Instead of anticipating when the COVID-19 pandemic subsides or waiting for the hospitality and travel industry to resume, business leaders have already been working on their post COVID-19 recovery plan through the revenue management approach, to ensure the cash-flow “in”. Putting themselves in an active position, together with the national vaccination campaign for the last few months to accelerate the domestic economic recovery.
Many often disregard the importance of revenue management in hospitality without the acknowledgement of its core value and financial benefits. It has always been the least understood part of the industry, and not always is appreciated by the management team nor the hotel owners. Having a proper revenue management strategy helps hotels to issue the best selling room rate, attract their ideal guests, allocate their manpower in high season, and over-crowded staff in low season. There are far more advantages that revenue management brings along and mentioning them all here might drag the blog too far from today’s blog. We would save it to a later blog, drop a comment down below to let us know if you are looking forward to it.
Speaking of revenue management, people would generally navigate toward demands and supply concepts. Through the unstable travel pattern of 2020 and 2021 pandemic, it has become extremely irrelevant to determine pricing strategy through historical events. If in the past, hotels were depending on system and software tools to generate an optimal room rate, this no longer works. Alternatively, let’s take in consideration the last few years as the new foundation paces to alter and examine as the pandemic implications go on. The goal of revenue management is selling the right product with the right price to the right customer at the right time. It comes down to: What is your optimal rate, Who is your customer and When.
Determine the Optimal Rate
COVID-19 has swept all the travel and hospitality industries off its feet by surprise. Many hoteliers found themselves lost as the pandemic progressed aggressively. The coronavirus outbreak disturbed the traditional algorithm to determine the best possible optimal rate, at which would maximize profit for the business. In lieu of such, putting the 2020 customer purchasing behavior into perspective would result in negative output down the line.
The one thing hoteliers had to learn throughout this global crisis was to be flexible at all cost. Stop counting on automating tools and systems, start doing your own critical analysis on the short-term demand obtained through recent market research reports, review and compare with your competitors’ room rates. Manually adjust your pricing strategy along the way, while submitting the learning process to your automation tool, which helps the system to update the current trend and generate a more accurate rate later on.
The right customers
Hoteliers frequently pay attention to attracting as many customers there are on the market as possible, making sure to obtain maximum room occupancy. Not all business is good business. Focusing on nurturing your existing customers, as it costs a lot more to acquire new ones than retaining them. Back to square one, identify who your customers are. Build your campaign, bundles and promotions targeting them specifically. Keep your message consistent on all channels, throughout all your customer purchasing journey, track their behaviors and conversion ratio associated with or without promotions. Hotels unintentionally established a correlated database for themselves that had eventually evolved from the traditional demographic segmentation to behavioral segmentation.
When to offer discount
Perhaps, it might get tricky when it comes to discounts. How do you know how much discount is enough? Leveraging the psychology of discounts to make more money, as it makes your customers feel a sense of urgency, stops them from shopping around. In the meantime, recurring discounts might backfire and become expected from your brand. We suggest looking at A/B testing on different types of promotions for the same customer segmentation. This helps to better analyze your product’s features, which in hospitality terminology can be equivalent to length of stays, advanced booking period, complimentary meals, etc.
Also take advantage of pre-arrival email to up-sell, offer either free or discount rate of complimentary upgrade package to your existing customers. The incentive only available after the initial purchase goes through, allows customers a time to reconsider whereas pricing has become less sensitive compared to during the time of booking. Discounts are arguably the essential component on the road of recovery. However, exercise this wisely and precisely and avoid undisciplined discounting if you must. Remember a full hotel does not guarantee profitable business.
Desperation is not a strategy. Neither is hope! In a nutshell, there is definitely no snap-back to the normal stage prior COVID-19. The post COVID-19 scenario is still ambiguous, unknown and uncertain. Stop panicking and overreact during a crisis; be flexible, be spontaneous, and make unemotional decisions instead. Have an agile revenue management strategy in place and get ready to rock it out when this turbulence of coronavirus is at halt. Reminding yourself to always measure, analyze,monitor and keep track of your strategy to adjust and modify accordingly. It is the only way to secure a successful recovery.
We also have an upcoming webinar Hospitality Revenue Management coming up shortly this month. Register to join us now. There is a limited offer for this webinar. More information can be found @Live webinar: Hospitality Revenue Management – Recovery Strategy post Covid-19. We see you then!