If you haven’t learned your own lessons during the treacherous year that was, then you may as well stop reading now. You’re like my neighbor’s dog; no matter how many times he’s been shocked by his electric fence, he still charges at me every day during my morning run. Bark … charge … ZAP! … whimper.
For the rest of us, periods of crisis not only force us to adapt and sharpen our skills in the moment, but they also help us prepare for future crises to come.
Sheryl E. Kimes of the Cornell Nanyang Institute of Hospitality Management understands as much. And during December 2009 and January 2010, she put those principles to work, asking more than 3,000 revenue-management professionals what they did to survive the recent economic downturn and whether or not their tactics worked.
Her findings, which you can (and should) access here, reveal that while discounting was the most frequently used strategy, marketing approaches (e.g. developing new market segments, using pay-per-click advertising, developing other revenue streams) were the most effective.
Kimes also identified seven key lessons all revenue-management professionals should remember in future downturns:
1. Be prepared. The foremost piece of advice respondents shared was to be prepared and to have a plan. When devising your plan, keep long-term goals in mind, Kimes said. How will your plan impact customer satisfaction, employee satisfaction and the long-term image of your hotel or chain?
2. Don’t panic. Stay calm and look for solutions. Don’t compare downturns periods with previous good periods. Think more in terms of long-term decisions.
3. Be wary of broad-scale discounting. Respondents were least likely to recommend this tactic for the future. It takes years to recover from carte-blanche discounting.
4. Don’t cut your marketing budget. If you cut your budgets, you won’t be able to develop the packages and promotions to keep current guests and attract potential guests.
5. Consider marketing approaches. Respondents reported high success targeting smaller, less price-sensitive market segments. Another popular tactic was to develop new revenue streams (e.g. food, spa) within the hotel, as were Web-based marketing approaches such as pay-per-click advertising.
6. Consider rate-obscuring practices. There’s a difference between your public rate and your private rate. Respondents were generally pleased with the performance of opaque distribution sites.
7. Service, service, service. Are you really surprised? While budget cuts typically are unavoidable, never do so at the cost of service.
Friday, April 30, 2010
Revenue management: Selling value over price
Customers want the best price they can get in any economy, but that statement holds particularly true in a downturn. Looking at many industries today, one may be left to believe that offering a low price is required to be successful. That works well if you can stand on the fact that you are the lowest-cost provider and that you are willing to go to the lengths necessary to remain in that position. Selling on cost is an uncomplicated form of marketing. It doesn’t require much thought or effort and it’s quick to market, but it’s typically not sustainable, nor do most of us strive to be the low-cost leader. Anyone can lower their price. We’ve probably all done it in one form or another in order to win business or gain market share, but it simply doesn’t work well as a long-term strategy.
Time and time again we have been shown the dangers and effects of cutting our prices. When you slash your prices, customers may perceive it as your admission that your prices were too high all along and that you’ve been gouging them. In good times, your customers may know that lower prices are possible. They may delay their buying decision or put you through rounds of negotiation to see just how low your prices can go.
Unfenced discounts may also give your customer the impression that your product is inferior. Long-term discounting leads to lower margins, revenue and profit. So what can you do to keep or gain customers without discounting?
Basing your success on price alone ignores the fact that people don’t make buying decisions based on price alone. Decisions are also based on value. Value is the one thing that separates one product from another and never before has the consumer looked more to that value in making their buying decision. This means that you must have some benefit other than price in order for the consumer to feel they have received any benefit from your product.
Learning how to establish and communicate your value proposition—your differentiator—is key to earning and keeping your customers. If your customers can’t perceive the value that you provide, then it probably doesn’t exist.
If you are competing on price alone, you likely will never achieve maximum profitability. You will be forced to ride the constant rate roller coaster, reacting to the market and actions of your competitors. If price is one of your advantages, that’s great; but you need something that will sustain that advantage and secure your relationships for the future. If it has been awhile since you sat down with other key stakeholders, especially those in sales and marketing, and discussed and solidified these success attributes, now is the time.
We need to look for ways to create meaningful value and significant impact for our customers. If you can build value on the front end, price becomes less of an issue on the back end.
Selling based on value requires that you do everything possible to communicate your value proposition to potential customers before price becomes an issue. Selling on value requires confidence that you can deliver on your promise. If you’re unsure about the validity of your claims and the payback that the customer will be able to achieve, selling on value will be very difficult. In turn, establishing value isn’t any easy task. It takes time to develop, sell and bring awareness to your value proposition. Items that are physical such as location or a historic building are a bit easier, but using a value proposition such as service or the beds in your rooms is much more difficult to achieve.
Begin by evaluating the value proposition of your competitors and determine what it is that you can do or offer that your competitors cannot. What sets you apart? If you can’t find a unique value, then what can you do or offer that, though your competitors can do it as well, your offer is superior to theirs. While not an easy process, once established, your value proposition is something that you can play off of for years to come.
Your attributes must be tangible and true points of differentiation. Once you agree on a value proposition, make sure the hotel staff, marketing pieces, Web site, etc., sell the message at every possible touch point with your current and potential customers. Use testimonials to back up your offering and know what your customers are saying about you on sites such as TripAdvisor, Twitter and Facebook. These social media sites serve as excellent platforms on which to sell your value proposition with immediacy and a targeted approach. Tweets or posts on Facebook should be aimed at selling your value proposition. If you are a hip boutique hotel focused on young business travelers, your posts and offers should be directed at selling that uniqueness.
Like any effort, your value proposition must be analyzed. Do your customers perceive the value that you are offering? Do they put as much value in it as you do? Does it influence their buying decision? What does it take to keep them coming back for more? You must look through the eyes of your customers to ensure you are delivering the value that they bought into and that they can achieve and measure it. You must also create a means of continuous feedback to ensure you are closing the value gap.
When you discover what sets you apart and you sell it, you can put more focus on competing on your uniqueness rather than competing on price. When you have a value proposition that you can sell and that your customers recognize, that value can help to sustain you through almost any economic condition. The best way to avoid being just another hotel is to sell value to your customers.
Time and time again we have been shown the dangers and effects of cutting our prices. When you slash your prices, customers may perceive it as your admission that your prices were too high all along and that you’ve been gouging them. In good times, your customers may know that lower prices are possible. They may delay their buying decision or put you through rounds of negotiation to see just how low your prices can go.
Unfenced discounts may also give your customer the impression that your product is inferior. Long-term discounting leads to lower margins, revenue and profit. So what can you do to keep or gain customers without discounting?
Basing your success on price alone ignores the fact that people don’t make buying decisions based on price alone. Decisions are also based on value. Value is the one thing that separates one product from another and never before has the consumer looked more to that value in making their buying decision. This means that you must have some benefit other than price in order for the consumer to feel they have received any benefit from your product.
Learning how to establish and communicate your value proposition—your differentiator—is key to earning and keeping your customers. If your customers can’t perceive the value that you provide, then it probably doesn’t exist.
If you are competing on price alone, you likely will never achieve maximum profitability. You will be forced to ride the constant rate roller coaster, reacting to the market and actions of your competitors. If price is one of your advantages, that’s great; but you need something that will sustain that advantage and secure your relationships for the future. If it has been awhile since you sat down with other key stakeholders, especially those in sales and marketing, and discussed and solidified these success attributes, now is the time.
We need to look for ways to create meaningful value and significant impact for our customers. If you can build value on the front end, price becomes less of an issue on the back end.
Selling based on value requires that you do everything possible to communicate your value proposition to potential customers before price becomes an issue. Selling on value requires confidence that you can deliver on your promise. If you’re unsure about the validity of your claims and the payback that the customer will be able to achieve, selling on value will be very difficult. In turn, establishing value isn’t any easy task. It takes time to develop, sell and bring awareness to your value proposition. Items that are physical such as location or a historic building are a bit easier, but using a value proposition such as service or the beds in your rooms is much more difficult to achieve.
Begin by evaluating the value proposition of your competitors and determine what it is that you can do or offer that your competitors cannot. What sets you apart? If you can’t find a unique value, then what can you do or offer that, though your competitors can do it as well, your offer is superior to theirs. While not an easy process, once established, your value proposition is something that you can play off of for years to come.
Your attributes must be tangible and true points of differentiation. Once you agree on a value proposition, make sure the hotel staff, marketing pieces, Web site, etc., sell the message at every possible touch point with your current and potential customers. Use testimonials to back up your offering and know what your customers are saying about you on sites such as TripAdvisor, Twitter and Facebook. These social media sites serve as excellent platforms on which to sell your value proposition with immediacy and a targeted approach. Tweets or posts on Facebook should be aimed at selling your value proposition. If you are a hip boutique hotel focused on young business travelers, your posts and offers should be directed at selling that uniqueness.
Like any effort, your value proposition must be analyzed. Do your customers perceive the value that you are offering? Do they put as much value in it as you do? Does it influence their buying decision? What does it take to keep them coming back for more? You must look through the eyes of your customers to ensure you are delivering the value that they bought into and that they can achieve and measure it. You must also create a means of continuous feedback to ensure you are closing the value gap.
When you discover what sets you apart and you sell it, you can put more focus on competing on your uniqueness rather than competing on price. When you have a value proposition that you can sell and that your customers recognize, that value can help to sustain you through almost any economic condition. The best way to avoid being just another hotel is to sell value to your customers.
8 things to look for when searching for a GM
The general manager is the “CEO” of your multi-million dollar asset. What they do and how they lead determines the success and profitability of your property. The following is a list of eight proven skills you should look for when you are trying to bring on a new leader or to measure the one you have in place.
Look for someone with:
1. Proven leadership as a GM. Preferably in the same segment as the hotel they will be leading.
2. A commitment to success. Take a look at their track record and their attitude. Ask questions that allow them to give examples of their past success and how they achieved it.
3. A service mentality. Do they always do their best to take care of the guest and to make sure the rest of the team does? Are you likely to see them out of their office meeting guests during key periods of the day such as check-in, check-out or breakfast?
4. A focus on quality. When they walk across a hotel, even one that is not theirs, do they pick-up
trash and not even break stride? Do they expect everyone else to do the same?
5. Sales expertise. Your GM should have a firm understanding of all aspects of sales from rate-setting, to account management to knowing what questions to ask the sales team. They should be available to assist the sales teams as needed with top accounts. Ideally, they have been in sales.
6. Excellent communications skills. Good GMs can communicate well with guests, employees and clients at all levels. They should be able to communicate clearly, concisely and in a positive way. They should be able to communicate with their management company or owner as well as their brand team.
7. A coach/mentor mentality. A good coach or mentor is not afraid to lead by example; they see opportunities for improvement in all departments and employees. They know how to council and train to improve performance and they know when to remove an employee that is holding the team back by not responding to the coaching (by choice or ability).
8. Understanding of a property-level business plan. They have the ability to measure against benchmarks and then adjust resources and the annual plan accordingly throughout the year to meet goals.
Maximizing your property’s bottom line often ties directly to the leadership and the experience of your GM. By focusing on proven traits you will maximize your revenue and minimize the risk of shortchanging your property, your guests or your bottom line. Is your multi-million dollar asset in the right hands?
Look for someone with:
1. Proven leadership as a GM. Preferably in the same segment as the hotel they will be leading.
2. A commitment to success. Take a look at their track record and their attitude. Ask questions that allow them to give examples of their past success and how they achieved it.
3. A service mentality. Do they always do their best to take care of the guest and to make sure the rest of the team does? Are you likely to see them out of their office meeting guests during key periods of the day such as check-in, check-out or breakfast?
4. A focus on quality. When they walk across a hotel, even one that is not theirs, do they pick-up
trash and not even break stride? Do they expect everyone else to do the same?
5. Sales expertise. Your GM should have a firm understanding of all aspects of sales from rate-setting, to account management to knowing what questions to ask the sales team. They should be available to assist the sales teams as needed with top accounts. Ideally, they have been in sales.
6. Excellent communications skills. Good GMs can communicate well with guests, employees and clients at all levels. They should be able to communicate clearly, concisely and in a positive way. They should be able to communicate with their management company or owner as well as their brand team.
7. A coach/mentor mentality. A good coach or mentor is not afraid to lead by example; they see opportunities for improvement in all departments and employees. They know how to council and train to improve performance and they know when to remove an employee that is holding the team back by not responding to the coaching (by choice or ability).
8. Understanding of a property-level business plan. They have the ability to measure against benchmarks and then adjust resources and the annual plan accordingly throughout the year to meet goals.
Maximizing your property’s bottom line often ties directly to the leadership and the experience of your GM. By focusing on proven traits you will maximize your revenue and minimize the risk of shortchanging your property, your guests or your bottom line. Is your multi-million dollar asset in the right hands?
Friday, April 2, 2010
How to compete successfully in a hotel price war
Drops in occupancies, ADR and RevPAR in 2009 have been widespread in the hotel industry and the trade press has been filled with articles discussing the downturn and proposing possible tactics for surviving it.
Not surprisingly, hotel owners and hotel operators have disagreed on how best to manage during a recession as owners try to maintain sufficient cash flow to cover their costs while operators attempt to maintain service levels and long-term brand equity.
One of the keys to success in a down market is to avoid offering across the board price cuts, but to instead focus on particular market segments and distribution channels. An ADR is just that, an average, and care should be taken to keep your ADR at near or above the average of your competitive set.
Research has shown that hotels with an ADR significantly lower than that of their competitive set have an inferior RevPAR performance relative to their competitors. This relationship has been shown to hold true across all hotel market levels.
For example, in the luxury market, hotels that have an ADR that is higher than their competitive set have the same or slightly lower occupancies, but have a 8- to 14 % higher RevPAR than their competitive set. Conversely, hotels that have a lower ADR than their competitive set have about the same to slightly higher occupancy levels, but report a RevPARs of 3- to 9-percent lower than their competitive set.
Given that knowledge, the challenge for hotel managers is how to compete in a price war. Essentially the two ways this can be done involve either non-price methods or price-related methods.
Non-price methods include competing on the basis of quality, creating strategic partnerships, leveraging your loyalty program, developing additional revenue sources and developing ad¬ditional market segments.
Price-based methods consist of offering packages, using opaque distribution channels and offering discounted rates to selected market segments. It’s not that hotels shouldn’t discount - it’s that they should do so in an intelligent and strategic way.
The intent of this study is to determine what tactics hotels used during the economic downturn and to evaluate the performance of these tactics. In addition, the study sought to solicit advice on how to approach future economic downturns so that it could develop specific advice for hoteliers on how to approach the next economic downturn.
Not surprisingly, hotel owners and hotel operators have disagreed on how best to manage during a recession as owners try to maintain sufficient cash flow to cover their costs while operators attempt to maintain service levels and long-term brand equity.
One of the keys to success in a down market is to avoid offering across the board price cuts, but to instead focus on particular market segments and distribution channels. An ADR is just that, an average, and care should be taken to keep your ADR at near or above the average of your competitive set.
Research has shown that hotels with an ADR significantly lower than that of their competitive set have an inferior RevPAR performance relative to their competitors. This relationship has been shown to hold true across all hotel market levels.
For example, in the luxury market, hotels that have an ADR that is higher than their competitive set have the same or slightly lower occupancies, but have a 8- to 14 % higher RevPAR than their competitive set. Conversely, hotels that have a lower ADR than their competitive set have about the same to slightly higher occupancy levels, but report a RevPARs of 3- to 9-percent lower than their competitive set.
Given that knowledge, the challenge for hotel managers is how to compete in a price war. Essentially the two ways this can be done involve either non-price methods or price-related methods.
Non-price methods include competing on the basis of quality, creating strategic partnerships, leveraging your loyalty program, developing additional revenue sources and developing ad¬ditional market segments.
Price-based methods consist of offering packages, using opaque distribution channels and offering discounted rates to selected market segments. It’s not that hotels shouldn’t discount - it’s that they should do so in an intelligent and strategic way.
The intent of this study is to determine what tactics hotels used during the economic downturn and to evaluate the performance of these tactics. In addition, the study sought to solicit advice on how to approach future economic downturns so that it could develop specific advice for hoteliers on how to approach the next economic downturn.
Thursday, April 1, 2010
Google adds new level of rate transparency
Google is working with select hotels on a pilot project to include hotel rates in Google Maps’ searches. So when a user searches for a hotel on Google Maps, they can enter the dates they plan to stay and see real-time room rates. Users can also click on the rate to see a list of advertisers—third-party travel providers—who have provided pricing information for that hotel.
So far, the test includes a “limited number of advertisers” and is visible only to a “small portion of users,” according to a Google Maps blog.
“We’ll evaluate the usefulness and effectiveness of this new feature, based on both data and feedback, and hope to make it available to more users and offer prices from more partners over time,” the blog reads.
It is unclear how long the Google Maps’ hotel rate test will last and when it will be expanded. “We don’t have a timeline for ending or expanding the experiment at this time,” Google spokeswoman Elaine Filadelfo said.
In a random test example, Google Maps’ blogs displays nightly room rates from third-party travel companies, along with several New York hotels. Those hotels included the Pennsylvania Hotel, Gramercy Park Hotel, Millennium Hotel New York, and Embassy Suites New York.
“It is tied to SEO (search engine optimization). If you are performing well with Google Maps, they are adding on additional features,” said Jim Zito, VP, interactive marketing, for Morgans Hotel Group in New York.
Some Morgans hotels are involved in the test by default, Zito said, because of their performance on Google Maps.
Zito said that as he understands the test, a small percentage of Google Maps’ searchers are able to see the lowest starting rate next to the hotel listing, and click through to a sponsoring third party travel company.
“It is too early to tell (how it is performing) because we can’t differentiate the traffic from those searches,” Zito said. And Zito has not been able to try the hotel rates tool because it is available to a small portion of users.
However, hoteliers that are not currently involved in the test are looking forward to using the Maps’ hotel rates service in the future.
David Doucette
executive director, Internet marketing
Fairmont Hotels and Resorts
“Google Maps is a very useful way to get exposure for our hotels and to drive traffic to Fairmont.com,” said David Doucette, executive director, Internet marketing, for Fairmont Hotels and Resorts in Toronto. “We have contacted our representatives with the Google Travel team and expressed interest in getting involved.”
Joie de Vivre Hotels in San Francisco, which typically adopts new online marketing tools early, also wants to get involved in the new service.
“I could see how the value of including hotel listings would make it even easier for the destination hotel shopper to find where they want to go in just one stop,” said Ann Nadeau, corporate director of marketing at JDV Hotels. “The addition of hotel listings met with the familiarity of Google Maps, (could make Google Maps) the first stop on the journey to find your hotel.”
Marketing executives with Highgate Holdings, of Irving, Texas, are also closely watching the hotel rates test. “I do think including rates on Google Maps is an interesting feature and could indeed result in increased guest room bookings,” said Victoria Grodzki, area director of marketing for Highgate Holdings’ New York office.
However, the new tool may not be useful to every hotel company. “It is not a priority for us at this point,” said Barry Goldstein, chief revenue officer and chief information officer for Dolce Hotels and Resorts in Montvale, New Jersey. For most of Dolce’s guests, Google Maps is a complementary tool they may use once they have chosen where to go, not where they originally find hotels, he said.
“Our properties are in secondary cities, not in city centers, so we tend to have people looking for driving directions, rather than mapping directions,” Goldstein said.
Still, Dolce has found a great way to use Google Maps for internal sales. “We are in the early stages of using things like Google Maps to really look at where our customers’ offices are, relative to our hotels,” Goldstein said. With that information, Dolce can book group business by letting companies now how convenient it is to schedule meetings near their offices.
So far, the test includes a “limited number of advertisers” and is visible only to a “small portion of users,” according to a Google Maps blog.
“We’ll evaluate the usefulness and effectiveness of this new feature, based on both data and feedback, and hope to make it available to more users and offer prices from more partners over time,” the blog reads.
It is unclear how long the Google Maps’ hotel rate test will last and when it will be expanded. “We don’t have a timeline for ending or expanding the experiment at this time,” Google spokeswoman Elaine Filadelfo said.
In a random test example, Google Maps’ blogs displays nightly room rates from third-party travel companies, along with several New York hotels. Those hotels included the Pennsylvania Hotel, Gramercy Park Hotel, Millennium Hotel New York, and Embassy Suites New York.
“It is tied to SEO (search engine optimization). If you are performing well with Google Maps, they are adding on additional features,” said Jim Zito, VP, interactive marketing, for Morgans Hotel Group in New York.
Some Morgans hotels are involved in the test by default, Zito said, because of their performance on Google Maps.
Zito said that as he understands the test, a small percentage of Google Maps’ searchers are able to see the lowest starting rate next to the hotel listing, and click through to a sponsoring third party travel company.
“It is too early to tell (how it is performing) because we can’t differentiate the traffic from those searches,” Zito said. And Zito has not been able to try the hotel rates tool because it is available to a small portion of users.
However, hoteliers that are not currently involved in the test are looking forward to using the Maps’ hotel rates service in the future.
David Doucette
executive director, Internet marketing
Fairmont Hotels and Resorts
“Google Maps is a very useful way to get exposure for our hotels and to drive traffic to Fairmont.com,” said David Doucette, executive director, Internet marketing, for Fairmont Hotels and Resorts in Toronto. “We have contacted our representatives with the Google Travel team and expressed interest in getting involved.”
Joie de Vivre Hotels in San Francisco, which typically adopts new online marketing tools early, also wants to get involved in the new service.
“I could see how the value of including hotel listings would make it even easier for the destination hotel shopper to find where they want to go in just one stop,” said Ann Nadeau, corporate director of marketing at JDV Hotels. “The addition of hotel listings met with the familiarity of Google Maps, (could make Google Maps) the first stop on the journey to find your hotel.”
Marketing executives with Highgate Holdings, of Irving, Texas, are also closely watching the hotel rates test. “I do think including rates on Google Maps is an interesting feature and could indeed result in increased guest room bookings,” said Victoria Grodzki, area director of marketing for Highgate Holdings’ New York office.
However, the new tool may not be useful to every hotel company. “It is not a priority for us at this point,” said Barry Goldstein, chief revenue officer and chief information officer for Dolce Hotels and Resorts in Montvale, New Jersey. For most of Dolce’s guests, Google Maps is a complementary tool they may use once they have chosen where to go, not where they originally find hotels, he said.
“Our properties are in secondary cities, not in city centers, so we tend to have people looking for driving directions, rather than mapping directions,” Goldstein said.
Still, Dolce has found a great way to use Google Maps for internal sales. “We are in the early stages of using things like Google Maps to really look at where our customers’ offices are, relative to our hotels,” Goldstein said. With that information, Dolce can book group business by letting companies now how convenient it is to schedule meetings near their offices.
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