CHICAGO—Whether revenue management is an art or a science—or a combination of both—is up for debate among many in the hotel industry. Greg Cross, senior VP of revenue management for Hyatt Hotels Corporation, doesn’t see it as either.
Cross, nearly two years in to his position at Hyatt, has been tasked with taking the hotel ownership, management and franchising company’s revenue management strategies to the next level. He said revenue management today is simply an evolution of what hoteliers called “hotel management” 30 years ago—finding the right balance of occupancy and rate.
“Prior to computers we were doing forecasting on large paper spreadsheets with a calculator,” Cross said. “In my mind, that core process remains intact. The beauty of technology and data today is that they can point you in the right direction.”
Cross said technology can help today’s revenue managers see opportunities further in advance and pull together myriad reports and data quicker than ever before. Cross has led Hyatt’s investment in new analytic technology called MaximRMS to assist Hyatt properties with pricing and revenue management.
“We’ve got a very strong (return on investment) on this going forward,” he said “The technology weaves itself into better decision-making.”
Cross opined on a number of hot-button issues affecting revenue managers today:
Occupancy or rate?
Occupancy across Hyatt Hotels has returned, Cross said, but pricing power has not returned to all markets. He said hoteliers today are dealing with a different market mix than in 2007, when the hotel industry was reporting peak profits.
“We see a lot of wholesales business, and that continues to diminish pricing power,” Cross said. “Peak years like 2007 are really one year out of a decade; we’re not going to see seven or eight of those within the same decade.”
Shifting channel mix
Cross said Hyatt uses technology to better understand where demand is coming from at any particular time, which helps them determine where to place inventory. As Hyatt hotels prepare in advance for the summer months, they’ll shift inventory to leisure-driven channels.
“As we look to a period like the summer, we’ve got high-quality data available to forecast and that helps the user make good decisions and helps me have consistent education in the field,” Cross said.
New OTA sites
Cross said new online travel agencies such as Backbid.com and Tingo do not yet play a role in Hyatt’s distribution strategy. Some of the more recently introduced channels—Groupon, for instance—were more user friendly and allowed Hyatt to test them out, although Cross said they don’t play much of a role either.
“These newer sites, we don’t see any activity of merit there yet,” he said. “Not like when Hotels.com or Expedia came along, and you saw a flush of business being driven. I don’t know if these two will gain traction, but we’ll continue to monitor that.”
If sites such as Backbid or Tingo—both which rely on refundable rates—do take hold, Cross said Hyatt would be forced to evaluate a move to advance purchase products.
Social media and online reviews
Because social-media conversations and online reviews continue to be largely leisure based, Cross said Hyatt treats them as just one more data point to review. Two years ago, he said, the company was placing more stock in what customers were saying online, but today Hyatt realizes that it’s out of their control.
“Social media will have a major impact on hotel marketing,” he said, “but what has not taken hold is booking engines through social media sites.
Room Key gone sour?
Some hoteliers have expressed concerns that Room Key is driving traffic away from brand.com into a higher-cost channel. Cross said Hyatt—one of Room Key’s founding members—doesn’t see it that way.
“Any booking coming through a third party is good if that’s where the customer wants to book,” he said.
However, Cross said the jury is still out on how successful Room Key is going to be because it’s up against “behemoths with $200-million budgets.”
Hyatt over the past few years changed its corporate revenue management structure. While there used to be more directives from corporate, executives including Cross now understand revenue management processes belong at the hotel level.
“We have regional directors but the reason for those is largely consultative. We’re available—we participate in the strategy development and tactical pricing of inventory—but it’s not so much based on directives.”
While mobile booking represent more than a drop in the bucket for Hyatt hotels, mobile still isn’t a consistent demand driver, Cross said.
“I’m waiting for the day that there’s an explosion (of mobile bookings),” he said. “Whether someone is booking by website, by mobile device, walking in … any reservation is a good one. We just haven’t seen this turn the corner yet.”