When Times are Bad, Online and Revenue Management Are The Stars.
By Yeoh Siew Hoon
Monday, 1st June 2009
Yeoh Siew Hoon attends an investment conference and finds the talk is as much about online distribution and revenue management as transactions and deals.

"A good brand thrives in good times but in bad times, it's the difference between life and death." – KP Ho (right)

It was interesting to hear the words "Internet" and "revenue management" pop up several times during the Hotel Investment Conference Asia Pacific (HICAP) – Southeast Asia Update held in Singapore last week.

Usually focused on investment, transactions and deals, there was more than the usual attention being paid to direct online distribution, the use of technology to get closer to customers and the need to maximise whatever revenues that were coming in at these difficult times.

I suppose there's only so many ways one can say down, dropped, declined, decreased, depressed … which was basically the common theme underlining the discussions around investment.

Hotel transactions in Asia Pacific down 18% in 2008 over 2007. First quarter 2009, just over US$2 billion in volume, 90% drop over first quarter 2008. But the good news, according to Arthur Haast, CEO of Jones Lang LaSalle Hotels, marginally more than fourth quarter 2008. "Does this signal the turning point?" he asked.

Robert Hecker, managing director of Horwath HTL (left), sharing his hotel weather forecasts for the region which had more predictions of dark clouds and stormy weather than pockets of sunshine, sees another turning point – that of consumers going online to search for the best deals, and staying online.

"We are seeing more consumers going online because they know that's the easiest way to check the best deals and having done that, they will stay online. They will get used to it and hoteliers will have to get used to a different way of selling and buying. There will be shorter lead times."

He added, "The revenue management model will need to change, it's now based on historical data and with shorter buying lead-times, that data may be of limited value."

Jonas Ogren of STR Global (right) said RevPAR was falling across the region and he was not convinced that dropping rates had actually done the industry any good. Did it stimulate new demand or did it just mean the same people traveling and paying less, he asked.

"Revenue management is going to become more and more important for hotels. For Asia, this is a young concept especially with the smaller players but a lot of hotel companies are now hiring revenue managers and moving them up the ranks."

He added, "How you do reservations, how you price, how you sell will become ever more important. The growth in low cost travel will continue and that will change the space for hotels."

He called it the biggest opportunity for the current time – "if you look at the rates, and the fact that there is more demand than supply, revenue management will go straight to the bottomline".

The sticking point, he said, was the relationship between owners and managers. "When the owner sees weak occupancies, he wants to slash rates."

Hecker identified the Internet as  an opportunity. "We are seeing a second wave of people going online due to the economy. It happened after September 11, 2001 in the US. Selling on the Internet has a lower cost but it also levels the playing field between brands and non-brands, but there's an opportunity to sell more rooms that way.

"The challenge for brands is to hold their brand value when people are saying, I am looking for a room, not the brand."

During the Hotel Leaders Panel, the chief executives agreed that a confluence of factors was driving the online environment – such as online adoption, low cost carriers, growth in domestic travel, changing demographics.
"It's definitely the way of the future," said Michael Issenberg, chairman and COO of Accor Asia Pacific (left), citing the recent Accor Super Sale as an example of a tactic that proved the power of the Web in moving hotel rooms.

Patrick Imbardelli, CEO of Pan Pacific Hotels Group, said hotels, being perishable commodities, lent themselves ideally to the online environment and that his group was investing heavily in the channel.

KP Ho, executive chairman of Banyan Tree Holding, said technology and the Internet has helped to shorten the food chain. Mobile, he said, "allows me to get even closer to the customer".

Asked therefore what was the value of a brand in such difficult times, Ho said, "A good brand thrives in good times but in bad times, it's the difference between life and death."

Yeoh Siew Hoon, one of Asia's most respected travel editors and commentators, writes a regular column on news, trends and issues in the hospitality industry for 4Hoteliers.com.

Siew Hoon, who has covered the tourism industry in Asia/Pacific for the past 20 years, runs SHY Ventures Pte Ltd. Her other writings can be found at www.thetransitcafe.com

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