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Revenue management for independent hotels
April 21 2011

Independent hotels can compete against international chains—providing they make the most of every booking channel and ramp up competitiveness.

Highlights
  • Data on the GDS must be complete and accurate.
  • Independent hotel websites should highlight a property’s best assets.
  • The market manager is truly the key to capturing OTA business.
By Burl Hutchison
HNN columnist

Seldom having the resources, the budgets or the loyalty programs that go along with national or international hotel companies, independent hoteliers often find themselves asking the question, “How can we compete against the chains?” 

With the rebound in the economy and in travel—PKF recently released a new and improved forecast, increasing expected revenue per available room growth from 5.6% to 7.1% in 2011—there are some key steps independents can take now to make the most of every booking channel and ramp up competitiveness.

 

Burl Hutchison

 

 

But first, let’s get on the same page. An independent hotel, as I see it, is an individual property or a small group of hotels. It typically has independent ownership and may have multiple investors. It may be self-managed or may be part of a group of properties that share the same management company. The fundamental differentiator between independents and chain hotels is chains share in a widely recognized brand name and chain code.

The GDS
For most of us, the global distribution system, or GDS, has always been an important channel, yet it is always the one we seem to know the least about. Unlike a website or the online travel agencies, the GDS information is not at your fingertips. However, the information within these systems and how we play in them is crucial in the production you receive.

For the first time in many years, the rebound of offline travel bookings is outpacing the growth of online travel bookings. Corporate travel budgets are expected to jump by 4.5% in 2011. While bookings will not reach the record highs of 2007, things are improving and are expected to keep gaining momentum into 2012. With the growth of offline travel, now may be the time to take advantage of GDS opportunities.

A chain code is a two letter code used by the GDS to identify what chain a property belongs to. Most large hotel chains have their own private-label chain code. Most independent properties and small groups use the chain code of a representation company such as Utell or Sabre Hospitality Solutions. (Full disclosure: Sabre is my employer).

Are you better served by your own chain code or by the chain code of a distribution company? Just like revenue management, the answer to that question is unique to every property and every situation. If the goal is to build brand awareness for a property, then a private-label chain code might be for you. It would allow you to control your own marketing messages, promote chain level standards, promote loyalty programs and communicate a level of consistency and uniqueness across multiple properties. This is especially important if you have a strong regional or city presence.
There are many variables in determining whether to have a private-label GDS chain code. Ask your representation company to help guide you in making the right decision for your property. Some things to consider:

 

 

 

 

 

  • What is your true objective in obtaining that code? Can you meet that same objective using the code of a representation company?
  • Do you have a significant marketing budget to promote your private chain code to the travel agent community?
  • What is your GDS production? Can you meet the GDS transaction minimums?


If you are using the GDS, regardless of whether you have your own chain code, there are five key components to success:

1.    Data integrity: Many of the fields in the GDS are used as searchable “qualifiers” by online tools and travel agents. If your data is incorrect or incomplete, you could be omitted from qualified search results. It is important to know what content you are supplying to these fields. Ask your representation company to review your hotel descriptions with you and assist you in enhancing the content. Make sure you are showing up in every search that you qualify for, and once you do, have quality data, compelling commissionable rates, room descriptions that actually sell the room type and rate plans that are clear and concise.
2.    Rate integrity: Rates should be sequenced from low to high, and policies should be competitive with your competitive set. Commission is a GDS standard for all unrestricted rates. Don’t forget the GDS also looks for rate parity. Agents look to these indicators to bring comfort that the rate they are booking is as low as any rate their client could find online.
3.    Availability: Maintain availability for all room types in the GDS at all times. Honor last room availability agreements on negotiated accounts, and consider loosening length of stay/arrival and policy restrictions during low occupancy periods.
4.    Property ratings: Make sure your property has a NTM (Northstar Travel Media) rating. There is no better way to sell your property than to identify the rating. As an independent hotel, this is especially important. Agents look to this rating to give them guidance in booking an unfamiliar hotel. Give them confidence that your property will meet the standards they are looking for. Other ratings such as AAA can go into the content of your property descriptions but will not show as prominently as the NTM rating. Best of all, the rating is free. All you have to do is apply.
5.    GDS preferencing and media opportunities: This item is last but far from least. GDS preferencing guarantees your property rotates within the top hotels of a GDS search rather than appearing on page two, three or beyond. Just like the OTAs, there is tremendous value in page positioning. Most properties will see tremendous growth in exposure and conversion when they participate. In addition, there are numerous types of GDS media that can be purchased to bring awareness to your property, such as sign-in messages and promo spots. 

Your own website
As an independent property, your website is probably your most powerful, cost-effective channel. Make sure you are putting your best foot forward. Explore every opportunity to get the most out of your own website. There are several areas to which you should pay particular attention:
  
1.    Look and feel: A picture is worth a thousand words. Look at your content, pictures and streaming video often. Is it the best possible presentation of your property?
2.    The booking process: Is the booking process simple and streamlined?  
3.    Search engine optimization: The foundation of any successful online marketing program is SEO. To drive qualified traffic to your website in the most cost-effective manner, you need to create an effective strategy for getting in front of your customer with relevant content. Relevant content based on a specific set of keywords brings organic results via the search engines. Coupling SEO with specific online media placements to further enhance your online visibility and exposure will impact the overall qualified traffic visiting your website. The more qualified traffic you can drive, the more likely you are to increase conversion.
4.    Pay per click: Layer on PPC campaigns during heavy promotional or need periods.
5.    Listen and engage: If you believe social media is just Facebook and Twitter, think again. Communication is happening everywhere, and you need to have a plan in place to manage it. Be sure to pay attention to channels like TripAdvisor, YouTube, Foursquare, local travel websites and blogs. Know what consumers are saying about your property, and where appropriate, respond in a non-defensive manner with resolution. Engage with your target audience via social media channels to help increase your overall online presence with limited dollars. When looking to engage with online media, take advantage of the power of ad networks since you are able to tap into thousands of websites with competitive cost per click rates.

Set plenty of time aside to meet regularly with your digital marketing team to discuss content, linking opportunities, search engine advertising, SEO strategies and guest behavior from the point of entry through the booking process. Identifying the customer’s path through your website and knowing at what point they convert or drop off is essential to the future development of your website.

Some recommended references that can help you in this area include white papers from HSMAI’s Digital Marketing Council:


Online travel agencies
OTA sites are as important as ever, and this is one area where independent hotels have an advantage. Market managers are very willing to work with independent properties and may actually seek them out as they do not have “brand” rules with which to comply. Your market manager is truly the key to helping you capture OTA business. Here are a couple of tips to maximize your exposure and get the most out of OTAs:

1.    Friend your market manager: Focus on building a strong relationship with your market manager. Keep in constant contact with him and discuss trends specific to your market and what is working for other hotels.
2.    Focus on placement: The best placement can be difficult to achieve. There are many factors that play into the algorithm of placement, but it is possible to get better placement by working with your market manager. When trying to improve your page placement, one of the biggest mistakes you can make is to ask for it. Instead, ask your market manager how your hotel can help them to achieve her goals.
3.    Commit to rate parity: You must be 100% committed to rate parity. Unless you are offering the site parity, your efforts to increase production from that site will be difficult at best. Prove that you are committed and that you value the partnership.
4.    Play in every channel: Participate in every channel the OTA site offers, for example Expedia’s room-and-package paths, Egencia and Hotwire; Travelocity’s room-and-package path as well as Travelocity Top Secret. This also will help you achieve better placement. The more you play, the better the partner you are.
5.    Make compelling offers: Participate in third-party sales with compelling offers. Consider using value-adds instead of discounting the rate.
6.    Be clear about the competition: Your competition on the third-party sites is not necessarily your STR competitive set. I look at those properties within the first page or two that are a similar star rating as my competitive set on that site. They are the hotels taking business from you and the hotels from which you can move share. Shop yourself like a consumer. Honestly shop your property next to the hotels you are competing against and ask yourself if you would pick your hotel. If there is a reason another hotel would get booked over yours, address that issue. Ask yourself what’s missing. What more could you tell or show a consumer that would help them make the decision to book you?
7.    Consider sponsored search:  Sponsored Search is a pay per click program where you bid for ad placement. You only pay if someone clicks on your ad. Conversion on these ad clicks is usually very strong and can generate a great deal of extra revenue for your property while earning enhanced placement on the site.

As the industry continues to gain momentum, it is more important than ever that you are positioned to compete against the big name properties. While an independent property may have unique challenges, following these tips will certainly help you make the most of your channels and earn your share.

About the author
Burl Hutchison is the Manager of Revenue Optimization for Sabre Hospitality Solutions. In this role he is responsible for consulting with customers in the field of revenue optimization and how it interfaces with CRS, PMS, CRM and RMS systems. In addition, he provides guidance on best practices within the field of revenue optimization and manages a full service revenue-for-hire program. Burl previously held positions as Sr. Revenue Consultant for Carlson Hotels Worldwide, Revenue Manager for Summit Hotels and Resorts, Golden Tulip Hotels and Utell International. He has also held positions as Director of Sales for both full and limited service properties. Burl earned a degree in Hospitality and Human Resources Management from Bellevue University. He is also a member of the HSMAI Revenue Management Advisory Board.

The opinions expressed in this column do not necessarily reflect the opinions of HotelNewsNow.com or its parent company, Smith Travel Research and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

About the HSMAI Revenue Management Advisory Board
The Revenue Management Advisory Board leverages insights, emerging trends, and industry innovations to guide the development of products and programs that optimize revenue for hotels. www.revmanagement.org

Members include:
•    Chris K. Anderson, Ph.D., Professor, Cornell University
•    Christopher Crenshaw, CRME, Vice President, Marketing Intelligence, Loews Hotels
•    Kathleen Cullen, CRME, Corporate Director of Revenue Strategies, Heritage Hotels and Resorts
•    Sloan Dean, CRME, Vice President of Sales & Marketing, Interstate Hotels & Resorts
•    Jon Eliot, CRME, CHA
•    Tammy Farley, Principal, The Rainmaker Group
•    Fred Heintz, CRME, Director of Group Strategy, Marriott & Renaissance Hotels of New York City
•    Jay Hubbs, Director Hotel Supplier Relations, Expedia Partner Services Group / Hotwire
•    Burl Hutchison, CRME, Manager of Revenue Optimization, Sabre Hospitality Solutions
•    Warren T. Jahn, Jr., Ph.D., Manager, Revenue Systems Training AMER, IHG
•    Klaus Kohlmayr, Senior Director, Consulting, IDeaS Revenue Optimization
•    Orly Ripmaster, CRME, Senior Analyst, STR Analytics
•    Scott Roby, CRME, Vice President, Revenue Management, Evolution Hospitality
•    Chinmai Sharma, Vice President, Revenue Management, Wyndham Hotel Group
•    Susan Spencer, Market Director - N. America, ChannelRUSH
•    Trevor Stuart-Hill, CRME, President, Revenue Matters
•    Rob Sudakow, Director of Revenue, Destination Hotels and Resorts
•    Paul Wood, CRME, CHBA, Vice President of Revenue Management, Greenwood Hospitality Group

Want to Learn More?
This topic will be addressed as part of the 10-part Revenue Management Webinar Series produced by the HSMAI University in partnership with HotelNewsNow and STR, and sponsored by IDeaS. Beginning March 29, 2011, and going through December, each month a webinar will cover various aspects of cutting edge revenue management in today's economy in conjunction with articles written by members of the HSMAI Revenue Management Advisory Board. If you’re not able to attend a live program, archives are available. Also, these and other timely revenue management topics will be the focus of the HSMAI Revenue Optimization Conference, co-located with HITEC, June 20 in Austin, TX.

COMMENTS   Show All
deepak suri,Golden Globe Hotels
4/28/2011 3:33:00 PM
Nice tri-furcation of Online Distribution Avenues, however Revenue Management wld also involve Offline partners/RFP's/Consortia's etc.Also for stand alone hotels/independent hotels, the contribution from GDS is not significant. If the article cld be more elaborative on the same,it would have been a great help as GDS is the domain of chain hotels hitherto
deezed
4/22/2011 5:39:00 AM
Nice article however how can you call it Revenue Management? Channel management (and mainly cost of it) is part of the science and art of revenue management but where is forecasting and pricing? The article seems to me more about distribution channel than revenue management...
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