Contributed by Nicole Adair, Corporate Director of Revenue Management, SHR
Reprinted from the Hotel Business Review with permission from hotelexecutive.com.
I think it's safe to say that no one reading this article has a marketing budget that even comes close to that of the big online travel agencies. But what we all do have is our guest and reservations data already sitting in our systems, and this can provide a wealth of insight that can be both utilized in forming rate and distribution strategy, as well as for hyper-targeting marketing efforts. The key is to use the treasure trove of information hoteliers already have at their fingertips that can be analyzed and acted upon for solid, measurable contributions to the bottom line.
You as a hotelier have the ultimate competitive advantage in that you own the guest's experience as soon as they walk through your doors. Just as you have an obsessive focus on customer service, so too should you emphasize to your team the importance of collecting info that can be used in the future to better deliver appropriate offerings to the guest. True, much of the data collection and reporting options available to hoteliers today can seem intimidating, but there is so much insight to be derived simply from analyzing your reservations data, it's very much worth your time and effort.
By combining segmentation data on booking and stay behavior with your knowledge of each guest's on-property experiences and preferences, your hotel can maximize your marketing efforts while at the same time capitalizing on guests that arrive at your hotel via other channels. And with proper forecasting and the ability to layer in business where and when it is needed based on thorough understanding of your reservations data, your hotel can also increase its bottom line without the frustration that comes with feeling like you have to compete with any specific channel.
Deciphering the Reservation Story
Think about the amazing story that a single reservation tells. You know how far in advance your guest booked and through what channel. You know how long they stayed, how much they paid for their room, and hopefully how much ancillary revenue was captured. In aggregate, your reservations tell you what room types and even which days of the week are popular with which market. By looking at the rate code data, you get a clear picture of arrival and stay patterns, right down to which markets and sources are most likely to cancel.
That is a lot of knowledge! Let's break it down and start with the key piece of information that only your property has on a guest, even if they didn't book direct, and that's the total value of each guest. The most valuable guest is the one that brings the most profit to your bottom line, not necessarily the one that brings in the best room rate. As the focus continues to shift away from revenue per room and toward gross profit, this number has become more and more important. From a property marketing perspective, this number can be utilized for marketing efforts such as targeted email campaigns. But the average revenue per guest, totaled by rate or market code, can also be a useful metric when deploying allotments or making decisions in restricting distribution. You may even find that some of your higher-spending guests are coming from such channels as third-party packages, which could get lost in the shuffle if strategy is too focused on minimizing non-direct bookings.
Has this ever happened to you? Hotels frequently determine a room type pricing differential and then never deviate from this number. One way of fixing this is if you have a system that allows for dynamically managing individual room type pricing, because this is a really effective area to manipulate for ADR and revenue gains. In addition, reservation-level data should be evaluated to determine demand for room types by day of week, time of year, as well as by market segment and rate code.
Your high-dollar corporate traveler will probably have a different room type preference than someone visiting for leisure on the weekend. Do your rooms have views that change their desirability by season? Even one-time events like a concert can dramatically change the demand for a given room type. By simply sorting your reservations for any given date or date range by booking window and then room type, you can quickly and easily adjust your room type pricing to capitalize on the varying demand. Conversely, you will know which room types are not in demand, which allows for more confidently deploying promotional discounts or opening of opaque channels to capture incremental business.
Honing-In on What Matters -- And What Doesn't
Another important room type data metric to glean from your reservations is whether your differential is carrying over to the average rate for any given room type over a longer date range. For instance, if you tend to sell suites for $30 more than standards, but the rooms are only averaging $10 more in ADR, either you are upgrading too much or the only demand for your suites' price point is in discounted segments. Both of these discoveries should lead to changes in strategy, yet require two very different action plans. Which way is the appropriate way to address a less than desirable room type ADR will depend upon the breakdown of your room level reservation data.
Your hotel's booking window behavior and average length of stay are two other data points easily calculated with the data you already possess, and can target down to the market and rate code level as desired. Armed with this knowledge and proper forecasting, your property team can more successfully target marketing messages and timelines. Once you've figured out who tends to book when, you won't run the risk of running ill-timed promotions that ultimately fail to produce, or extending an unnecessary discount to markets that already exhibit the booking behaviors you are trying to encourage. For example, length of stay discounts are always popular for hotels, but do you offer them to everyone?
Various market segments or sources may already average this length of stay for which you are offering a discount, in which case you are just leaving money on the table. Average length of stay and booking window data by market should absolutely be taken into consideration before deploying length of stay or advance purchase discounts. Current technology allows so much control over your distribution, there is really no reason for you not to be maximizing your ability to customize what you are offering.
Properly armed with all of this knowledge, your property team can then assess forecasts and market knowledge to properly pursue the optimal mix of business and marketing strategy. If you know, for instance, that there are a few days of expected compression where shoulders have been historically hard to fill, using length-of-stay data to identify segments with perhaps a lower rate, but longer stay pattern, will allow you to address this issue at the appropriate time. Often, you can do this months in advance, versus scrambling to get last minute filler business on shoulder dates.
Getting back to our discussion on total value, that data surrounding a guest's value to the hotel is the key ingredient to successfully driving profitability. This data is useful in two ways. First, it allows you to identify guests and markets that wouldn't appear highly desirable at first glance based upon rate. And second, it allows for highly effective promotion targeting only at guests most likely to convert. It is relatively easy, for instance, to sort and segment your data to identify guests who have met a minimum spend threshold in spa outlets, and for whom a spa package would be much more appealing than for your average guest. Why overload your guests with messages that don't appeal to their particular spending habits when you can send multiple, targeted campaigns that speak to their on-property habits in a way that no third-party can easily replicate?
At this point, it's important to note, and I cannot emphasize enough, the importance of a proper incentive program for your employees when it comes to capturing guest data and getting it into the system cleanly. Every single third-party guest that comes to your property has the potential to be a future direct booker, but you will not have the ability to reach them if your staff is not capturing their info. Remember, third-party booking sites can be one of your best customer acquisition tools, but only if your people have the proper systems and processes in place to convert guests' business and win their loyalty.
The Bottom Line
At the end of the day, every one of us as hoteliers want as much of our business to book directly as possible. However, the guests we are talking about trying to capture are but a small subset of the total potential occupancy of our hotel. Once we accept that our highest priority is profitability, we can start evaluating our data and business mix in terms of which guest or market brings the highest revenue contribution, and how we can maximize that business, instead of thinking solely in terms of margins and commissions.
Click here for the original article, as published on October 28, 2018, HBR.