THINK TANK RELATED FINAL EXAM

Think tank

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In class exercise:Social network + Social Rewards/ OTA

Digital marketing 6 04 2011

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Mid-term exam

Article for Wednesday, 6th of April: LivingSocial works to expand hotel-deals offerings

In the crowded space of daily deals, there are two big players: LivingSocial and Groupon. Over the past few months, Groupon has received the lion’s share of attention due to their growth, investment and valuation. Still, since recently, LivingSocial is leading Groupon in monthly unique visitors and the site should attract even more customers thanks to the acquisition of the social adventure company, Urban Escapes.

The article "LivingSocial works to expand hotel-deals" explains what this new offering consist in and how it can help LivingSocial differentiating from its competitors, not only Groupon but also travel deal sites like SniqueAway, Rue La La, Jetsetter, Ideeli etc.

LivingSocial Escapes is the company's travel division. Unlike sites like Expedia that work with thousands of hotels, LivingSocial Escapes only work with a small number of hotels. The site sends to its members local travel deals, available for purchase for 7 days and that you can generally use withing a year. It is a small revolution in the daily deals as the offers for travels and hotel nights were very few on the coupons sites. The deals include not only 1 or 2 night at a local hotel but also a dinner, spa, or other benefits. Customers are then offered more than a hotel night, they are offered an experience thanks to these attractive packages.

Both the hotels and the customers benefit from these deals. For the hoteliers, it is the opportunity to attract new customers with the objective to convert them into loyal guests with value-added packages, or simply filling beds during a slow period with 50% discounts. It is also a way to sell customers an extra night or two since many people prefers escapes of more than 1 night. For the guests, it is a good way to try a new hotel for the week end not far from home and to enjoy an "experience" at least cost. Besides, the site found a good strategy to promote sharing, offering a free escape to its customers that share a deal with their friends and got 3 of them buy it.

I think the idea of selling hotel deals on coupons sites is a great idea, provided you do it wisely... While it can be a very interesting way to sell additional rooms during slow periods and a good way to attract new customers as well, there are also a risk to devalue your hotel and to create expectations from customers... Besides, it has been proved that giving great discount for engaging trials is not rewarding as you will mostly attract one time guests that are looking for the best offers and could not offer the standard price otherwise. Still, it remains a good way to avoid selling through OTAs and to create good publicity for your company, without mentioning the great opportunity to sell packages that are unique and give and added value to your products..



Article for Wednesday, 30th of March 2011

A few years after its creation, marketers have understood the power and huge potential that Facebook represents for their business. Although the use of Facebook as a marketing tool is very recent, we can already observe an evolution in how it is used and in how it impacts sales growth and revenue.

The article "Facebook leads to hotel room revenue" explains us that Facebook is not used only for CRM any more. With the development of the e-commerce, more and more hotels for instance integrated a booking engine on their Facebook page, offering their guests an additional option and service. Has it proved successful? Certainly. For some hotels, the conversion rate on direct referrals from traveler review sites to hotel supplier websites ranged from 4% to 6% in 2009, while conversion from Facebook to hotel websites was 8%. It is of course not as well developed for all the hotels but most hotels have now realized the potential behind Facebook e-commerce and the possible impact on their revenue. Thus, many have started developing, in addition to their customer-engagement marketing, an e-commerce activity on their FB page, like Westin Hotels & Resorts in January that introduced a shop tab on its properties' FB pages.

This trend is promised to grow with currently more than 13% of social-network users using social networks to shop for travel, according to the firm’s “Traveler Technology Survey 2010. In addition,

the proportion of people talking about travel on FB with their friends and family is in constant growth as well as the travelers'engagement with the travel companies on social media.

As a result, companies and hotels are jumping quickly on this FB business and even if most hoteliers still consider that the primary purpose of the social media is to engage with their customers to build trust and loyalty, few would ignore this new way of making revenue...

Comment:

For some people, the best uses of social media are: • An important component of hotel’s multi-channel marketing • Buzz-building • Brand-building • Interacting with and engaging customers • Keeping up with the times, making the hotel look current, cool and up-to-date • Driving engaged and relevant traffic to the property’s own website.

For my part, I think that e-commerce via FB is a huge opportunity. It is clearly the future of checking-in and selling on internet. Thanks to social media like FB, you can accompany your customers from the decision to purchase to the after-sales. You can give them tips and recommendations, fix any problems that can occur after or during the sales and even upsell! All of these in a friendly and more customized way. Besides, for those who doubt the utility for FB on both of these 2 uses (CRM and e-commerce), I think they should first wonder whether they use FB the right way (do they engage with their followers regularly? post interesting contents? use the proper tone? have an attractive page? etc.) and to use their analytics to discover what the problems may be. The key is to perseverate and to remember that FB is good not only at improving your CRM, image and sales when used properly but also to improve your ranking on internet (SEO) and the possibility to find your key followers, your influencers to help you growing your community online as well as your sales.

Social media ROI - In-class exercice

Social media roi

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Article for Wednesday, 23rd of March 2011F

Let's talk again about Revenue Management. The article I chose today comes from the site hotelmarketing.com and is called "Rate quotation strategies for your hotel's sales agents".

This article states the problem that is facing Revenue Management these days, compared to its strategy a few years ago. While before the rates fluctuations were more or less predictable, depending mostly on the seasonality and big events, it is now very hard to know which rates we as a guest, can expect for such and such dates. This is also true for the booking conditions and rate "fences". It is due to the sophistification of the RM tools and to the different booking practices of the customers, without mentioning the whole mutation of the distribution channels. What happen for instance is that customers book their rooms more and more often at the last minute and the rates they discover can sometimes be dramatically different from their previous booking... They were certain to spend such amount of money and they are told it will be twice as much, while maybe no parameter changed since their last booking (same room category, same period, same number of nights etc). Of course, the advantage is that the hotel optimized its revenue at that moment. However, this may be very damageable for the CRM (Customer Relation Management) and the long term stategy of the hotel.

I propose to share with you the few tips given in the article to deal with guests at the delicate step of booking.

During the periods of high demand:

• Prepare your pricing strategy in advance: during the low season, insist on the good value of your offers so that customers realize there are not normal rates for a hotel of your standing. When the high season is coming and your rates increase, care particularly about your product description. Description should not be limited to a list of features but used as a way to "make your customers dream", imagine its stay and project himself. Use sensorial marketing through the terms you use...
• Train your sales agents to mention the "rack rates" so that during high (but not peak) seasons, the customers realize that they may pay higher prices than during their previous stay but that the rates they are offered are still good value (for instance, the offered rate is $175 and the rack rate is $200).
• Be precise on the terms you use. For instance, prefer "sold out" to "not available", which conveys the idea that you do not want to give that rate to your guests while it still exists... You should also seize the opportunity to suggest other date options to your customers, particularly on the lower demand period, instead of letting them go.
• Present minimum stays as an advantage for your guests stressing the benefits they will have staying a night more (like later check-out, earlier check-in etc).
• Master upselling and down-selling. In case your premium or standard inventory sold out, do not apologize to the guests saying something like: "Sorry, all we have left is...", which gives the impression of left-overs nobody wants... Instead, turn the situation into a good news for them, highlighting the benefits they will have choosing another room category than the one they wanted.
• Tell your sales agents to be firm on prices and not to be uncomfortable with mentioning high prices as these prices are justified and you will always have clever customers trying to get a better offer, just in case it works...

 During the period of low demand:

• Do not limit your sales agents to the only mention of the lowest available rates. You should at least try to upsell with another rate, comparing its added value to the cheaper product.
• Allow your staff to offer "fade rates" or what is called "don't lose the sales rate" in extremely low period... When you feel you can lose a booking at the benefit of a competitor or a third party site (that offer lower rates than you do), you can exceptionnaly choose to offer the guests a lower rate than the "best available" one (as it is still more profitable than selling via a 3rd party site).

Tips for all market conditions:

• Always start mentioning the highest rate and finish with the lowest rate. For instance, if your pricing changes everyday and your guests stay 3 nights, mention the highest night price, even if it is the rate for their last night and give them the best price at the end. It gives them the impression to have made a deal.
• Explain your guests why rates changed since their last stay. Be honest and treat them as equal, explaining that the economic situation changed since their last stay, which explain why your rates are now back to normal.

For me who want to work in RM later, I learnt a lot thanks to this article. It all makes good sense and I am convince that as long as you have a good sales team that knows how to talk with the guests and present the products, you can sell anything. Still, I think that the fluctuation of rates can damage the relationship with the guests as RM does not take into account the value of each guests, their loyalty and the additional money they can spend in your hotel. Of course loyalty card may help to offer the best to your most loyal customers but it is still insufficient and could be improved. Not all your guests subscibed to this kind of program and they may not be willing to pay for these loyalty cards...

That's why I think a good way to mix RM and CRM is to use the new technologies. I mean using SIM to link the 2 domains, allowing hoteliers to reward their most loyal fans based on their activity on the social media. More and more sophisticated tools can be used to measure it and to integrate the score of individuals in the reservation system. It would not only improve your CRM but also encourage people to talk more about you, resulting in a free and efficient marketing for your hotel and potentially in growing sales and a better image!

Mobile Marketing Exercise for Sunday, 20th of March

Mobile marketing: The SoLoMo Approach

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Mid-term exam Social Influence marketing

Open publication - Free publishing - More influence

Article for Wednesday, 16th of March 2011

Today, I chose to treat the article "Seven tips for embracing Social Commerce". This article gives us the key ideas to sell successfully on the social media. It is indeed becoming crucial for the companies to use properly this distribution channel as more and more customers buy directly from the brand social sites and 2011 will be THE  year when social media trend dramatically grows. Understanding how social commerce works and how to catch your followers' attention is definately a huge competitive advantage. Let's see what the author's advices are...

As the title suggests, the writter gives us 7 main recommandations to implement a winning strategy:

• Check your analytics
• Understand how social your customers are
• Start using your Facebook Page to promote products
• Socialize your website
• Use a Facebook shopping app
• Investigate bespoke solutions
• Don't just sell

Basically, the idea is to make sure that your business will benefit from the presence of an e-boutique on your social media, to build an attractive and relevant landing page that will drive your customers to your site and convert them into buyers and to facilitate the purchasing process by adding shopping app and communicating with your fans. The author also insists that you should not only focus on selling and on your brand but on socialising and sharing more with your followers.

This article really well summarized the steps to develop your social commerce successfully. I am convinced that this trend will grow in the next few months and that social media may eventually replace the brand sites as the customers will find all the information they need, as well as reviews from other users and tips and special offers directly from the sellers, without mentioning the various loyalty programs and contests that may be organized by the brand on its social sites.

Still, I think that one additional advice we could give to the companies that is missing in the article is to provide a securitized online payment. It may seem obvious but it is fundamental. As I said, Social Commerce may become the main selling channel as the brand will not only be able to reach a large community of fans, share and know more about them, what they like, do not like and answer their questions and doubts immediately, give them tips and suggestions about a product and even offer their most loyal fans discounts and special gifts. Last but not the least, the social platform may facilitate the after sales services and fix the problems directly, reducing the percentage of unsatisfied customers. What is great I think with social commerce is that advantages are both for the buyers and the sellers. In other words, it is a win-win practice and companies should not neglect this new trend.

Article for Wednesday, 9th of March 2011

Today, I would like to talk about this article I found on hotelmarketing.com: "Google reaching out to major hotel brands and CRS". It deals with the new Google Maps feature added at the beginning of February, providing travelers with the average hotel rates and availability. This new service will surely have consequences on hotel room distribution strategy. Negative or positive? Let's first have a closer look at what this new feature consists in.

Since the beginning of February this year, when searching a hotel on Google Maps, you can find next to the name of the listed hotels a price followed by a blue arrow. If you click on this arrow, you will discover the prices offered for the selected hotel by the major OTAs, with a possibility to click on the OTAs' link to book online. Below, you can also have the hotel own site but no price will show up. Indeed, at the moment, Google only proposes the rates and availability for the different OTAs. Still, Google announced that it is currently working with CRS providers and the major brands, which would allow the hotels to compete more effectively with the OTAs. Below, you can have a look at what the Google Maps looks like:

Why is it so important? Even crucial? Simply because if hotels are not participating to this system, they may lose the opportunity of capturing many direct bookings at the profit of OTAs... Given the costs associated with OTAs booking, it is understandable why hotels cannot afford to keep away.

Thus, after OTAs, it is the turn of CRS providers and big hotel groups to take part of the system. Pegasus ("the developer of the RezView CRS products and provider of the hotel industry’s dominant “switch” that routes hotel availability to the GDS") is working with its hotels clients to find a way to share the rates and availability on Google Maps. Google says that eventually, bigger as smaller hospitality players will be on board.

How does it work? It willl be a PPC pricing model. OTAs and hotels who list their availability in Google Maps will pay a fee anytime a user clicks the link (sources say anywhere from 50 cents to US$2). If the user books a hotel room, a larger fee is collected based on the amount paid.

For the moment, it is still hard to know which impacts this new system will have on rooms distribution but hotels are monitoring closely the evolution. What is sure is that both hoteliers and OTAs are more or less worried...

Indeed, the question is particularly dificult for small independant hotels who do not have the same budget as the big hotel chains for these PPC and advertising system and that risk to be left behind. Moreover, if for the moment Google does not make pay the hotel for the access to direct booking, nobody can know what will happen in the future... Still, for the hoteliers, the main concern is that Google is not helping them with direct bookings for now and that competition with OTAs will remain hard, or harder...

As for OTAs, even if Google claims that it does not attend to conduct booking itself, who knows how it will evolve?

I personnally think it is a good thing Google added prices and availability to the information. Price is one key element when we are searching for an hotel so it seems logical to provide users with these data. Still, I agree that chances to benefit from the system are not equal among the hotels and independant hotels may have difficulty to compete... However, I believe that it exists other ways, and probable more efficient, to catch travelers' attention: networking and sharing on social media! Taking care of your community may be more rewarding than costly advertising campaigns.

Presentation in Community Management - Seth Godin or "The Remarkable blog of a Remarkable man"

Seth Godin The Remarkable blog of a Remarkable man

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Online exercise for the Think Tank: What will delight today's customers who are mobile friendly?

What will delight today's customers who are mobile

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Article for Wednesday, 2nd March 2011

The article "American Airlines’ AAdvantage Facebook Fans grow 84 fold in 54 hours. The most successful campaign ever by an airline?" shows how the airline company managed to dramatically increase its number of followers on Facebook thanks to a clever marketing campaign or rather loyalty program.

Indeed, figures speaks quite clearly: the loyalty group at American Airlines, AAdvantage, set up the Facebook fanpage on Feb 1 and in the first couple of weeks, they won 2000+ fans, organically. Then they launched the Mystery Miles campaign to drive membership, and the numbers exploded. In 24 hours, not only they went from 2,558 fans to 163,000 (and had reached a staggering 210,000 fans just 54 hours after the campaign was launched) but the interactions and engagements on the fanpage also increased dramatically  from just 41 likes for one of the initial posts, to over 1,200 likes for one just sent out.

The AAdvantage campaign consisted in a very simple proposition: “Like” a Facebook fanpage to get a random reward, that is to get between 100 to 100,000 miles just for liking their Facebook fanpage, in their Mystery Miles contest.

It is the first time a campaign launched by an airline company is so successful in such a short time. Before that, other airline companies also found efficient ways to drive brand engagement. You will find below the Top 10 Facebook contest by Airlines:

Top 10 Facebook Contests by Airlines

View more presentations from Shashank Nigam

As you can see, it exists many ways to encourage the fans' interaction and social networks like Facebook are becoming the ideal places to launch your loyalty programs. Still, the article reminds us that a few questions remain to be answered to manage very large community. For instance, companies should wonder how to distinguish between the one-time “likers” and the “real-fans; how to set the right expectations for future campaigns, given the first campaign was so generous; how to start driving business from these fans ( how many offers is too many?) or how to scale up the team internally and use the right tools to manage this.

I personally think the combination social media + loyalty program is very clever. It is a good way to reach a large number of people who are supposed to be your "fans" as they follow you and to get many feedbacks in a short time and at a low cost.

Cool video explaining the interest of LBS social rewards program - SNAP Rewards

In class exercise - What are the pros and cons of using social media in your business strategy?

What are the risks involved in using 'social

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Final Exam Digital Marketing

Open publication - Free publishing - More social

Article for Wednesday, 9th 2011 - Are Q&A sites the new travel search?

Today, I chose this article "Question and Answer sites – another piece of the online travel search revolution" not really to wonder whether yes or no Q&A sites are the new travel search (as in my opinion this question is already obvious: yes they are definately the growing trend) but because it allows me to discuss of their role in the CRM (customer relationship management) and online brand building. These sites are usually very useful, convenient and it is fast to get an answer. Besides, it is a good way to have the insights of someone who already experienced the products or services we have doubts about. We are now in a period when other users' feedbacks are more relied on than brand messages and it explains why these sites are so increasingly popular.

The article presents you 4 Q&A sites - namely Quora, Aardvark, Travellr and Mygola - and describes you how they work. What is very interesting is what comes next: the author introduces to you the 2 challenges challenging these websites, which are 1) Are incentives necessary to make work these sites on the long term or the will to share and be useful to one another is stronger? 2) What will become of these sites if (when) Facebook will launch its own Q&A section (which is actually already happening as you will see in this article)

I think these are very interesting questions. Of course, opinions vary on these topics. For instance, concerning the 1st question, some sites believe that paying the participants for their contributions is logical (like Mahalo or Mygola) while other sites believe that human desire to share stories and be useful are more powerful than financial rewards (like Quora or Travellr). In my opinion, financial rewards should not be part of the game. The greed for money could encourage people to answer all questions, whatever their level of knowledge on a topic and be damageable for the quality of the answers. I think this method could affect the "purity" and honesty of the site and of its contributions.

As for the 2nd question, it is no doubt that Facebook would be a great challenger and that it may jeopardize the survival of these sites. However, may Q&A sites are in "niche" services. Not all of them are focusing on the same types of questions and people choosing one or another Q&A sites are looking for different king of information. For instance, you have general sites like YahooAnswer, professional sites like Linkedin Answers etc. The best would be to look at the presentation below, which will give you a better highlight of what already exists:

Q&A sites, forum des années 2010

View more presentations from Cyril Hijar.

As you see, Q&A sites are already many on the virtual market and all have their own purpose. Thus, I am sure there would still be space for some of them, provided they focus on their niche markets.

I would also like to add that another challenge facing the most popular sites is... their increasing popularity itself! What I mean is that the more people interact on the site, the higher the risk to get lower quality answer and to make the sites lose its relevancy. Sites like Quora should be very careful to monitor the quality of the contents.

Now is the topic I wanted to launch: how Q&A can help businesses? We always think of social media like Facebook or Twitter as the new tools to build our brand online but hardly do we mention Q&A sites. Still, they are social media in their style and business should monitor these sites to see what is said about them, their products and their competitors. It is the new place to be as they will have the possibility to interact with the participants, to answer their questions, measure their popularity, what is positive and negative about them and how they could better compete on their markets. It will also allow them to build a relationship with people and to have a higher visibility, while controlling and making sure what is said about your brand is true. I strongly encourage people interested in that matter to watch this video:

Groupon vs Google Offer - Should hotels use these tools?

In my opinion, it depends on what type of hotel you run or manage. If you are a 1 or 2 star hotels, you can afford to bargain your rooms or meals to attract people during the low period. It will drive more revenue and it may turn 1 time guests into loyal guests after that experience. People going to that kind of economic hotels are more likely to use coupons and discounts so offering great discounts will not seem ackward or devalue your product. Anyway, these people will probably continue going to hotels of your standard.

The problem is different for 3, 4 and 5 star hotels. Contrary to the hotels mentioned above, guests going to these hotels have a higher purchasing power. If you bargain your prices too low, you may attract a clientele you did not target and you may devalue your products in the eyes of your current or potential customers. Below are the reasons why I believe upscale and luxury hotels should not use the Groupon and Google offer sites:

• Devaluation of your products and services in the eyes of the consumers
• Attract a segment of clientele you did not want for your hotel
• Offering a discount does not mean that next time, the guests will be willing to buy your products at full price
• Blur your brand positionning and in a world of brand reputation, image deficit is a killer
• It is very easy to discount and lower prices but it is very hard to re-set up origianl prices.

If you have an other opinion, I would be happy to hear your points!

Measure social influence with Klout - Group work

Measuring Social Influence : Klout


• How the tool can be used to increase brand awareness

- Klout allows the brand to find influencers based on topic or hashtag

- Help your brand to understand your influencers’ network value

- Be focus on people recommendation and not advertisements



• How the hotel can be used to create service differentiation - for influencers

- A free week-end for 2 pax for the most important influencer

- Discounts

- Loyalties

- Special amenities

- A package to use all services of the hotel (spa, room service, fitness center, etc…)



• How the tool can be used to impact revenue

- Target important influencers and their community

- Communicate we them to get more influencers

- Use service differentiation for influencers



• Why this tool is better than others, mentioned in the article

- Focus and specified on Tweeter and Facebook

- Use 35 variables of those social medias measuring True Reach, Amplification Probability, and Network Score

- Real analysis of what is said about your brand, not only a grade

Article for Wednesday, 2nd 2011

The article I chose to deal with today is "10 Tips to Better Pricing for the Travel Industry".

According to the author, using the pricing strategy could grow substantially your operating profit: a 1% increase of your prices, while demand level remains constant, would increase your average operating profit by 11%. For some businesses, the margin could even be higher. Price is a key element for both the seller and the buyer. The problem is that very often, the seller does not try to understand the buyer's point of view, which results in bad pricing and thus, potential losses and  a lower revenue... The aim of the article is to demonstrate that with 10 simple rules, you can follow a successful pricing startegy that will help you to grow your business.

 
Rule n° 1: "Don't make up cost" by calculating the return you expect on such or such product (for instance, a 30% margin requirement) . It will only give you a number disconnected from the reality of the buyer and the value he attaches to the product. By forgetting your customer psychology and purchasing power, you risk never reaching your goals.
 
Rule n°2: "Set prices that capture value", which means put yourself in the shoes of the customers and try to guess what is the value that he would put in your products based on the circomstances. Do you offer the best value for money product or service compared to your competitors?
 
Rule n°3: "Create a value statement", that is to say define your points of differentiation with your competitors and state your competitive advantages. It will justify your prices to the customers.
 
Rule n°4: "Make your employees understand there is nothing wrong to earn high profit". Some staff may feel guilty for charging a price higher than what they judge to be fair and  tend to give away discounts more than necessary. You have to remind them that the majority of the guests are not loyal and that the business earn the money necassary to bear the risks of the market.
 
Rule n°5: "A discount today does not necessarily mean a premium tomorrow". Indeed, nothing guarantee that because you offered a discount to a customer, for a trial or whatever, this one will spend the full price for your products or services next time.
 
Rule n°6: "Different customers equal different pricing needs": each customer is different so their needs are also different, differing in 3 main ways: pricing plans, product preferences and product valuations. You need to have a pricing plan taking into account these criteria to be successful.
 
Rule n°7: "The pick-a-plan option" correspond to the customer pricing plans. It means that your customer may want your product but the pricing plan does not work for him: instead of purchasing,  it is maybe more  convenient for him to rent or to lease. By offering a pick-a-plan strategy, you offer a wider range of possibilities and may increase your customer data base.
 
Rule n°8: "Different versions of one product" enables you to answer the customer's need for a more or less elaborated offer (adapting then to different wallets) and to widen your choices.
 
Rule n°9: The "Implement different pricing" strategy consists in elaborating tactics to identify the more and less price sensitive customers. For instance, if a customer took the time to cut out a voucher  in a magazine, you will know he is more price sensitive than another client who would be willing to spend more on the same product.
 
Rule n°10: "See you customer base as a big puzzle": by identifying each new profile of consumers, you will be able to create new products versions, differential pricing and different pricing plans adapted to each or the majority of the customers.
 
If you follow  the 10 rules above, your chance to maximize immediately your revenue are increasing.
 
Comment:
 
I think this article is good sense. It seems to be very obvious when you are told what to do but the truth is, it is not necessarily before you are told so. The 1st rule for example is logical but I am sure most of the sellers base their pricing on this "profitability" requirement, without thinking much on the customers side. 
 
In addition, I realize that I am aware of the 3 pricing ways necessary to adapt each customer's needs but that I may not think to combine the 3 of them for my pricing strategy. I also realize that it is not common to be offered the 3 plans (1 concerning the pricing plan, 1 about the different pricing and 1 for  the different version).
 
I guess that if the method was applied everywhere, life would be so easier, particularly for the pricing plan (offering you to rent, borrow, exchange or lease instead of buying would be just fantastic! There are so many thing you use only once and forget in a corner...) . It would be a win-win strategy: happy sellers with better revenue and happy buyers with the êxact type of product or service they need.
 

Last version of my Prezi presentation for Wednesday, 26th of 2011

A new hotel experience with the TED technologies on Prezi

Article for Wednesday, 26th of January 2011

I found a very well written article today about the "Future of hotel pricing". This is a report on the webinar hosted by the Center of Hospitality Research at Cornell University School and SAS.

The participants all agreed that dynamic prices are the future of hotel pricing. Still, they also admitted that none can ignore the many challenges facing that pricing strategy.

As a reminder, dynamic prices are the contrary of set prices. It suggests that revenue managers have to be constantly in alert and be ready to change the hotel prices at any up and down on the market. Being able to make real time decisions is what is considered to be the best way to maximize the revenue opportunities. But isn't it very time-consuming? As we are going to see, this is not the only concern about this method.

As the Revenue Management trends evolve, we are passing from an inventory optimization to a price optimization logic. The goal is not any more to sell the maximum of rooms but to sell them at the best prices (meaning the highest prices the customers are willing to pay). With a dynamic prices strategy, the hoteliers would be able to match the prices in real time, based on the demand. If in the morning the activity seems higher than forecasted, prices would follow the trend. If in that same afternoon or evening, activity decreased and the hotels feared not filling the empty rooms, prices would drop. What would be the impact on the guests? While most of the guests are aware of this practice, particularly with the airline industry, what would they think of such fluctuation in prices?  

One thing we have to keep in mind is that, even if it seems a very rational and logical idea mathematically, the result in practice may be different. We know that depending on the segments (leisure, business etc.), prices sensitivity is different so elasticity of the prices is to be considered as a crucial component. There are now very sophisticated software (like IDeaS) able to calculate what prices should be, including data like competition, past bookings etc., but none of them can integrate such data as prices sensitivity...

Another element to consider is the additional revenue. The key figure today for revenue managers is not RevPAR but TrevPAR, which takes into account not only the room prices but the additional contribution like restaurant expenses, spas etc. These are elements to think about when you price rooms and Las Vegas is one of the best example as room rates are usually very low because guests will spend a lot at the casinos.

Today, most of the hoteliers continue defining their revenue strategy on Excel, while a few already invested in revenue management systems and follow their recommandations. Still, nothing is won in advance even for the better equipped hotels. Statistics are good but adaptation may be necessary as I said. When elaborating the prices, considerations such as the guests characterictics or profile (loyal customers, student etc.), the additional revenue contribution, the segment and prices sensitivity are as many elements to think about.

That is why today revenue managers are considered to be as much inventory managers as marketers. They have to find the best packages and promotions to attract different types of guests. This is their role to improve guests' experience through adapted offers, offers that they will care about. At the end, it is not the hotels that would fight for the guests but the guests who would fight for the best hotel deals. Some even predict that thanks to the technology progress and forecasting evolution, it will be possible soon to propose one on one prices. Is such customization a good thing for hotels and their guests?

Comments:

I personnaly think that dynamic pricing is a clever strategy as it is the best way for a hotel to make profit. However, we should also be careful that it does not affect the guests 'satisfaction and loyalty. It is also no doubt that it is very time consuming. IHG tries to convince its partners to accept that deal and offers a solution by proposing hybrid prices to its corporate clients, mixing fluctuating prices and capped rates as a security. 

This article asks the right questions about the pros and (particularly) cons of dynamic pricing. To mention aonly a few of , we could wonder whether this practice would not turn away our loyal guests, whether it would not make difficult our promotion campaigns and the work of the travel agencies or whether it would not affect our additional revenue. Last but not the least, is it the best way for a hotel image to compete on prices?

Article for Wednesday, 19th of January 2011

This article "Five hidden secret of social media failure" was very instructive and I would like to share it with you.

Social media are the new marketing tools for the companies today and many of them invested in these tools to increase their visibility and potentially, their market share... However, they were also many not having benefited from this investment and not being able to justify such a waste. Here are the reasons for their failure:

•  The myth of planning: the problem of marketers was not that they did not plan enough but rather that they planned too much! Why? Social media are very new and constantly changing, evolving so that it is impossible to forecast on the long-term, contrary to what marketers did. In addition, the selling process via social media is different from what actually happen in real life. Sellers may not seize the opportunities at the right time on social media as the selling methods are different and the moment to conclude as well.
• Not just goals-metrics: The problem is that many marketers and companies in general do not understand that social media are not only necessary for increasing revenue, they also have ancilliary added value, other benefits. Beyond the quantitive aspect (revenue, sales), a qualitative aspect cannot be neglicted. It includes information, competitive intelligence, insight,  a new supplier or partner, publicity, brand awareness, an idea, customer insights...
• Why the boss matters?: Top management should sponsor, encourage the project and imply all the relevant teams on the project. Small wins are also the best way to successfully achieve goals and is better than willing to do everything in one time
• Beyond marketing: For now, the traditional use of social media is by marketers and any services that engage publicly from B to C. How about using social media internally? Your team could benefit from this tool by learning from each other, communicating better, collaborate and innovate.
• The curse of the social media know nothings: Digital marketing is quite new and the problem for companies is to hire the right person. What are the necessary skills, competencies we should expect from a Digital marketer? Tendency is to hire young professional with no knowledge of marketing but who excel on facebook, twitter, blogs etc. That can become a reason for the failure of your strategy...

I think this article was very clear and set the right questions. It is important to understand that social media work differently and we cannot apply the traditional methods of selling and it is also important to realize that social media give you more than an opportunity to sell. It is a way to learn (from clients, competitors, your products and company pros and cons), to have a free database and to increase loyalty. The use of social media at the internal level was also a very clever idea and it could be adopted very soon by companies. I was mostly interested in the question of the professional skills necessary to become a good digital marketer. For my part, the question would be quickly answered: I would definitely hire a great marketer and train him or her on the use of social media rather than a "skilled social networkers" with no or almost no knowledge of marketing.

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Article for Wednesday, 12th of 2011

This article deals with the new management tool that is necessary to understand to be an efficient revenue manager as selling trends are changing rapidly. It is called the "Net ADR Yield" and is used for the management of distribution channel related costs.

Indeed, in the past, revenue managers focused mostly on the top-line revenue or the RevPAR to assess which distribution channel was the best to sell the products. In brief, it was considered that "The higher the total revenue generated by a distribution channel (evaluated by assessing Rooms Sold x ADR); the better the channel."


As you saw in my previous article about the conflict between the airline companies and the intermediaries, RevPAR is not the only element to consider to maximise revenue. Today, hotels, like air companies, are using different distribution channels to offer their guests the choice of booking where, when and how they want. It gives an added value to the hotel products but the problem is, not all distribution channels have the same cost. All the intermediaries have to charge their services to the hotels but the fees between them may vary dramatically. Thus, it is very important to manage these costs. One solution is to manage which channel you use, another is to move repeat buyers from costly distribution channels to less costly channels. How can we measure the profitability of each channel?

The old tool of using ADR and RevPAR is not useful here as it does not take into consideration the distribution channel cost. The new tool to be used then is the Net ADR Yield. You can obtain it by calculating the Net room rate (Standard room rate - cost) divided by the standard room rate. It will give you in percentage what is left to you after you paid for the costs of selling the room. For instance, if you sell the same number of rooms at the same price through 2 different channels that have 2 different fees, 1 very low and 1 high, you will realize that your revenue at the end will dramatically change...

As a consequence, with this tool, you can find which channels have the highest Net ADR Yield, that is which of them are the most profitable. The most important is to calculate the average Net ADR Yield, combining the results of each distribution channel to see how you manage these channels and their related costs. A high Average ADR Yield would show that you have a good control over your distribution channels while a low Average ADR Yield may show that you need to review your channel distribution.

However, it would be restrictive to say that high Net ADR Yield  are always more desiderable than lower Net ADR Yield. A low ADR with a high Net ADR Yield will have a very bad impact on GOPPAR as will a very high ADR with a lower Net ADR Yield. A high Net ADR Yield will also be a problem if it is combined with only a small proportion of rooms sold.
What is important to understand then is that today, revenue manager still have to attach importance to Rev PAR optimization (as ADR times the  room sold gives the revenue) but that they also have to pay attention to the profitability of each channel of distribution.

Comments:

Revenue Management has become a key component in the hotel industry and it will become more and more important as the selling process is changing and the competition is getting harder and harder. The dream for a revenue manager would be of course to reduce or even eliminate the transaction fees the hotel pays to its intermediaries to maximize the hotel profit. New technological tools and practices are already helping hoteliers to attract guests to their site to book directly on their own booking engine. Hotels also are more and more numerous to use the mobile app and mobile websites to respond customers' demand. With the conflict between the airline companies and the intermediaries, would it be unbelievable to think that hotels would follow the trends? I think the current fight is to be watched very closely...

Article analysis for Wednesday, 5th 2011

Since the end of December 2010, a big controversy has surged concerning American Airline's move to distribute its own fares through its new distribution system, cutting out intermediaries. This article explains what the real impacts for this decision are and what is actually at stakes on the short-term and long-term.

On the short-term, this conflict is seen as a price battle, a fight over the commission fees. Indeed, in the past, air companies relied on intermediaries - OTA & GDS - to sell their air tickets. In exchange for their agreement to pay a fee for the intermediaries' services, the intermediaries accepted to reduce their fee structures. While the contracts between the different parties is to be renewed between 2011 and 2013, one of the biggest airline company, American Airline, decided to pull its fares from the OTA Orbitz.com in December 2010, affirming its will to no longer submit to the high fees practiced bu the intermediaries. Instead, it would like all intermediaries to connect directly to its sites to obtain customized information. This decision resulted in Expedia supporting its direct competitor. The famous OTA indeed decided to refuse showing the AA fares on its website. The last wave on this affair was the decision on January 1st 2011 by Sabre GDS to terminate its contract with AA, one month earlier, and to make it more difficult to find AA fares as well as the end of the discounts on the fees applied for the airline company.

At the moment, the air travel industry hopes for a negociation between the parties because they still need each other and a new design of the air ticket distribution would have serious impacts on the market.

On the long-term, we understand thanks to this article that the real aim of the airline companies is to control the air fares research. We are passing from a fare and schedule-led selling to merchandising. In brief, it means that AA does not accept the current system proposed by OTA and GDS that only take into account fares and availibility as research criteria. AA wants to offer tailored services as well to provide better propositions to its guests. Thus, AA would become more a product marketer... What does it have to do with AA's direct platform?

Actually, when guests are looking for fares on OTA, they can only access fares and availibility and the air companies have little say about what is displayed on these sites. They cannot control or justify the prices. Thanks to a direct platform on the airline company's website, they could rebundle, customized and merchandise their products and so, have a better control on what they sell and how they sell.

Still, in spite of a likely inclination to follow the move, air companies will surely not be able to work without intermediaries so soon... Here are 9 issues to watch that are central to the evolution of air companies distribution:

• Airlines readiness= not all airlines are ready to work without intermediaries and to offer an easy to use website for their guests
• the commercial model for merchandising= who will pay for the connection system to the airline companies? Will the ROI worth the high cost?
• consumers= even if they are generally overlooked, they are the final desion makers and what they need is the cheapest fare to go from A to B. The capacity to adapt products and services while providing the best fares and being the most competitive are the key issues.
• comparability and travelers' rights= the new system will make it difficult for intermediaries and guests to compare the competitive fares. In addition, with the rebundling and merchandising practices, it will be hard to compare products as they will not be similar.
• regulatory= the Department of Travel will have to regulate on the merchandising practices to make sure it is not a camouflage for unfair fares.
• technology= if it will undoubtely be a good thing for innovation, the new model will cause problems to GDS, OTA and ITA software to gather information, establish comparison, control fares etc.
• GDS= the GDS have always adapted to the distribution changes and even if they are often considered costly, slow and legacy, they are not going to disappear soon as they are still very powerful.
• Google and ITA purchase= This event could totally redefined the distribution model if it happened.

Comments:

We know that today, companies are trying to lower their distribution fees by reducing the importance of the intermediaries and working on direct booking instead. Revenue management optimization is an issue faced by the hospitality sector (hotels, travel companies) and some solutions are offered by the new technology. For instance, companies can offer customized services and easy online booking and create a stronger link with their guests via smartphone app, website design, blog, social network etc.

Still, the battle does not end there. Companies want to control the whole distribution process. While AA may lose traffic at the begining, it is almost sure that it will be joined soon by other companies and eventually, it is Expedia and all the GDS and OTA that will be in trouble and may not survive...Delta already removed its fare information from 3 small OTA and it is probably the begining of a new trend. If an agreement is not reached soon between the parties, the first to be penalized will of course be the guests, as they will have less possibilities to compare fares and less points of reference because of the merchandising system. Transparency will no longer be possible. This conflict as only at its begining and should be watched very carefully, particularly since the Google claim to purchase ITA. We may also wonder whether it will influence the hotel industry, which I believe will.



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