The 2nd session kicked off with an examination of where the hotel industry was currently at in terms of translating revenue management insights and principles towards marketing efforts. Participants felt that whilst there was a gradual shift from previously working in silos towards integration – providing upsides of knowing which customer segments to target and which channels to utilize, as mentioned by Maunik Thacker, Senior Vice President of Marketing at Marina Bay Sands (MBS), it was still not practiced in the fullest sense. The ideal of “right customer at the right price” remains difficult to implement, and instead price parity is more often used instead, as acknowledged by Tarandeep Singh, Senior Director or Revenue Performance and Analytics Organization of InterContinental Hotels.
Later discussions of this problem attribute it to the lack of quality data, at times inaccurate and not granular enough to make specific targeted pricing decisions, stressing the importance of improving back-end capabilities first. Clive Hawthorn, Director of Market Management for Malaysia and Singapore at Expedia, also shared about the website’s use of incremental experimentation in the form of A/B testing to uncover trends due to the lack of granular data, with the surprising result that visitors to the website did not prefer pets. In terms of understanding total customer value, this is further complicated my customers utilizing multiple online accounts on different platforms (eg, email, Facebook), making it difficult to interlink the collected data to form a coherent picture of the individual, as well as the issue of charging loyal customers a higher price. Beyond this, the Human Resource challenges were also brought up, with Kathrin Bhalla the Director of Global Solutions, Engineering at IDeaS, highlighting the need for better training of frontline staff to align them with revenue management objectives.
Central to the topic of data collection was the theme of privacy concerns for the individual, which was also hotly discussed. Citing the example of Disney’s Magic Wristbands for their resort guests, used to track their purchasing and park behavior, Professor Sherri Kimes pointed to the mutual benefit recieved by both parties. Patrick Andres, the Regional Managing Director, Asia Pacific, of revenue management consultancy Rainmaker, then furthered that whilst consumers see value in providing their information (e.g, discounts), there was also a self-policing mechanism in place that prevented use of the data against the consumer (e.g, price discrimination). Professor Jochen Wirtz of NUS shared this view, emphasizing the backlash from consumers if their data was used in ways other than to further the customer experience.
Another big topic of discussion in line with managing the customer relationship was the usefulness of apps and how much should be invested into their development. This is where participants from the hotel industry diverged, depending on the number of properties within their group, as Maunik of MBS pointed out that apps had less appeal to hotels with single properties as opposed to chains such as Hilton and Four Seasons. Nonetheless, apps were primarily seen as tools for cross selling whilst on the property itself, and less so for marketing purposes and bookings as hotels were not expecting booking patterns to shift to mobile, according to Siv Forlie, Vice President of Revenue Management at Shangri La.
Ultimately, the 2nd round of the roundtable focusing on marketing in relation to revenue management was an insightful one, with our key takeaways summarized below:
- Integrating revenue management insights with marketing has improved but is still far from ideal, encumbered by HR and Data collection issues.
- Privacy is a selective concern of the customer, whom is willing to offer information to improve their experience but not against them – limiting the ability of hotels to act on their provided information to price discriminate.
- Apps are in development to further the customer relationship and are used mostly as cross selling tools.
Round 2 of our Revenue Management Roundtable saw the largest crowd and arguably the most exciting discussion of the day: “Integration of Marketing and Revenue Management”. There was humour, heated discussions, as well as a general consensus on the importance and vast applications of data analytics for Revenue Management.
Here are 4 key takeaways from the exciting session!
- The Importance of Data Analytics in Revenue Management
The importance of data analytics was brought up multiple times, and the discussions touched on issues pertaining to the following three sub-topics:
- a) Where the Industry is at: Integration of Data
The topic on “Integration of Marketing and RM” was kick-started by Mr Tarandeep Singh, who discussed how companies can answer the fundamental question of where and how marketing dollars should be spent.
A key point Mr Singh brought up was the need for an integrated marketing approach. Currently, the different hotel departments (commercial, loyalty, channels) have their own promotions and KPIs, which might be sub-optimal for the hotel’s overall performance. Integration of marketing activities thus presents an opportunity for data analytics to help craft targeted campaigns that meet the organisation’s goals. Nevertheless, an integrated marketing approach would require an integrated information system to achieve better outcomes for the organization.
Mr Maunik Thacker iterates this point by explaining that while Marketing’s data analytics seeks to drive demand through the most effective channel, integration is necessary so that Revenue Management also has the right processes in place to accept the demand.
Subsequently, Mr Singh also commented that Intercontinental Hotels integrates both internal and external data. External data would include things macroeconomic trends, stock prices, oil prices, GDP growth, and their analytics correlates the external data with internal customer data to find out what sorts of data work and provide insights.
- b) Working Towards: Operationalizing the Data
Mr Tarandeep Singh commented that a big thing about data mining is developing calls to action. Given that marketing funding is finite, data analytics allows the organization to decide on the best decision to make. In Mr Puneet’s words, “The CMO wants marketing to do just five things this year, so I want to be absolutely brilliant in doing these five things. But how am I going to determine out of a bucket of 70, what those 5 are? It’s all about data analytics.” Clearly, applications of data analytics are very important to making marketing dollars more efficient.
Furthermore, hotels can use insights from data to guide marketing efforts so as to generate the most revenue or customer acquisition. One way in which Expedia purposefully utilized data analytics (A/B Testing) to save $7 million was generously shared by Mr Clive Hawthorn.
|Kill the Dog Initiative
Expedia wanted to know if a “No Pets” policy would affect customers. To find out, they compared the booking data for pages with and without the policy and discovered that people don’t like looking at ads on the site promoting dog-friendly hotels.
“Killing the Dog” was worth 7 million dollars
|The Story of the Lamp- A beautiful story of Data collection and the Human Touch
Ayesha’s friend had shared with her an incident that had happened at Four Seasons. As a regular traveller and customer of Four Seasons, he had once mentioned to the hotel staff that the hotel room had a very beautiful lamp. Unbeknownst to him, Four Seasons had collected that piece of data into their system, and then on, manually moved that lamp to his room every time he returned to the hotel.
Data collected by hotels can also be operationalized to drive greater customer experience, and this was best exemplified through a story shared by Ms Ayesha D’Souza.
In line with this, Mr Chhavi Malhotra also commented that data can be used as a loyalty gateway. With data, companies are able to understand what customers are looking for and help them find it, thus winning their loyalty and capturing their lifetime value.
Nevertheless, there are some challenges to this, such as the tendency of customers to have different email addresses for different online personas, which was an issue brought up by Ms Siv Forlie. However, this may not be a major challenge as Mr Tarandeep Singh commented that hotels can still fine-tune offers to the email ID and the online persona to match the customer’s purpose.
- c) Privacy and data
While she acknowledges the value of data analytics for both customers and hotels, Professor Sherri Kimes brought up an issue which irks her most – highly pervasive data collection, such as the kind done by the Disney wristband. Would it be valued by customers, was it too creepy, would the data be clean and what are potential privacy issues?
Customers may welcome the customization and better service from data analytics, but they may raise concerns if they are aware that their data is used for price discrimination, which translates to higher rates for them.
However, Mr Patrick Andres noted how customers are willing to provide access to their information as long as they saw value, and how the younger generation seemed to value many other benefits (like free WiFi) over the privacy of the data. This could mean that this may not be as much a concern in the years to come.
- Owning the Customer Relationship
Ultimately, all organizations, should aim to own their customer relationships. As Professor Jochen Wirtz pointed out, companies earning the most money are those who are able to own the brand, and the customer relationship. Examples were asset-light companies such as Uber and Airbnb, who own customer relationships instead of the property itself, and are enjoying tremendous success today.
Loyalty Programmes become crucial for Revenue Management as there is great value in owning the customer relationship of your most valued customers. Hotels can cater specifically to the needs of its members by providing greater value to them in order to maximize revenue per customer. Existing customers are extremely profitable if you could develop strong relationships with them to increase their switching cost. We have to see that Marketing and Revenue Optimization does indeed come hand-in-hand.
Revenue Optimization generates many insights for the Marketing team to create campaigns which are driven by strong data analytics. Thus, hotels can incentivise its customers to join their loyalty program, so that they can better understand their customers. Besides knowing their existing customers, they go one step ahead by looking for ways to ‘fish’ for customers with similar profiles to that of their most valued ones.
- Increasing Shift to Mobile
On the topic of the latest trends, Ms Ayesha D’Souza from Google pointed out that there is a trend of travel enquiries shifting from desktop to mobile devices amongst consumers. She pointed out that 50% of all travel queries are now made on mobile devices in APAC and Google is looking heavily at how to build better mobile systems. Interestingly, bookings have not shifted as quickly.
With regards to the pertinent decision of ‘To app or not to app’, Mr Maunik Thacker questioned the return of investment of a hotel’s mobile application given the large number of apps each individual has right now. He also went further to question the reasons as to why a customer would want a hotel app, especially if it is not the go-to app for Singapore hotels.
The heated discussion regarding the value of a hotel mobile app continued with Ms Siv Forlie highlighting that Shangri-La uses its mobile app to augment customers experience within the hotel. It makes sure that their customers have convenient one-stop access to everything they require, and the hotel does not expect to receive many bookings through the app. Mr Puneet Mahindroo strongly agreed with this, and added that the Four Seasons app serves to provide customers with real-time access to services without them having to go to the concierge. Professor Jochen also commented that hotels can use these apps to up-sell and cross-sell other services for revenue generation.
To reconcile all the insightful points brought up, we should see the mobile application as an additional customer touch point for the hotel to delight and build customer relationships. In a post roundtable discussion, Mr Maunik highlighted that it was important to see the motivation of an app, and that the way that different hotels use the app should be adapted to each hotel’s business model and revenue streams, rather than the blind adaptation of market trends.
- Revenue Management… 5 Years On
To round up the discussion, Professor Sherri Kimes asked an interesting question of whether they would be talking about the same issues 5 years down the road.
Mr Maunik Thacker felt that the key issue about data would have changed, and that they would have moved from discussing how to harness data into talking about how to deploy data, especially since technology is evolving. Many guests also agreed that technology is evolving and that we cannot predict what it would be like 5 years from now.
Nevertheless, Ms Ayesha D’Souza commented that with more people adopting technology and getting connected, the conversation would move towards how everything can be fused together instead of being about how to create campaigns.
Furthermore, Ms Kathrin Bhalla also commented that before hotels could move on to other issues, they would have to master the fundamentals first. This includes integrating data from both online and offline sources as all data sources have to be inter-linked to capture the total value of customers. Additionally, collecting clean data is also necessary and would require educating everyone in the organisation on the importance of clean data. Unfortunately, Ms Bhalla finds that these fundamentals have not been laid down fully. On the positive side, Mr Timothy Tan commented that this would improve as the number of hotels resistant to using data, such as those who prefer using their instincts and experience, is likely to decrease in the future.
Through the roundtable session, the largest takeaway was the wide application of Revenue Management to other functions of the hotel. With marketing, Revenue Management looks beyond the revenue gained from each room, but goes one level higher to look at the life-time revenue gained from guests at the hotel. The methodical, analytical approach taken by RM also creates a strong foundation for targeted and efficient marketing, maximising the dollar value of marketing.
On 21st March 2016, the second session of a three-part roundtable led by Professor Sherri Kimes provided students with important insights on the relationship between Revenue Management & Marketing. Revenue management professionals from various companies attended the event and sparked meaningful discussions on the relationship between revenue management and marketing, big data, and mobile applications. These companies range from big data companies (e.g. Google), to hotels (Fairmont, Shangri-la, etc.) and network aggregators (e.g. Expedia). With insights of Revenue Management application in the corporate world shared by these professionals, this blog post will then highlight two key aspects brought up by the industry leaders: Current Trends in Marketing and The Future of Revenue Management.
Current Trends in Marketing
While marketing and revenue management are separate departments, collaboration between them is essential in maximizing profits for a company. Besides deciding the target customers and the timing to launch into the market, the role of marketing in revenue management covers the ways in driving customers to the most effective distribution channels. Demand data generated by the marketing department also forms an important input in revenue management models. In turn, data analytics used in revenue management facilitates the selection of an ideal customer base to target so as to develop appropriate marketing strategies for that customer segment, thus improving the effectiveness of marketing. Hence, companies are trending towards an integration of their marketing and revenue management arms to bring about synergies to the company.
In marketing, customer relationship management (CRM) is an important component in the hotel industry. As customer retention is necessary for sustaining a business, it becomes increasingly important for hotels to manage customer relationships within their network. For example, Airbnb and Uber attribute their success to their ownership of customer relationships. Compared to merely issuing discounts to consumers, loyalty programs would be more effective in maintaining long term customer relationships. However, the hotel industry has not seen success in maintaining customer relationships on a long-term basis. Besides incentivizing customers to join the hotel’s loyalty program, NUS Marketing Professor Jochen proposed “the use of mobile applications (apps)” in connecting hotels to customers.
Although the creation of mobile applications is trending, the value derived from investments in mobile apps is debatable. From the customer’s perspective, a centralized mobile platform provides convenience as it functions as a one-stop platform to access the plethora of services offered by the hotels. However, customer usage rate of mobile apps may be low, given that a typical consumer has many apps on his/her smartphone and would not place the hotel’s app on their main screen. Additionally, customers would only use the (hotel’s) app during or nearing their stay, translating to low usage for the majority of its consumers, who are non-regular customers. As highlighted by Maunik, Senior Vice President of Marketing in Marina Bay Sands, “Most consumers will wonder and question themselves if they should download the app”. In this sense, the low usage rate of mobile apps in driving sales or maintaining customer relationships would not render the investment worthwhile. Therefore, the effectiveness of mobile apps in retaining customers in the the hotel’s network is questionable.
From the hotel’s perspective, mobile apps provide an alternative platform to drive sales, while obtaining data on consumers’ behaviour at the same time. Analyzing this data would then allow hotels to identify profitable business segments for expansion. However, hotels should exercise caution in using consumer data against the interests of their customers. For example, should customers know that their data is being used by the hotel to reap higher profits, there will be a loss of customer goodwill. Additionally, there could be negative word-of-mouth via social media platforms, generating negative publicity for the hotels in the long run. Nevertheless, customers are generally willing to exchange their data or privacy in return for value, such as customization and discounts. Hotels should thus uphold the trust that their customers place in them for the data they provide and consider their customers’ receptiveness towards any revenue management strategy they intend to implement.
The relevance of the large amount of data collected is another point of consideration. As customers may exhibit different purchasing behaviours and patterns, a hotel may find it difficult to sieve and interpret the data. Moreover, a customer may have multiple email accounts for varying purposes, thereby creating different personas, which in turn poses a challenge in understanding the hotel’s customers.
Essentially, the motivation behind investing in mobile apps should aim to enhance the relationship with their customers, rather than to drive sales. Instead of being physically present at the concierge to make reservations, mobile apps provide a more convenient platform, thereby improving their user experience which could potentially be a form of differentiation for hotels. For instance, Four Seasons Hotel leverages on its mobile app to improve their customer experience from pre-arrival to arrival in differentiating itself from competitors. Therefore, mobile apps should serve to complement, instead of replace, staff in maintaining personal relationships with customers.
The Future of Revenue Management
In the future, the most important aspect of revenue management is data. As aptly put across by Puneet, Corporate Director of Revenue Management at Four Seasons Hotels and Resorts, “data should become a key topic of conversation rather than just one of the topics 5 years from now”.
As technology progresses, companies should be able to capture more data by infusing technology into the lives of consumers but the key challenge lies in harnessing and interlinking those data from a variety of sources to make a holistic evaluation. Even when clean data can be retrieved, it is crucial that back-end personnels understand and use the information meaningfully. Educating the entire organization of why and how data can be used will help in reducing employee resistance towards revenue management, and thus ensures that revenue management algorithms already out there in the industry can be implemented successfully. It is impossible to completely eliminate the inclusion of human element in revenue management and this increases the amount of uncertainty for companies. As such, revenue management leaders are looking forward to seeing more digital managers and content analysts in their departments as this would raise the rationality of decisions backed by real data rather than intuition. Staffing is thus one of the greatest challenges in implementing revenue management successfully. Nevertheless, revenue management has helped many companies in maximizing their profits and been articulated by multiple companies as part of their vision. The future will thus see a likely trend where companies pool more resources into revenue management and reap the benefits from it.
Concluding Thoughts on RM and Marketing
Overall, marketing creates and drives demand to distribution channels, while revenue management manages the operational aspect to cope with demand. Even though it is important to integrate both activities in business operations, the fine act of balancing resources between marketing and revenue management is difficult to achieve. Many factors have to be considered in ensuring their success integration, from aligning departmental goals and employee mindsets to implementing appropriate systems for workplace collaboration. Only when the fundamentals are well established can the company make the best sense out of marketing data in managing revenue.