We are delighted to have been a part of the Revenue Optimisation Conference 2018 by HSMAI in Amsterdam last week. It was great to meet everyone that attended, participate in some great discussions and hear from all the speakers who presented.
There were so many great topics discussed, ideas and opinions shared - but three key themes stood out for us:
- Hotels are using more and more data to inform how they optimise their revenue.
- Many hotels have already shifted their focus from RevPAR to calculating and tracking net RevPAR.
- Artificial Intelligence and Machine Learning may be the key to unlocking the real potential of data to drive more optimal business / distribution / channel mix.
As sponsors, we had the pleasure of hosting a roundtable session on the topic of ‘emerging challenges and opportunities in online distribution’ where the theme and focus of net RevPAR continued here. With more hotels and chains already monitoring or working towards monitoring net RevPAR, our discussion eventually shifted to explore what comes next. More on this shortly.
Some key points that emerged from our discussion were:
- Wholesale continues to pose complex challenges. Wholesale contracts constantly disrupt hotels’ ability to achieve an optimum distribution mix. Hotels and chains that were mainly city-based explained that they have either shut down all wholesale and FIT contracts or are seriously reviewing their position. Meanwhile, leisure hotels are not in a position to take a hard stance yet, as they still rely heavily on tour operators. But they are getting more selective and preferring to work with partners who are more transparent and enable more control. Participants voiced that there are still a significant group of travellers who like to book packages and like the convenience of using tour operators, in the leisure sector. So it is vital for them to work with such wholesalers and find better ways to manage their relationship with them by pursuing dynamic contracts and proactively monitoring and managing their activities.
- As usual, there was plenty of friendly picking on the OTAs. We had representatives from both Expedia and Booking.com that participated in good spirit. But looking past the frustration of parity related issues, there was an increasing recognition of the value OTAs bring to the table with their reach, as well as the fact that issues can often be as a result of internal issues. Hotels appeared to see OTAs as partners to work closely with, than fight against.
- We were also intrigued to learn that many hotels are already measuring and tracking their net RevPAR, actively. Everyone who was not tracking already, said that they were actively working on systems and processes for taking into account all their costs across across direct and indirect to calculate an overall cost of distribution. It is early days, and much of it still appears to be manual and hotels who are tracking this admit it is not yet perfect. Hotels that made the transition shared it wasn’t easy - it was a complex process which required cooperation across different functions. But once they have achieved this, it really allowed them to become more dynamic in how they managed their distribution channels. A more holistic view of their channels and estimated cost of distribution for each channel allowed these hotels to shift emphasis between direct and indirect channels for distribution depending on the costs they were able to achieve in different channels.
What comes after net RevPAR?
At Fornova we have recognised and advocated the importance of the shift in focus from RevPAR and net RevPAR for a while now so it’s encouraging to see more hotels in the industry starting to realise the benefits. Naturally, the discussion moved towards what comes next?
We discussed the notion that net RevPAR may perhaps still be a short term, point-in-time view. An idea emerged that eventually, achieving the optimal channel mix should consider the Lifetime Value of the guests booking. Tracking that will require the measurement of cost of acquiring returning vs new customers across all the channels. This will provide an additional dimension to really understanding whether the channel is having an incremental or cannibalising effect on the guest bookings.
Using business intelligence and historical trends can help with formulating a strategy for pricing and distribution. But achieving that plan and maximising profitability is a discipline of ongoing execution - monitoring and responding to changes in the distribution landscape and channels monthly, weekly or even daily.
It is still early days, and establishing the systems and processes to enable tracking net RevPAR is the first step in the right direction, and we are really excited to see this taking root. There are still many challenges in understanding the true cost of distribution. What are some of the challenges you are facing?