Three Game-Changing Hospitality Trends for 2017
And What to Do About Them
By Tammy Farley, Co-Founder and President, The Rainmaker Group
There is an old adage that says, "The only constant is change." Although attributed to Heraclitus, a Greek philosopher who lived around 500 B.C., apparently that statement is as true now as it has ever been - perhaps even more so. 2016 has proven to be a year of tumultuous change in the hospitality industry, from the dizzying pace of technological advancements and fluctuating global economies to the introduction and adoption of entire new segments of the business. With rapidly advancing technologies in just about every sector of the industry, hospitality has experienced an exponential transformation over the past several years, dramatically changing the face of one of the world's oldest occupations.
As another year draws to a close, savvy hoteliers are beginning to reflect on all that has transpired in 2016, in order to effectively plan and implement strategies that will optimize revenues in the coming year. In 2017, hoteliers and revenue managers will need to quickly grasp these significant market changes and understand, on a deeper level, the effect those changes and resulting trends will have on the industry. They will also need to analyze how each hotel sector and each individual market and property should approach doing business under these new realities, in order to maximize their market share.
Understanding what has happened, however is only a piece of the puzzle. Even more important is knowing how to leverage these changes -- or combat them. Current industry trends such as the escalating push for direct bookings, the return of group business, and the continued growth of the "sharing economy" are three key topics that will likely shape the hospitality landscape over the course of 2017. Following are some effective ways that hoteliers and revenue managers can take action as we head into a new year, in order to make these trends work for them and ensure success:
1. Competitive Insight Delivers Direct Bookings
While hotels benefit from the exposure and reach the OTAs can provide, it's no secret that they would prefer to avoid the resulting 20-30% commissions by channeling potential guests to their own direct booking engines on their proprietary websites. With gated loyalty rates continuing to gain in popularity among hotel brands as a way to circumvent rate parity agreements, it's important to note that it's only a matter of time before the OTAs implement a counter attack to keep their competitive edge. Large OTAs have already made claims that they will follow suit with their own loyalty programs and discounted rates, creating the potential for a price war that will drive rates and revenue down for everyone.
It's essential for revenue managers to have access to the omni-vision, so to speak, that competitive pricing information provides. This intel is a crucial aspect for revenue managers in developing pricing strategies that keep them ahead of the game. Particularly for independent and boutique hotels which have traditionally been unable to go toe-to-toe with OTAs in attracting direct bookings, the ability to quickly and affordably gain insight into pricing data across all channel types is highly beneficial. Using this competitive intelligence, hotel properties can effortlessly monitor both OTA and brand.com rates in order to implement meaningful revenue strategies. Without overstretching resources, these hoteliers can overcome once-limited opportunities to directly market to guests without the need for loyalty programs, in order to funnel traffic directly to their own websites. With the ability to automatically obtain rate information from the same OTAs and brand.com websites that travelers themselves visit, revenue managers can quickly gauge where their property stands in local markets, and adjust prices accordingly.
Once a process involving painstaking hours of research and analysis, today's advanced rate shopping solutions provide hoteliers with the ability to gather the data they need instantly, and with a fraction of the staff time once required. In addition, these solutions can filter data on competitive pricing in any way hoteliers might need, customizing this data to fit the specific needs of a property or across a brand. These properties can then make sense of what's happening in their specific markets and gain critical insights into pricing data across all channel types.
With this up-to-date data that can be readily acted upon, hoteliers can then more effectively compete with their better-equipped competitors having access to key intel on what those particular competitors are doing. With supply increasing and occupancy predicted to level out in 2017, revenue management strategies based on intel from competitive pricing will only grow in importance as hoteliers work to maintain and maximize their share.
2. Using New Sources of Rich Data to Boost Group Business
As markets inevitably continue to evolve, so too does the makeup and importance of various guest segments including group business, which promises robust growth over the coming year. This fact demands analytics that are capable of determining the best pricing strategy for each group, in order to ensure success. Using historical data, hoteliers can establish micro-segmentation and predict price-sensitivity, using that information to configure optimal pricing strategies for future group business. Further still, such information can also be used to determine which groups are more profitable.
With a recent PricewaterhouseCoopers study indicating that the meetings industry spends $39 billion on accommodations annually, hoteliers clearly stand to gain significant revenue growth by better understanding how to attract and earn the loyalty of this highly profitable segment. Powerful technologies and tools have evolved as a result, and are capable of pulling rich data elements to help revenue managers make optimal group pricing decisions in seconds. Gathering and assessing historical data on these groups, such as how many rooms washed from the group block between the booking date and arrival date, can enable hotels to refine their forecasts and better optimize future group pricing.
With revenue managers experiencing record high levels of group RFPs, yet often lacking the ability to respond in a timely fashion, many hotels are losing potential group business to first responders. Even in successful RFPs revenues are often being left on the table due to many hoteliers over-relying on Minimum Acceptable Rate (MAR) strategies. Here too, we see the rise of big data analytics helping to redraw the lines in the landscape by providing hoteliers with tools capable of prioritizing and streamlining the RFP response process.
Now able to quickly leverage information from lead-scoring sources such as Cvent, revenue managers can confidently prioritize RFPs in seconds by implementing group pricing analytics; effectively shortcutting a procedure once infamous for its lengthy time-consuming nature. Today's revenue managers as a result, can finally look forward to pricing RFPs optimally in seconds, slashing response rates. With the risk of losing business to the first responders now significantly reduced, hoteliers can also find themselves increasingly able to tailor services to group needs; enhancing their odds of ultimately winning a proposal, while ensuring that the ability to earn maximum revenue is realized.
3. Factoring the Impact of the "Sharing Economy" on Traditional Pricing Strategies
As the hospitality industry undergoes radical market changes that include an increased inventory of alternative accommodations in the majority of markets, it is more vital than ever that hoteliers equip themselves with data that allows them to adapt to this evolving landscape. With regard to these new categories of competition, big data stands to pave the way for hoteliers to alter strategy at the very moment that a market's landscape changes.
Lodging options, such as Airbnb, boutique hotels and lifestyle brands, have seen unprecedented success in catering to the changing needs of guests, since they add personalized touches that make guests feel comfortable during their stay. These accommodations typically go above and beyond what hotels have traditionally included in their base rates, making them more attractive to some travelers. While alternative accommodations, like Airbnb, have heavily penetrated several large, urban markets, other cities and regions have still remained relatively unaffected by them. This is changing rapidly, and hoteliers need to take notice in the coming year to properly assess which types of accommodations are moving into or growing in their particular market and how they are accomplishing that growth.
Despite an obvious inability to prevent this sort of change within the hospitality environment, more traditional hoteliers can adapt their services and pricing strategy in order to remain competitive. In again leveraging the potential that big data can provide, hotels and resorts can ensure that prices take both conventional and unconventional trends into account. By doing so, revenue managers can always remain fully confident in decisions made over which channels are used, when they are used and at what optimal rate.
2017 and Beyond
In the year ahead and beyond, the trends that are shaping the industry will continue to evolve. The drive for direct bookings, the growth of group business and the cultural shifts that are a result of "the sharing economy" will all significantly impact hotel revenues in all markets and demand new strategies, in order to survive and excel. To that end, leveraging the power of big data will become even more vital in implementing true revenue management and profit optimization for hotel organizations around the world, regardless of size, brand or market position. Fortunately, big data is becoming easier to navigate; ensuring that revenue managers can more efficiently and effectively decipher changing market trends and guest behavior.
To plan effective strategies, revenue managers will need to implement solutions that help them drive direct bookings through competitor pricing analysis, maximize profitability from group business and evaluate market penetration of alternative accommodations and new lodging options. These goals are all now much easier to accomplish, due to the availability of robust tools that allow for the strategic analysis of big data. Using these strategies, hotels can successfully minimize potential obstacles or threats in the market, and ensure continued business success, not just for 2017 but for years to come.
Tammy Farley co-founded The Rainmaker Group in 1998 and serves as its president. She spearheads all sales, marketing and customer-related operations for the organization, which is the market leader in profit optimization solutions serving the Hospitality Industry. Ms. Farley always goes the extra mile for a customer or a cause. She once walked 60 miles to raise funds for breast cancer awareness. At Rainmaker her expert stewardship, along with that of co-founder Bruce Barfield, has earned their company a spot among the Inc. 5000 fastest growing private companies for five consecutive years. Ms. Farley can be contacted at 678-578-5700 or email@example.com Please visit www.letitrain.com for more information. Extended Bio...
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