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!