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Natural Synergies

Today’s environment of interconnectivity, crowdsourcing, flash sales, mobile marketing, and social media adds additional complexity to the already challenging job of driving revenue and profits for hotels. Every time you turn around there is another opportunity to dump inventory at drastically reduced rates. Recent economic pressures have made it even more tempting to unload distressed inventory through channels you may never have considered four years ago. As demand recovers, we are left with a legacy of flash sales, opaque sites, and room auctions. As an industry we’ve become very good at proactively chasing bad business, but now we have an opportunity to change the mentality to cultivate high value segments.

As complexity increases, the role of the revenue manager has evolved. No longer is this job about managing access to inventory. Now the revenue manager must set pricing strategies, manage distribution channels, perform competitive analysis, manage revenue from various sources across the hotel, and become more customer-centric in pricing strategies. To be successful, revenue managers must incorporate new data and analytics from other departments across the hotel.

The most natural place to start is with the marketing department. While revenue management traditionally works with demand at the market segment level, marketing cultivates the relationship with the consumer more directly. Marketing is responsible for generating demand, while revenue management controls it through profitable pricing strategies.
These may seem like opposing responsibilities, but when goals are synchronized there are natural synergies. Revenue management knows where holes in demand are, and marketing knows consumer preferences to target the right customers to fill those holes. Together the departments can move the hotel away from out-of-synch demand generation and demand control efforts.

The idea of integrating decisions from the revenue management and marketing departments is not new. Most hotels have organized weekly or monthly meetings to bring both sides to the table. In this new environment, weekly is not enough. Revenue managers and marketers need real time access to the right information for efficient decision-making. Instead of bringing spreadsheets to weekly meetings to trade routine information, revenue managers and marketers need to be able to access the information they need, when they need it, in the systems they use every day, and in the format that they prefer. When routine decision-making is automated, revenue managers and marketers can spend the weekly meetings working together to address only events that require more rigorous analysis and carefully planned strategy. This is just a first step.

In a truly integrated system, all decisions are synchronized through easy access to integrated data and analytics. Revenue management forecasts and pricing decisions are transmitted to campaign management, so better decisions can be made about the design, content, timing, and contact strategy of promotions. Guest analytics uncover which guests are most likely to respond to what kinds of offers, and marketing optimization algorithms select the best set of offers, prices and contact lists that maximize the profitability of each campaign, while operating within the constraints of the revenue management forecast—protecting against dilution. The revenue management system incorporates promotional information into the demand forecast, improving accuracy, and resulting in better pricing decisions. At the intersection of guest analytics, revenue management, marketing optimization, and marketing automation is Intelligent Demand Management.

The Intelligent Demand Management vision is achievable in small steps. Ensuring that the foundational technologies are available, and utilized, each department provides short-term benefits. Automated exchange of key data (even without analytics) gets each group used to working with the other’s data before it is incorporated into the analytics. This data share also facilitates communication between the groups, and helps to break down organizational and cultural boundaries. Small steps in optimization can be taken as well. Start with incorporating expected response rates to promotions in the revenue management forecast, for example.

Technology can be the glue that binds departments together, but, while a well-planned technology strategy is essential, it is only an enabler. Goals and incentives need to be aligned, and there must be buy-in from everyone from top corporate executives to property level analysts. The best way to get buy-in is to demonstrate success. It doesn’t have to represent sweeping change, but it does need to be significant enough to demonstrate potential.

To get your hotel started, build a task force. Select motivated folks from the revenue management and marketing departments and have them identify opportunities.
Ask marketing and revenue management departments to share their daily activities so they can better understand the details of each other’s job.

Look closely at the available data and metrics from each department. Determine what data should be shared, align metric definitions to improve communication, and identify missing information.

Look at business processes and the technology you are using to support them. Ensure you are leveraging all available functionality, and build a business case for augmenting where necessary.

A carefully planned, phased approach to implementation ensures success. Think of a four-step process where you first establish enabling technologies and organizational structure, and next, manually integrate the systems to get users comfortable with the new data and processes. After that comes optimize, where automation adds speed and accuracy to decisions. Finally, the innovate stage suggests new data sources and new initiatives (likely returning you to the establish phase). This should help you move the hotel away from out-of-synch demand generation and demand control efforts and back to cultivating high value segments.

Kelly McGuire, Ph.D., is executive director of hospitality and travel global practice for SAS, and also works closely with IDeaS Revenue Solutions, an SAS company.

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