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A Close Look into the Hotelier's Revenue Management Crystal Ball.
By Jean Francois Mourier, REVPAR GURU
Thursday, 13th January 2011
 
The industry will continue to grow, largely because of technological shifts. The more nimble and adaptable operators will profit handsomely from this trend.

2010 was a fine year for the hotel industry and 2011 is shaping up to be even better. In the first three months of 2010, RevPAR around the world increased, in one case dramatically.

The metric for Europe grew 3.8% during those months, while the Middle East and Africa gained 3.9%, the Americas 5.3%, and Asia-Pacific a whopping 22.8%, according to Smith Travel Research (STR). For 2011, that growth story should continue across the globe. It's obvious that, although today's bookings aren't quite where they were at during the pre-recession days, the industry is slowly managing to crawl out of its slump.

But not every hotel and tour operator will benefit from the boost in business. Competition remains strong and customers are becoming increasingly selective. In order to take advantage of the upward trend, hotels will need to be increasingly flexible in not only marketing their rooms, but determining what price their customers are willing to pay.

This is because potential guests now have a wealth of comparative pricing information at their fingertips, ensuring that they won't book if a hotel's pricing is too high. More and more, even a few dollars can make the difference between a customer booking and not booking with a property.

Technology Wins the Prize

In the travel and tourism industry, operators who take advantage of the technology currently available will be the winners in 2011. Witness Google's $700 million takeover of ITA Software, which will not only make the internet powerhouse a serious operator in the travel business, it will also rewrite the rules for bookings.

As Google is a ubiquitous presence in every corner of the internet, it will seed its travel offerings throughout the online space. It's very possible that starting as early as this year, web surfers logged into Gmail will be able to plan and book their entire vacation with a few mouse clicks inside the Google web ecosystem, making it much easier to do from anywhere, while on the go.

2011 will see the further deepening of the mobile web environment, so customers will make more bookings while in transit, often as close as from the pavement outside their hotel of choice. Now, more than ever, a customer will be able to wait until the very last possible moment to get the very best possible price, making the already tiny booking window even more miniscule. Wi-Fi options offered by most airlines will mean that, particularly for well-expensed business travelers, more bookings will be made in-flight, or from the airport lounge.

Compounding this trend will be more and better smartphone apps to sniff out available rooms and, crucially, the best prices on those rooms. According to Priceline, 58% of customers with mobile devices made their booking within 20 miles of their hotel where they ended up staying. More impressively, 35% of those polled were within one mile when they clicked on the "reserve this room" button.

Tech Shift The Customer Gets the Power

With continuing developments in technology, the industry heavily favors the consumer, over the hotel or hotel chain. Not only does a traveler have a wealth of solid pricing information available (often literally) in their pocket 24/7, travel companies are shaping their business to conform to what customers want. As ever, what those travelers want is better prices, and this demand has had a big impact on the industry.

Late last year, American Airlines pulled its listings from Orbitz, in order to avoid the fees charged by the site. The airline was subsequently dropped from Expedia. Ignoring angry accusations of unfair practices from those operators, AA shifted its focus to its own website, effectively allowing it to offer the best deals possible.

AA's move will mean a direct connection between the airline and its consumers, which will be another factor driving down prices. This is happening across the broader travel sector, not just in the hotel industry. The wise hotel operator would be well advised to consider how best to reap the rewards from this trend, thinking about how to optimize bookings across both the OTAs and through their own property's website to ensure the most online bookings possible.

Tour package operators are already rising to the challenge of this new reality. They will continue their relentless march from the offline (i.e., expensive storefronts and sales operations) to the online space. Increasingly, they'll attempt to reach the customer and score fees by providing services through mobile apps and social networking.

And speaking of social networking, it will be another engine driving growth in bookings in 2011. Facebook is now the giant of the internet - the most-visited website in the world. Smart operators and hotels have recognized the value of Facebook and its kind, and will continue to take advantage of it as yet another booking channel, especially since the invention of tools that allow direct bookings through social networking sites.

After all, millions of people on earth use it to communicate with their friends and post updates about their lives so 2011 will see them continuing to broaden their usage to include e-commerce opportunities - which includes, of course, tour operators and hotels.

TripAdvisor, for example, has meshed aspects of its site with Facebook, so consumers can view travel experiences and recommendations from their friend list, when logged into either site. Before long, researching a hotel stay and booking it within Facebook will become commonplace and hotels need to plan accordingly, before they lose out on valuable social media bookings.

Adapt, Capitalize and Win

Rather than being overwhelmed and under-informed about this technology and the big changes in the industry, in 2011 the clever and profitable hotelier will adapt to them and use them to his advantage. Pricing in 2011 should be seen as a fluid system responsive to consumer demand, not as a fixed, immobile and static set of numbers on a page.

Revenue management systems have already evolved to manage this fluidity and the savvy hotelier and revenue manager will allow these RMS to handle the minutiae of their day-to-day pricing tasks in order to stay ahead of the competition and affording them the opportunity to focus on the bigger, more strategic revenue management picture. Especially since this year will see a noticeable uptick in the "book anywhere, anytime" environment, a well-functioning and always up-to-date RMS framework will be a crucial tool for success.

But as always, technology is only an enabler, however, so it will be imperative for hotels to utilize it properly. Revenue managers will increasingly need to harness data properly in real-time, in order to effectively adjust pricing according to the various key factors (room availability, etc.). The savvy RM will also use RMS tools to shape their property's value-added offerings to the incoming guest, perhaps by bundling a few concessions appropriate to the guest's profile into the room price.

The Guest is King

At the end of the day, of course, making money in the hotel business is all about providing comfort and service to the customer. As that customer gets more tech-savvy and flexible, he or she will reward accommodation providers who do likewise. Harnessing the power and promise of technology, both externally via the internet and internally through good RMS management, will be the key to winning guests in 2011 and to reaping the benefits of the industry's upswing in the process.

So what are you waiting for? Make technology your property's ally in 2011.

About REVPAR GURU

REVPAR GURU provides hotels around the world with an alternative revenue management software solution, designed to deliver maximum bookings and profits. As REVPAR GURU's custom-designed Yield Dynamic Price Engine is the only real-time revenue management software available on the market, it meets the rapidly changing needs of hotels in a very demanding business environment. REVPAR GURU's solution offers dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management and GDS sales distribution, to increase a hotel's RevPAR intelligently and effectively, while maintaining rate integrity and automated rate parity. Since 2004, REVPAR GURU's software solution has been used by hotels worldwide to increase occupancy and RevPAR.

Headquartered in Miami, Florida, additional information can be found at www.revparguru.com or by calling +1.786.478.3500.

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