Revenue Management in Today’s Online World Online Revealed – Toronto – May 2007

Introductions Victoria Edwards Over 25 years travel, tourism, hospitality Hotelier, entrepreneur University of Victoria, University of British Columbia, DuBrulle French Culinary Institute Board of Directors HSMAI Advisory Board AHLA certification program Co-founder/co-owner Buckhiester Management Creator of REV RoadMap™ Buckhiester Management… Founded in 1995 Client base - hotel & resort companies N. America, Europe, Caribbean Offices - Seattle, Vancouver, Washington, DC Products: REV RoadMap® & REV olution® (rooms, F&B, Golf, Spa)

Victoria Edwards

Over 25 years travel, tourism, hospitality

Hotelier, entrepreneur

University of Victoria, University of British Columbia, DuBrulle French Culinary Institute

Board of Directors HSMAI

Advisory Board AHLA certification program

Co-founder/co-owner Buckhiester Management

Creator of REV RoadMap™

Buckhiester Management…

Founded in 1995

Client base - hotel & resort companies

N. America, Europe, Caribbean

Offices - Seattle, Vancouver, Washington, DC

Products: REV RoadMap® & REV olution® (rooms, F&B, Golf, Spa)

Who is in the room today? Industry Hotel DMO other Role Sales/Marketing? Corporate level? Property level? Revenue Manager?

Industry

Hotel

DMO

other

Role

Sales/Marketing?

Corporate level?

Property level?

Revenue Manager?

Objectives Better understanding of the interdependent nature of demand creation/capture/management Overview of how evolution of the online world has impacted RM Provide some suggestion & tips for your RM practice moving forward

Better understanding of the interdependent nature of demand creation/capture/management

Overview of how evolution of the online world has impacted RM

Provide some suggestion & tips for your RM practice moving forward

Topics Functional areas & business process Evolution of Distribution Impact on RM practice First line of defense – your website Measuring Performance If I were in your shoes….

Functional areas & business process

Evolution of Distribution

Impact on RM practice

First line of defense – your website

Measuring Performance

If I were in your shoes….

Three Inter-dependent Disciplines Demand Management CRM (Demand Capture) Demand Creation

Revenue Management as a Business Process REV RoadMap® Product Definition Competitive Benchmarking Strategic Pricing Demand Forecasting Distribution Management Business Mix Manipulation

Traditional Reservations CRS Connect to GDS + 800# PMS Property Voice Reservations GDS Travel Agent Reservations Manager

Distribution Management - Present CRS Central Reservation System GDS Global Distribution Systems Onward Distribution Proprietary Website www.yourhotel.com IDS Internet Distribution Systems PMS Property Management System DORM Director, Revenue Management

The “Mechanics” of Onward Distribution Four ways that Internet sites receive hotel information & rates. Switch Reservations Smaller websites GDS Extranet E-Mail

GDS Powered Websites Travelocity, GetThere, Site59 Trip, Cheaptickets, Lodging, Orbitz, ebookers, Collegetravelnetwork Hotels.com (retail version) Expedia, Hotwire, Lodging, Priceline OneTravel, Vacation, opodo Booking Engine Onward Distribution

Switch or Data Base Powered Hoteldiscounts, Yahoo, AOL, 180096hotel, Travelnow, Lowestfare Placestostay, Gotrooms, yahoo, USAhotelguide TravelWeb, Hotwire, Travelscape, TravelHero, CNNtraveller, Lastminute.com (over 1,200 sites) Booking Engine Onward Distribution

Technology “ Internal” PMS POS RMS Sales/Catering CRM Hotel website Web booking engine CMS (channel management systems) “ External” CRS GDS + connectivity IDS connectivity Group/meeting websites RFP websites Rate Shopper systems CGM Customer Generated Media Source: HSMAI De-Mystifying Distribution

“ Internal”

PMS

POS

RMS

Sales/Catering

CRM

Hotel website

Web booking engine

CMS (channel management systems)

“ External”

CRS

GDS + connectivity

IDS connectivity

Group/meeting websites

RFP websites

Rate Shopper systems

CGM Customer Generated Media

Reservation Sources – Major Hotel Brands 2006 38.3% +20% ‘05 35.6% +5% ’05 26.1% -1.5% ‘05 Source: TravelCLICK April 2007

Internet Source Breakdown - Major Hotel Brands 2006 81.4% Source: TravelCLICK April 2007

Hospitality Revenues Generated by the Internet In 2006, 27-29% of all revenues in hospitality would be generated from the internet. Another ¼ of hotel bookings will be influence by the Internet, but done offline.

In 2006, 27-29% of all revenues in hospitality would be generated from the internet.

Another ¼ of hotel bookings will be influence by the Internet, but done offline.

Hospitality Revenues Generated by the Internet (cont’) In 2006, 54% of all internet bookings in hospitality are projected to be direct to consumer (B2C) via hotel owned websites. By 2008, the direct portion of online bookings is expected to reach 62%. Are you ready for this dramatic channel shift? Source: Hospitality eBusiness Strategies

In 2006, 54% of all internet bookings in hospitality are projected to be direct to consumer (B2C) via hotel owned websites.

By 2008, the direct portion of online bookings is expected to reach 62%.

Are you ready for this dramatic channel shift?

Source: Hospitality eBusiness Strategies

Evolution Tech Impact on hotels Seamless /Transparent distribution Rate Integrity Economy – commoditization Education has not kept pace Lack of technology integration and data integrity Segments begin to blur

Tech Impact on hotels

Seamless /Transparent distribution

Rate Integrity

Economy – commoditization

Education has not kept pace

Lack of technology integration and data integrity

Segments begin to blur

Evolution Tech Impact on Guest Better educated/well traveled Commoditization sets dangerous price references Poorly defined value prop & mismanaged fences = lack of rate integrity Increased use of 3 rd party providers Distrust set stage for social networking

Tech Impact on Guest

Better educated/well traveled

Commoditization sets dangerous price references

Poorly defined value prop & mismanaged fences = lack of rate integrity

Increased use of 3 rd party providers

Distrust set stage for social networking

Travel 2.0 Evolutionary stage of internet development in tour & travel segment Shift from supplier-side control, static content to consumer driven/controlled dynamic content Includes consumer driven content social networking, highly interactive content, interfaces & mash-ups

Evolutionary stage of internet development in tour & travel segment

Shift from supplier-side control, static content to consumer driven/controlled dynamic content

Includes consumer driven content social networking, highly interactive content, interfaces & mash-ups

Travel 2.0 Emphasis is on value & experience rather than price Seamless combination of content from multiple sources in a single experience Examples – Gusto.com, Trip Advisor, Travel Zoo, triphub.com

Emphasis is on value & experience rather than price

Seamless combination of content from multiple sources in a single experience

Examples – Gusto.com, Trip Advisor, Travel Zoo, triphub.com

Travel 2.0 Types of T2.0 Sites Blogs: travel blogs include video and written Wikis: consumer driven guides or reference info Reviews: primary purpose is to over marketing unbiased review of hotel, restaurant, attraction Mashups:combines content from more than one source into integrated experience

Types of T2.0 Sites

Blogs: travel blogs include video and written

Wikis: consumer driven guides or reference info

Reviews: primary purpose is to over marketing unbiased review of hotel, restaurant, attraction

Mashups:combines content from more than one source into integrated experience

Site Sample Mash-ups: Gusto, Travelbud, Triporama, TripHub Blogs: YouTube Travel, Travelistics,TheLobby.com Reviews: tripadvisor Wikis: wikitravel,turn here, IgoUgo Groups: groople, meetingsonline

Mash-ups: Gusto, Travelbud, Triporama, TripHub

Blogs: YouTube Travel, Travelistics,TheLobby.com

Reviews: tripadvisor

Wikis: wikitravel,turn here, IgoUgo

Groups: groople, meetingsonline

Demand Creation In 2007, a remarkable 68% of hoteliers will be shifting their budgets from offline to online marketing activities, representing a huge shift from traditional methods. The top three Internet marketing formats hoteliers believe produce the highest ROIs are website optimization, Search Optimization + Organic Search, and website re-design. Source: Hospitality eBusiness Strategies December 2006

In 2007, a remarkable 68% of hoteliers will be shifting their budgets from offline to online marketing activities, representing a huge shift from traditional methods.

The top three Internet marketing formats hoteliers believe produce the highest ROIs are website optimization, Search Optimization + Organic Search, and website re-design.

Source: Hospitality eBusiness Strategies December 2006

So why should you care? Potentially impacts all aspects of RM business cycle Product definition Competitive benchmarking Pricing Forecasting Mix manipulation

Potentially impacts all aspects of RM business cycle

Product definition

Competitive benchmarking

Pricing

Forecasting

Mix manipulation

Product definition Matching User needs to Product Defining Hotels Segmentation Inventory Stratification Product Utilization

Matching User needs to Product

Defining Hotels Segmentation

Inventory Stratification

Product Utilization

Competitive Benchmarking Market supply & demand Qualitative & Quantitative Positioning by segment Positioning by channel

Market supply & demand

Qualitative & Quantitative

Positioning by segment

Positioning by channel

Pricing Rational – identify most valuable segments Shift from traditional models –cost to market and market to value Drivers of Price reference Consistent application of fences BAR & derivative pricing

Rational – identify most valuable segments

Shift from traditional models –cost to market and market to value

Drivers of Price reference

Consistent application of fences

BAR & derivative pricing

Who Determines Price? #1 Truth: Customers drive prices Price References: Product line price influences Past price influences Purchase context influences Prices of similar items Cost-based influences

#1 Truth: Customers drive prices

Price References:

Product line price influences

Past price influences

Purchase context influences

Prices of similar items

Cost-based influences

The Price Triangle Fair Price (Rate of the Day) Corp Meeting – no rooms Price Volume of Sales (duration of day parts & number of covers) 0 295 $405 “ Retail” Demand – Customers seeking fair price “ Premium” Demand – Customers willing to pay higher than fair market price e.g. Incentive Group “ Discount” Demand – Customers seeking lower than fair market price e.g. Association Dinner

The Price Triangle Customers determine where they fall in the price triangle Based on demand, different every night The fair price for each segment of demand is the price that yields the maximum revenues from the balance of occupied function space (or outlet seats) per day part and average check for that segment

Customers determine where they fall in the price triangle

Based on demand, different every night

The fair price for each segment of demand is the price that yields the maximum revenues from the balance of occupied function space (or outlet seats) per day part and average check for that segment

Why create BAR rates? Move from opaque to transparent channels Poor understanding of Rate Parity vs. Rate Integrity Commoditization of product through poor rate structure management Blurring of market segments online

Move from opaque to transparent channels

Poor understanding of Rate Parity vs. Rate Integrity

Commoditization of product through poor rate structure management

Blurring of market segments online

Forecasting Unconstrained rather than constrained Micro-segment Forecast accuracy by day of week Trend analysis Role of history

Unconstrained rather than constrained

Micro-segment

Forecast accuracy by day of week

Trend analysis

Role of history

Forecasting Free and Accurate Airfare Predictions Find out if you should buy now or wait. Learn More

Mix Management Quantify performance Look at Index Balance Leverage opportunities based on segment demand

Quantify performance

Look at Index Balance

Leverage opportunities based on segment demand

Trends in Group Business Leisure group travel segment – fastest growing segment will be small gatherings of up to 9 rooms By 2008 total small leisure group segment will grow at twice the rate of other groups Corp meetings with less than 25 attendees projected to increase by 13% between 2006-2007 Sarbanes-Oxley continues to force companies to tighten controls on travel

Leisure group travel segment – fastest growing segment will be small gatherings of up to 9 rooms

By 2008 total small leisure group segment will grow at twice the rate of other groups

Corp meetings with less than 25 attendees projected to increase by 13% between 2006-2007

Sarbanes-Oxley continues to force companies to tighten controls on travel

Trends in Group Business Components of large meetings (e.g. RFP, housing management) will continue to move online New entrants into market as well as intermediaries will push need to consolidate portions of group & meetings lifecycle Big gap between supplier perceptions of needs of buyer and consumer/planner expectations

Components of large meetings (e.g. RFP, housing management) will continue to move online

New entrants into market as well as intermediaries will push need to consolidate portions of group & meetings lifecycle

Big gap between supplier perceptions of needs of buyer and consumer/planner expectations

Why is Mix Manipulation So Important? Asset management versus business management Diversification of risk Managing yield from the bottom up Return cycle to equal levels of profitability much easier

Asset management versus business management

Diversification of risk

Managing yield from the bottom up

Return cycle to equal levels of profitability much easier

Distribution Distributed work force & Travel 2.0 continue morph the distribution landscape 3 rd parties intermediaries & new entrants such as groople getting into group game Lowering distribution costs & capturing demographic data

Distributed work force & Travel 2.0 continue morph the distribution landscape

3 rd parties intermediaries & new entrants such as groople getting into group game

Lowering distribution costs & capturing demographic data

Hotel Website Purpose Attract – targeted traffic to your web site. Retain – keep traffic on your site & returning to your site. Eliminate opportunities for “disconnect.” Convert – succeed in having visitors take a desired action.

Purpose

Attract – targeted traffic to your web site.

Retain – keep traffic on your site & returning to your site. Eliminate opportunities for “disconnect.”

Convert – succeed in having visitors take a desired action.

Proprietary Website Key Considerations User experience/design – especially w/ booking engine User needs vs. Site objectives Navigation and architecture Search engine optimization Link popularity Meta tag review Content review Web traffic analysis

Key Considerations

User experience/design – especially w/ booking engine

User needs vs. Site objectives

Navigation and architecture

Search engine optimization

Link popularity

Meta tag review

Content review

Web traffic analysis

User Experience & Design When reviewing your site’s “look and feel” consider visual application of text, graphic page elements and navigational components. In a website, user experience is governed by the user’s interaction within the website. How successful is a user in fulfilling his/her goals? Is the experience difficult? Or is it smooth?

When reviewing your site’s “look and feel” consider visual application of text, graphic page elements and navigational components.

In a website, user experience is governed by the user’s interaction within the website.

How successful is a user in fulfilling his/her goals? Is the experience difficult? Or is it smooth?

User Needs vs. Site Objectives Ensure that the user’s needs and the site’s objectives correspond Externally derived goals for the site usually determined via user/demographic market research are not in conflict with the business, creative and other internally driven goals for the site.

Ensure that the user’s needs and the site’s objectives correspond

Externally derived goals for the site usually determined via user/demographic market research are not in conflict with the business, creative and other internally driven goals for the site.

Search Engine Optimization A web site efforts to be ranked high on a listing by virtue of appropriate copy writing and links to & from other complimentary links Search engines such as Google & yahoo! Use spiders to look for site based on the keywords used by an individual

A web site efforts to be ranked high on a listing by virtue of appropriate copy writing and links to & from other complimentary links

Search engines such as Google & yahoo! Use spiders to look for site based on the keywords used by an individual

SEO Tools Google PageRank - Page rank is an indication of a page’s popularity and relevant content. It is established by the number of quality pages with links targeting the site pages. Link Popularity - indicates how many links are targeting the site. Linking is critical to page rank.. Reciprocal Linking Program - increases the number of links pointing into the site.

Google PageRank - Page rank is an indication of a page’s popularity and relevant content. It is established by the number of quality pages with links targeting the site pages.

Link Popularity - indicates how many links are targeting the site. Linking is critical to page rank..

Reciprocal Linking Program - increases the number of links pointing into the site.

Website Metrics Marketing KEI – key word effectiveness index Page Rank Link Popularity Traffic Analysis Revenue Management Visitor to Book ratio Visitor to Look ratio Look to Book ratio

Marketing

KEI – key word effectiveness index

Page Rank

Link Popularity

Traffic Analysis

Revenue Management

Visitor to Book ratio

Visitor to Look ratio

Look to Book ratio

Metrics Then ADR/RevPAR/Occ ADR/RevPAR/Occ Index GOPPAR EBITDA Comp Rank Now (all of the Then +) Contribution/segment Contribution/guest RevPASH RevPSF RevPACV Look to book Key word density Page Rank Forecast accuracy per segment per day

Then

ADR/RevPAR/Occ

ADR/RevPAR/Occ Index

GOPPAR

EBITDA

Comp Rank

Now (all of the Then +)

Contribution/segment

Contribution/guest

RevPASH

RevPSF

RevPACV

Look to book

Key word density

Page Rank

Forecast accuracy per segment per day

Strategic Mistakes No clear eDistribution strategy No trained distribution expert (viewed as clerical work) Lack of knowledge of connectivity (how CRS “talks” to GDS, how GDS “talks” to Internet) Lack of knowledge of functionality

No clear eDistribution strategy

No trained distribution expert (viewed as clerical work)

Lack of knowledge of connectivity (how CRS “talks” to GDS, how GDS “talks” to Internet)

Lack of knowledge of functionality

Strategic Mistakes Senior management underestimates complexity, labor intensity of managing sources (“just do it” mentality) Underestimating impact of staff turnover Unaware of distribution options Rev. Mgr. tactically strong, strategically weak

Senior management underestimates complexity, labor intensity of managing sources (“just do it” mentality)

Underestimating impact of staff turnover

Unaware of distribution options

Rev. Mgr. tactically strong, strategically weak

Tactical Mistakes Rate loading errors: loaded but not active, rates not loaded, wrong rates, inappropriate rate display order Inaccurate property data, not checked (HOD) Improper use of stay controls turning business away Contribution reports tossed, source under performing

Rate loading errors: loaded but not active, rates not loaded, wrong rates, inappropriate rate display order

Inaccurate property data, not checked (HOD)

Improper use of stay controls turning business away

Contribution reports tossed, source under performing

Tactical Mistakes Not understanding what travel agents or consumers see Adding too many sources at once Not completely understanding product line difference between self and comp set

Not understanding what travel agents or consumers see

Adding too many sources at once

Not completely understanding product line difference between self and comp set

If I were I GM Today…. Ensure that team is working together to obtain balance between demand creation/demand capture and demand management Review current product offering in term of user needs Check for inventory stratification opportunities Check “Review sites/Blogs” to see if guest benchmarking aligns with your comp set

Ensure that team is working together to obtain balance between demand creation/demand capture and demand management

Review current product offering in term of user needs

Check for inventory stratification opportunities

Check “Review sites/Blogs” to see if guest benchmarking aligns with your comp set

If I were I GM Today…. Ensure that team can articulate the difference in value proposition per product compared to comp set MUST fully utilize 3 rd party reports – STR, Hotelligence,Future Pace Ensure pricing structure recognizes most valuable segment

Ensure that team can articulate the difference in value proposition per product compared to comp set

MUST fully utilize 3 rd party reports – STR, Hotelligence,Future Pace

Ensure pricing structure recognizes most valuable segment

If I were I GM Today…. Is relationship between BAR rates and derivative pricing understood by team? Chart segment pricing against comp set to ensure reasonable positioning Are forecast based on unconstrained demand? Are they granular enough? Do you measure forecast accuracy & trend by day of week and segment?

Is relationship between BAR rates and derivative pricing understood by team?

Chart segment pricing against comp set to ensure reasonable positioning

Are forecast based on unconstrained demand? Are they granular enough?

Do you measure forecast accuracy & trend by day of week and segment?

If I were I GM Today…. Are indexed balanced? If not what shift in mix is required to achieve balance? Make distribution plan part of annual business plan process Ensure team is aware of segment versus source costs Have website audit conducted by outside source to look at design functionality & web optimization SEO – measure look 2 book, KDI, page rank, traffic analysis monthly

Are indexed balanced? If not what shift in mix is required to achieve balance?

Make distribution plan part of annual business plan process

Ensure team is aware of segment versus source costs

Have website audit conducted by outside source to look at design functionality & web optimization

SEO – measure look 2 book, KDI, page rank, traffic analysis monthly

Reference Sites www.websidestory.com www.alexa.com www.wordtracker.com www.hitbox.com www.seochat

www.websidestory.com

www.alexa.com

www.wordtracker.com

www.hitbox.com

www.seochat

Questions? Comments? Thank you for your time

Questions?

Comments?

Thank you for your time