Today's customer is more cost conscious than ever and this is having a big impact on the travel and hospitality sector. According to recent research from Mintel, an increasing number of holiday and hotel purchases are being made online, as holidaymakers are increasingly of the opinion that it offers them the best value for money.
This has left traditional travel companies struggling as their 'one-stop-shop' formula is no longer driving sales. Now consumers are going online and booking flights and accommodation separately. So how does the holiday industry ensure it is still encouraging and maximising demand?
The price factor
Businesses in the travel and hospitality sector need to be able to compete on price by looking at external data, such as the prices of airlines and direct accommodation and ensuring that they can compete. As such, adopting flexible pricing and revenue management tools and practices should be seen as essential, yet many businesses ironically see customer satisfaction as a huge stumbling block towards their adoption.
We live in a world of Big Data where businesses have access to sales, Web visitor and search history information, and so for optimum revenue generation, businesses should build pricing around the customer, as well as around market conditions. The perception by many revenue managers is that customers either actively resist revenue management or think that it is a business trick to earn more money. However, customers do actually appreciate revenue management efforts if a company is successful in communicating the benefits of the dynamic pricing that it brings. Customers rarely resist paying a premium for options they see as valuable, such as convenience and choice.
Check out the reviews
It is all too easy to often blame online holiday review and price aggregator sites, such as TripAdvisor, for the problems the travel industry is facing. However, such sites in fact offer genuine reviews from holidaymakers, and are therefore a vital source of data. Rather than ignore these sites, hotels need to use them to gain a better understanding of consumers and build flexible, sustainable pricing models based on that knowledge. For example, if they are highly rated on TripAdvisor, even the smallest hotels could perhaps afford to increase rates. Similarly, if a hotel finds its sales figures are unexplainably dipping, they could use online data to see where the issue is and decide whether they need to adapt their pricing or make changes to the business itself to improve the customer experience.
Talk to your customers
Ultimately, today's customers are more appreciative of dynamic pricing than many organisations think – really, it's all about communication. Ultimately combining good communication with the latest pricing and revenue management techniques could help organisations boost their annual revenues by up to 4% (Source: The Truth About Pricing and Revenue Management). It is therefore essential that companies have their marketing departments closely aligned with their revenue managers in order to ensure that they are communicating exactly what it is that the customer is receiving in exchange for occasionally paying a higher price. Such benefits could include the opportunity to line up a desired room at short notice or having a later check-out time.
Revenue management systems can help businesses in the travel and hospitality industry better understand what their customers want, when they want it and how much they are willing to pay. Customer profiling is not a new art but, with the amount of data now available - thanks in part to online growth - these profiles can be far more accurate and effective.
By utilising and communicating this approach to intelligent pricing hotels can maximise capacity, plug revenue leakages and ultimately put them on the road to sustained success.