What are the major drivers of change confronting the hotel industry? To delve deeper into these issues and more, I recently spoke with Frederic Deschamps, vice president of global revenue optimization at Carlson Rezidor Hotel Group (@CarlsonRezidor), about the issues that currently keep him up at night. His concerns are not much different from executives in other industries; like many others, he stays awake thinking about pricing and the impact of social media, mobile technology and big data. As a side note, Deschamps recently spoke on this topic in a keynote panel session at EyeforTravel’s Travel Distribution Summit 2012 in Las Vegas last week. Excerpts from our conversation follow:
What are the business critical issues that keep you up at night?
First, price transparency’s fundamental reshuffling of the transaction with the customer. We used to be able to rely on channels to target customer segments with distinct needs. Now customers have access to all the rates in real time so we have to rethink how we segment and what the customer is willing to pay.
Additionally, the meaning of brand has evolved. Brand is a way to convey product content and set expectations with the customer. Until recently, that’s really all the customer had to go on, with the occasional magazine review and hearsay. Today, numerous websites aggregate customer feedback into satisfaction and product content indicators so the brand level expectations are supplemented with a finer, individual hotel level of detail and there is instant accountability on delivering these expectations.
Finally, the “now” phenomenon, the ubiquitous availability of information, is shortening the customer’s decision cycle. There is instant access to ratings, comparisons, and opinions ‒ both expert and experiential — so customers research and decide basically when the need occurs. Electronic payment options further facilitate this. The specific impact to hotels is that the booking curve is growing ever shorter. This deprives the hotel of vital information on how to price a room night, as forecasting what ultimate demand will be is based on ever shorter booking curves and can become less accurate.
What are some of the dominant challenges facing the hotel industry in 2013 and beyond?
For 2013 specifically, and broadly speaking, I think we’ve seen a return of demand to near 2008 level but not so for rates where we are still lagging. This picture is very uneven across the market so the challenge for hotels in 2013 will be to correctly assess their particular situation, how their competition might react (e.g., price) and what to do about it. Indicators are likely to be fluid and contradictory at times so this will not be trivial. All the while these macro trends of transparency, brand dilution and instant purchase are limiting the hotel’s traditional levers.
How are you approaching these issues as a decision maker?
Our approach has been to stay in lockstep with how the customer is buying and making decisions. We want to be present where the customer is willing to buy, and that has pushed us into social media and additional new value-add (services based) channels. We want to be on top of and actively engaged in the brand identity that is being shaped for us in opinion-based databases, so we monitor what’s being said about us and use that to set parts of our communication strategy. We want to price according to what the customers will be and recognize that the customer will shop all channels, so we price according to price elasticity and have abandoned the traditional inventory-based revenue management.
How can decision makers such as yourself work with internal teams to ensure the company is applying innovative practices?
Capturing your revenue opportunity is longer within a single department’s means, if it ever was. We have to make the sale, deliver the product and make sure the customer comes back. The way we approach this is to have regular consultations between functional teams on strategic and tactical issues, to make all the metrics we have on the customer’s journey available to everyone and to be fairly draconian on achieving the cross-functional priorities we’ve set for ourselves. That way, everyone feels involved, is aware of what we’re working on and why and can contribute without needing to be directed. The wealth of data that is now available on the customer makes it possible to engage everyone into finding better ways to meet needs; by having an open book policy internally we ensure we maximize that opportunity.
What are some of the disruptive technologies that will shape the future of revenue management?
Mobile is obviously on everyone’s mind, but so far we’ve seen it used a lot more for looking than for booking. It’s no less of an opportunity, but it’s coming into focus as an opportunity to communicate and not necessarily to transact with the customer for now, so we’re adjusting our mobile strategy accordingly. That said, mobile payment and ID technology is around the corner, and that could turn your mobile device into a booking engine, wallet, room keycard and ID. At that point, a lot of convenience could be added to delivering the product, but at a cost to the hotel and it’s not yet clear if and how much the customer is willing to pay for that.
The other technology on our radar screen is customer profiling. Our ability to price optimally relies on correctly measuring price elasticity. Social media can potentially provide us with useful inputs as to the customer’s state of mind, and hence elasticity. Today we simply reflect the sum total of all of the customer’s considerations into a single elasticity number. But we’d like to understand the components of this number and social media can provide insight into that.
How can your organization prepare and what are the basics you should have in place to be business-ready?
I think that how you prepare is to remain very educated about your ever-changing customer. A customer now has access to qualitative data at a higher level of detail about each hotel ‒ including rates ‒ and decides at the last minute. The implications are that our internal processes need to be nimble, our data kept fresh and accessible at least daily and we have to be right about what the customer is willing to pay for under what circumstances. Basically, you have to be into big data or your competition will outsmart you.
Do you agree with the issues Deschamps cites? What keeps you up at night?