rewards, loyalty..ultimately people are loyal to value for money!

52 Decision Making is About Value....because price is only an issue in the absence of value.

53 Business vs Leisure Travellers Value - Business Travellers Review Sentiment Brand Aggregate Rating Price Review Language (i.e. emotional, descriptive) Value - Leisure Travellers Review Sentiment Price Aggregate Rating TripAdvisor Rank Brand (i.e. unknown, known)

54 Non Contracted Bookings Value is different for experience seekers vs deal seekers. Emotional booking behaviour: Selfie vs Bargain Patterns change based on type of travelers, demographic. Some travelers prefer travel agents, OTAs, Phone. Online vs Offline: Consumers will do a lot of research online and then might go into a travel agency for some final advice on the details and booking convenience.

55 Where Most People Book Online? Billboard Effect Reversed! Different Results By Countries Source: Phocuswright / Eye For Travel / Google / Expedia Media Solution

56 Why OTAs? Why not Direct? 1. Website is easy to use 2. I book travel this way 3. I trust the brand 4. OTAs typically have the best price 5. Easy to book all travel in 1 place 6. Wide selection 7. Easy to cancel / change 8. I like the Mobile app 9. Couldn t find on other sites

57 Why OTAs Are Easier to Book? Simple messaging (ie: Pay Now, Pay Later, Icons) Influence and psychology Content, Deals, Translation for international Brand awareness Investment in tech and marketing Customer focus

58 Why OTAs? Why not Direct? OTA vs Direct Booking can be easy or frustrating Right Focus? OTAs are better at easy Hotels are better at frustrating OTAs are solely conversion focused and try to make a booking easy Hotels websites are often built for info and can be complicated! Hotelier Focus OTA and Consumer Focus

59 What is The Point? The point is that it is not about $3 Billions spent on marketing or visits..it IS ONLY ABOUT CONVERSION!!

60 Booking Conversion Explanation of typical non contracted guest path to booking. (Herobe s Findings)

61 OTA Ranking & Exposure The ranking is driven by consumer behavior. The foremost ingredient affecting ranking is conversion, it s actually not that much of a rocket science. Which hotel is more likely to convert? The majority of people start filtering, sorting, ordering in some way. Also, we change the results depending on the click behavior that we see. I want to be on page 1 of the ranking, which one? Source: Booking.com CMO - Pepijn Rijvers -

62 Want Direct Conversion? Focus on OTA ranking to drive visits. Focus on the magnitude of your deals for multiple LOSearch. Invest in Metasearch. Consumer touch point closer to ROI. Invest in the best booking engine. Must be multilingual. Great content and simple language. Pay Later, Pay Now. Re-evalutate OTA promotion paths expensive & on-seller relationships

63 Travel Agents Most travel agencies have a separate department devoted to making travel arrangements for leisure as well as business travellers and some travel agencies specialise in commercial and business travel only (TMCs). Travel Agents book hotels in three ways: 1. Via a wholesaler (ie: leisure customers) 2. Via the Global Distribution System (GDS) 3. Directly with a hotel if they have a special negotiated rate available.

64 What other distribution channels are available for consumers to book their rooms? We have talked about OTAs, Direct, Meta, GDS, Travel Agents Groups - 10 Minutes

65 Inter-Related Distribution Channels Direct Channels (Reservation Team + Website) Affiliates Channels Loyalty Members Corporate Partners Staff Friends and Family Social Media Direct via Meta Search Direct via Travel Agents Travel Agents via GDS Online Travel Agents Wholesalers

66 Acquisition Cost - Perception

67 Acquisition Cost Reality?

68 Experiencing and Sharing Phases

69 Experiencing and Sharing Phases Source: Google / Phocuswright / Travelclick

70 Experiencing and Sharing These phases influences others decision making! Just about EVERYONE who has had a bad experience shares the experience on social media and review sites. Source: Google / HSMAI / Common Sense

71 Satisfaction is Relative to Set Expectations Find the right balance between pricing positioning and reputation. Price is relative to booking promise.

72 Conclusion

73 Conclusion Path to Booking Understanding who customers are and how they book is critical to maximising exposure, optimise marketing, pricing initiatives, revenue and profits, and minimise cost of acquisition. Use all distribution channels Understand cost of acquisition, Who s who in the zoo, Collect data, Understand market demand patterns

74 GAME TIME! Enter Token

75 How this works? Game 2-4: A dynamic competitor Round 1 Round 2 Simulator reacts to your decisions, assume they are the same in round 2 Marketing Involved with PPC and commission overrides

76 MARKET SEGMENTATION

77 Types of Marketing

78 Mass Marketing An attempt to appeal to an entire market with one basic marketing strategy utilising mass distribution and mass media. This approach is beneficial when opening a new hotel or launching a newly renovated room, or new package for instance.

79 Not all customers are alike. Therefore not all products, prices, or promotions are alike either.

80 Segment Marketing Focusing in on a specific market segment which allows a business to tailor existing products and services to meet the particular needs of those customers. This approach is beneficial by allowing a hotel design future products and pricing options to address the exact needs of the target market.

81 Benefits of Market Segmentation?

82 Benefits of Segmentation Segmentation helps to defines the types, or groups, of customers for our accommodation property and then we can apply the following: Creation of value for each segment Effective use of hotel resources Effective focus on each segment Simplification of the product positioning

83 Why Hoteliers Use Segmentation?

84 Why Use Segmentation The segments created are composed of consumers who will respond similarly to marketing strategies and who share traits such as similar interests, needs, or locations, which make them easier for hoteliers to target.

85 Why Use Segmentation? Better tailor their pricing, marketing, and sales efforts. Framework for all hotel budgets, forecasts, systems and KPIs.

86 Why Does the Revenue Team Need to Know About Market Segments?

87 Mainly Forecasting Forecast is created by the Revenue team using pick up trends indicators from each market segment. Past performance of the hotel is used as a basis for projecting how the hotel will perform in the future. The Revenue Director will take this forecast into the Revenue Meeting and the discussions will be all around which segments are performing, which are slower than expected.

88 How to Segments?

89 How to Segments? Who are they? Where are they coming from? When do they book? How do they book? What do they like? Elements to consider: Geography region, size, population and climate Demographics age, gender, lifestyle, income and occupation Psychographics activities, social interest and values Behavioral features, benefits, usage, loyalty and occasion

90 Segmentation Step 1 Identify the reason for segmenting your market (Business vs Leisure?) Then develop a profile of each segment How are we going to collect data? PMS, channels Staff training

91 Segmentation Step 2 Develop a method to size each segment. Each segment should be large enough for you to focus your efforts and resources on Think ROI!

92 Segmentation Step 3 Develop positioning for your target segments. (eg: suites for your business segment and apartment-style family rooms for your leisure segment?). Consider the grade of rooms suitable for each segment, their length of stay / lead time and then start developing your market mix for each segment.

93 The Blurred Lines of Segmentation?

94 Current Trends

95 Current Trends Traditional classification of market segments not current anymore. Purpose or reason for traveling is no longer apparent to the hotelier based on the type of rate confirmed. Business travellers don't book a specific negotiated rate or they book via OTAs. It is more difficult to identify them as corporate travellers until they arrive at the hotel to check-in.

96 Current Trends In addition to Market Segments, we also define the Source of Business. A market segment is based on the guest's reason for travel. e.g. Business or leisure travelers A source of business is the channel which the reservation is made.

97 Source of Business? Direct Non-commissionable: Brand Website, Call Centre Direct: Commissionable: Meta, Google, Affiliates OTAs Wholesalers Travel Agents - GDS

98 Source of Business?

99 Evaluating Segments / Sources of Business Segments Identifiable so they can be measured. Accessible by communications and distribution channels. Substantial so that it is profitable Actionable and durable enough to maintain ROI Sources of Business Identifiable so they can be measured. Accessible by communications to the general consumer Substantial so that it is profitable Able to be marketed and promoted

100 Emerging Trends? A change towards personalised pricing and products, as opposed to pricing by market segment and source Recognising and valuing the total customer value An industry-wide change to segmenting people by personas rather than by their reason for travelling or where they live

101 Let s Call It Business Mix! Market Segments (Transient, Group, Corporate, C&E, Internal) Source of Business (Direct, OTAs, GDS, Wholesaler, Metasearch) Channels (Expedia, B.com, Traveloka, Amadeus, Sabre) Geo Source Markets (International, Domestic, Regions) Personas (Baby Boomers, Solo Travellers, Families, D.I.N.K.S)

102 Geo Sources Markets If your hotel is located in Bangkok, Thailand, your main source markets might be China, Indonesia, Japan and Germany. In most cases, your source markets will be different for Corporate travel as opposed to leisure travel.

103 Personas Often, your marketing team will be using personas to segment their campaigns, some examples are: Energised Baby Boomers (very marketing.energised??) Solo travellers Spending singles Families

104 Best Market Segmentation Allows you to sell the right room to the right person at the right time on the right date at the right price via the right channels (at the right cost?) No cookie cutter approach to market segmentation Mix of segments, booking source channels, geo source, channels, Personas Allows you to forecast accurately Allows you to make meaningful decisions Allows you get a ROI on marketing initiatives Allows you to maximise revenue and profits

105 Best Market Segmentation Use all data and information available to you (eg: PMS Data, Pace Data, Travel News, Tourism Reports, Demand Drivers, Supply) Understanding guest behavior in terms of booking windows, channel preference, spend propensity, loyalty, stay duration and frequency of stays are all factors to consider. Replicate what is working, discard what is not working! Retain your most profitable customers in high demand.

106 Best Market Segmentation Work closely with Sales and Marketing to created smart campaigns that stand out AND align to your revenue goals Tell the right story to the right people at the right time Analyse Demographic and Psychographic data together to create buyer personas Define Personalised offers targeted at your buyer personas.

107 REVENUE MEETINGS

108 Importance of Revenue Meetings? The entire management of an organisation, including owners and general managers, are unified around profitability goals The revenue department administers the economics, forecasting, pricing, distribution and strategy execution in order to maximise the hotel s revenue and profit potential.

109 What to Discuss? A forum where the various managers come together and discuss the revenue performance of the property. Discussion around new goals or changes in strategy. The most important elements to discuss are those which impact revenue performance of the hotel. Forward forecast, Yield strategy, Pricing, Market Mix, Sales and Marketing.

110 What to Discuss Some of the discussion areas might be: How does our current booking pace compare to last year? Are we on track to reach the revenue budget? Why / Why Not? Are there key market segments of our business that are tracking behind? What revenue management tactics should we deploy? Each department should be represented at the Revenue Meeting It provides the opportunity for all departmental representatives to obtain insight into planned strategies to ensure alignment across the property is achieved. Financial objectives can be outlined and expenditure

111 What Should be Reviewed? Decisions must be based on facts and knowledge, not on feelings!: History: Factual historical data on bookings, pricing and results against the competitor set using market intelligence etc,.. Future Demand Calendar: Yield opportunities, Major Event, Need periods Future Your competitors' pricing Future A booking pace report Future Sales & Marketing insights Corporate production, C&E holding, marketing and demand-generating activities.

112 Who Should Attend?

113 Want an Efficient Meeting? The Top 5 Rules of Revenue Meetings: Rule #1: Be consistent; meet at the right place and right time Rule #2: Involve the right team members Rule #3: Bring the right reports and information Rule #4: Discuss the right things Rule #5: Do the right follow up

114 Sample RM Meeting Agendas Sample revenue meeting agenda and minutes document. sources/articles-and-whitepapers/newitem

115 Join us in Melbourne 2 full days of Revenue Training

116 CERTIFICATE OF REVENUE MANAGEMENT (HOSPITALITY)

117 Events Education Membership Information & tools