Winter Newsletter
The events of the last few months have sent shockwaves throughout the global economy and for most European hoteliers, the big question is how to prepare for and survive the current downturn?
In this newsletter we review how hotels need to learn from the mistakes of the past to implement effective pricing and distribution strategies to maintain market share during the current economic climate.
9/11 - the mistakes made
Without 9/11, the hotel industry would have undoubtedly approached the online travel agent model in a more calm and controlled manner. However mass corporate market consolidation combined with inflexible pricing management, led thousands of hotels to abandon their historic pricing & channel structures and free-fall into a new era of B2C distribution. The impact of this included:
- Rate inertia & chaotic inventory and channel management
- Rate cannibalisation by contracted corporate & leisure accounts
- Unqualified distribution partner selection
- Poor promotion & content management
- Customer mistrust of direct distribution channels
Recent downturns - examples of positive actions by European hotels
Within the 24 months following 9/11, chains followed by many independent hotels in Europe were quick to implement rational pricing structures combined with channel management technology, to regain control of their customer and maintain rate parity across all channels of distribution.
The war in Iraq, SARS and the Madrid & London bombings, inevitably led to declines which on top of the global recovery post 9/11, created ongoing difficulties for many hotels. The reasons for declining revenue generation however were less to do with rate cannibalisation and poor channel management and more with unmanaged price discounting across all segments.
Emerging from these events were a new breed of hotelier, quick to learn from the past downturns and had set in place a strategy for pricing, channel & inventory management, including:
- Removal of historic pricing structures (Rack, Public Corporate)
- Addition of demand based pricing (DOW,LOS) via BAR rate tools
- Focus on competitor behaviour via benchmarking and daily pricing strategy
- Focus on short-term promos & packages for specific segments
- Conversion of OTA customers into direct channels
- Investment in direct distribution channels
Tactics to create value for your customers
Whether it will be Heaven in Eleven or a swifter recovery, the fact remains that hotels in Europe will face a decline in demand in 2009 and must act to prevent loss of market share. As the European consumer shifts buying behaviour to expect higher value, the successful hoteliers in 2009 will be those that in addition to the strategy outlined above, create imaginative and customer segment specific products that demonstrate real value to the customer, such as:
- Implement a total dynamic pricing strategy, where all rates (or at least all public rates) are
connected to your hotels best available rate
- Add value to BAR and promo rates by incorporating high priced, low cost products such as breakfast and internet
- Introduce dynamic packaging through the hotels website to promote products and services at incentivised prices and to demonstrate the advantage of your added-value rates
- Utilise direct connects via your CRS/PMS provider & channel management technology to ensure your hotel can immediately update price & availability changes across all channels
- Maintain and increase your online marketing budget, focused on promoting actual products (promotions & packages) through Pay-Per Click marketing
Related Topics
