Mr. Kistner

Revenue Management

Hotel Competitive Intelligence: What is it, Can it Affect Your Revenue Management?

By Mike Kistner, President, Chief Executive Officer & Chairman of the Board, Pegasus Solutions

Based on the three to five billion transactions Pegasus Solutions is processing each month for more than 95,000 hotel distribution customers worldwide, leisure travelers are regaining confidence. In fact, booking volumes through the alternative distribution systems (ADS), made predominantly by leisure travelers, climbed +13.93% above 2009, +9.13% above 2008, and a staggering +33.83% above 2007 levels. Future booking data in the same channel evidenced positive growth in reservations on the books through mid-2010.

That means the bookers for your rooms are there, and continuing to come back. The question becomes, how are you going to get them?

You’ve realized that you need to have a good revenue manager to ensure you’re selling at the right price, to the right people, at the right time. But have you provided that revenue manager with sophisticated hotel competitive intelligence tools to increase your revenue through smart analysis of your market and competitive set with historical and forward-looking data?

You need intelligence, not the day’s headlines

The 24-hour news cycle has shortened the “time-to-press” of environmental events and business developments that will affect your business. A regional win for a football team may mean an immediate sell-out of your hotel in the next game’s host city. A natural disaster may create demand for lodging in a nearby aid location. However, even with online news and social media, catching the potential increase/decrease in demand, timing your related revenue management decision – release the rooms, lower the rates, restrict the sale – will be impossible without receiving comprehensive, pertinent and objective facts outlining your individual market situation, and that of a selected set of your competitors.

Hotel competitive intelligence is not a monthly or a quarterly event, it is a daily science requiring careful and thorough analysis of environmental events, business developments, competitor actions, and buyer behavior to name a few. Hotel competitive intelligence identifies early risks and opportunities before they become obvious. It is the difference between widely available factual information, i.e. traditional, online and social media, and a uniquely created perspective on developments and events that yield a competitive edge. This requires immediate and actionable information.

It’s not intelligence if it’s not actionable

Competitive intelligence professionals employ sophisticated training and processes to gather information, convert it into intelligence and then utilize it in business decision-making, which – in this case – is revenue management. These professionals also emphasize that if the information is not usable, or actionable, then it is not intelligence. This again calls upon the timing of your information – daily versus quarterly? It also begs the question of how powerful your data is.

- How rich is your data source?

Does it look at the average daily rate for three months ago based on two other hotels in your region, or does it draw from a robust collection of hotels using various market views? More importantly, as we see the shift from business to more leisure-oriented booking channels, does it utilize more than just global distribution system (GDS) data?

- How “far” can it see?

Historical perspective and analysis is tremendously valuable, but the ability to look beyond today’s booking into the next three months can dramatically improve a property’s sales, marketing and revenue management decisions.

- Has it been proven?

Or even better, would you be worried if you found your competitor was using it to analyze your business? When budgets are tight, you have to analyze every investment to ensure it will bring about some return on investment (ROI) to your business.

Case in point

Apex Hotels operates seven hotels in London, Edinburgh and Dundee – highly competitive international hotel markets. The company’s hotels are stylish and contemporary with a unique style, and are always located in city centers near entertainment, attractions and shops. Offering excellent facilities and service, Apex caters to both business and leisure travelers. That is, once the guest has booked and arrived.

Before the guest actually gets to an Apex hotel, she has the choice of booking many alternate hotels in the same destination through a travel agent, corporate buyer, travel management company, or online, either directly at Apex’s Web site or one of the online travel agencies. If the purchase is made online, consider this: the number of shopping requests into hotel central reservation systems (CRS) made against the number of actual bookings made, i.e. the look-to-book ratio, has grown nearly +55 percent since October 2008. So many channels for them to consider…AND for you too!

That means leisure travelers, who have fueled the decline in average daily rate through competitive shopping online, will likely make that decision to book, or not to, with Apex based predominantly on the rate presented. Too high, and poof, she’s gone. Too low, and poof, your revenue is.

Pegasus’ MarketVision Agency Position, has allowed Apex to keep ahead of the competition and plan for future bookings with accurate, fresh and actionable data. Sales director of business travel Alan Greene says that the tool has allowed Apex, as an independent hotel group, to compete with the major chains through the tough market, with limited resources and actual, realized ROI.

How it’s done

Back to that revenue manager and your competitive intelligence tools, which I’m assuming you’re ready to get if you haven’t already. What you now have is a strategist equipped with aggregated booking information from both your hotel and a group of your key competitors, including average daily rate, length of stay, booking volumes, etc. You also have access to aggregated data from yesterday, a month ago, or even three months from today.

These resources now empower you to know how your hotel is performing in relation to your competitive set in terms of room rates achieved, geographical source of business and which channel is producing the bookings. You can identify and react to what’s happening in your market, recognize booking trends and spot gaps in business demand and market share.

This, of course, leads to better channel management distribution, but that’s for another article.

If, for example, three months from now you’re seeing a jump in the number of inbound bookings from agents in Italy, then you can adjust promotions and sales team efforts to target that target audience in that specific region to capture the available business.

You can also analyze performance per property against the market to make adjustments and report to stakeholders. In planning, it allows you to identify future opportunities and risks, plan the most effective timing of marketing promotions and measure their effectiveness. Finally, to the relief (or chagrin) of your newly hired revenue manager, you can determine if your revenue strategy is yielding the best return.

Recovery by the numbers

From the bold leisure traveler to increased volumes in the GDS, we’re seeing evidence everywhere of a recovery for the lodging industry. But, budgets are still tight, and rates are still down. At the end of 2009, booking volumes in both the GDS and ADS were above 2008 levels, but rates lowered to drive demand during the downturn remained down, thus stifling potential revenue growth.

Many hoteliers find themselves again in the position they did post-2001 – faced with developing the most effective strategies to increase rates to a normalized level. However, rising look-to-books portend more pressure on technology infrastructure for travel suppliers, and an obvious competitive rate and shopping environment.

Not only does this put hotels in the difficult position of handling the immense number of rate and availability requests on the CRS (again, a topic for another article), but it also makes it so vitally important to blend an aggressive, dynamic rate strategy founded on sound revenue management together with actionable hotel competitive intelligence to create the essential strategies for growth, if not just survival.

Mike Kistner is Chairman, President and Chief Executive of Pegasus Solutions. He joined Pegasus from Best Western, where he was CIO and SVP of distribution. Mr. Kistner holds a BS from Northern State University, Aberdeen, S.D., and a MS in Information Systems from Colorado State University. He is the past Chairman and current member of the e-commerce committee of the AH&LA. From 2000 to 2005, he served as Chairman of the Open Travel Alliance (OTA) and has been recognized as one of the leading CIOs in the hospitality industry. Mr. Kistner can be contacted at 480-624-6450 or mike.kistner@pegs.com Extended Bio...

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