By Ruben Reyes, Assurance & Marketing Program Director
Revenue management continues to be fundamentally important for any hotel to strategically align itself against its competitive set, but also during any economic state. During the oil and gas drilling boom in Texas, for example, hoteliers noted the building of full-service and upscale brands in rural towns that, at one time, brands such as Marriott and Holiday Inn would not have ever considered building. The onslaught of these hotels not only oversaturated the market with excess room inventory, but led to rate wars between full-service and limited-service hotels, which also caused full-service models to compete with limited-service hotels during fluctuations in room occupancy. The revenue management gloves were off, and everyone was trying to maximize their revenue through room occupancy, as the rates were already at an all-time high. Trying to book a room in Texas in Midland, Monahans or as far away as Fort Stockton was an impossible chore; and the winners were those that elected to use OTA sites to help draw in corporate travelers through online bookings. The competition was fierce and capturing future guaranteed bookings was the name of the game.
Now, let us jump in the way back machine. No, not the digital archive, Mr. Peabody’s Wayback Machine, as it was also not too long ago that online travel agencies started to make the jump from retail to net rate and opaque listings. With this change, limited to independent hotels were forced to re-consider their marketing strategies. They would either jump on the net rate train or be cast aside with a display of no rooms available.
During this time, I was working with a property in Ranger, Texas. We had done all our homework and had worked diligently to assure that the property was correctly placed, yet we had no OTA presence. This is because we were not on the net rate train. So, a few phone calls later and a signed agreement and we were all aboard.
With online travel agencies now controlling approximately two thirds of all online bookings, it is crucial for any property to participate with as many OTAs as possible. Participation with OTAs will result in increased online visibility, a better pool of guests, and an increase in guest reviews that are designed to drive more online bookings. Many hoteliers are reluctant to work with such online distribution channels out of the fear that they are going to pay a very high commission (margin) and, as a result, they will not be gaining enough of a profit margin.
Perhaps jumpstarting your revenue management skills by looking at third-party sites to maximize bookings at your property is something that you have started to consider post-COVID. Or, it’s part of a plan that you have already started to work on, as it is a stable point that any hotelier could direct his/her efforts to for online bookings. Either way, it is a good direction to head in if you are correctly placed and are diligently working with your OTA manager, participating in all available programs, avoiding rate parity and making your inventory available for bookings.
But if you have decided that working with third-party sites does not meet your revenue requirements, then you are not alone. Many hoteliers use OTAs to keep a steady flow of reservations coming into their hotel to feed the demand for room bookings, but know that each reservation comes with a cost of either a steep margin or a game of cat and mouse with their online presence, as they may have weak reservation flow, marginal reviews and poor-quality photos. Unless you are affiliated with a brand that can direct your presence with a well-seasoned marketing director and are linked to a strong central reservation system, then this can be a cause for concern.
Opting to go it alone is a risky option, but may seem sensible to some hoteliers since they are free to limit discounted rates and direct all efforts to direct and repeat bookings. This is not to say that I approve of this move, but I have found it difficult at times to convince even the most long-term operator otherwise. I always recommend that all hoteliers work with OTAs and channel them through their CRS so they have one platform to work on, as this is a responsible thing to do. Here are a few items, though, you may wish to consider when going it alone. Associate your property with a brand that:
- Will help you to strategically align your hotel against your competitive set,
- Uses a strong Central Reservation System that not only pushes your property out to brand.com, but to other affiliate listings,
- Utilizes a brand.com site for direct bookings
- Entices repeat business through an incentive program
- Helps you to engage your guests with a strong value proposition
- Helps you to position your room inventory accordingly
- Categorizes your business mix
- Helps you decide how to price each category
- Encourages reputation management
- Captures and manages your property’s search engine listings
- Works to help secure transient group bookings
If you do your homework, you will find that brands such as Hospitality International see the value of a dedicated sales and marketing director to help its franchisees run their properties for themselves, but with the continued support of a well-seasoned sales manager.
As we see business travelers start to increase their travel plans and as the European Union announces that it will consider allowing vaccinated American tourists to travel to Europe this summer, airlines are starting to gear up as they predict that business will not only be back to normal but may exceed bookings this summer. So, if this is the path that you have decided to travel, then I applaud your efforts, as this is the road that is less traveled.