I am often asked: 'what are the major drivers of change confronting the hotel industry today? Recently, I've spent countless nights awake thinking not only about pricing management but also about the impact mobile technology, big data and social media, is having within the industry.

 

The business critical issues that keep me up at night
My first observation is how transparency in pricing has created an open market for all customer segments. Previously, hoteliers were able to rely on channels to target the various segments; each with their distinct needs. But now, customers have access to room rates in real time and this has forced us to rethink how we segment and what the customer is willing to pay.

Additionally, the meaning of 'brand' has evolved. In the past, a carefully built brand name set down all expectations with the customer. Until recently, that's really all the customer had to go on, other than the occasional magazine review or hearsay. But now, numerous travel websites aggregate customer feedback into satisfaction indicators; brand expectations are set about and discussed online in granular detail and has put more pressure on hoteliers to deliver on higher expectations.

The "now" phenomenon is that ubiquitous availability of information is shortening the customer's decision cycle. There is instant access to ratings, comparisons, and opinions ‒ both expert and experiential — so customers research and make decisions as and when they require a room. Electronic payment options have further facilitated this cycle. For hotels it has meant that the booking curve has reduced in duration, depriving hotels of vital information on how to price a room per night. All in all, forecasting ultimate demand has now become less accurate.

The dominant challenges facing the hotel industry in 2013 and beyond
For 2013 specifically, and broadly speaking, I think we've seen a return of demand to near 2008 demand levels, but not so for room rates, where we are still lagging. This picture is very uneven across the market so the challenge for hotels in 2013 will be to correctly assess their particular situation, how their competition might react (e.g. pricing) and what they plan to do about this. Indicators are likely to be fluid and contradictory at times so this will not be trivial. All the while these macro trends of transparency, brand dilution and instant purchase are limiting the hotel's traditional levers.

Approaching these issues as a decision maker
Our approach at Carlson Rezidor has been to keep in lockstep with how the customer is buying and making decisions. We want to be present where the customer is willing to buy, and that has lead us into social media and new value-added (services based) channels. We want to be on top of and actively engaged in the brand identity conversation that is being shaped for us online, so we monitor what's being said about us and use that information to set parts of our communication strategy. We want to price according to our customers segments even thought we recognise that they now all shop all across channels. Now, we price according to price elasticity and have abandoned the traditional inventory-based revenue management.

Working with internal teams to ensure the company is applying innovative practices
Capturing your revenue opportunity is no longer within a single department’s means, if ever it was. We have to make the sale, deliver the product and then make sure the customer comes back. And the way we approach this is to have regular consultations between functional teams on strategic and tactical issues, to make all the metrics we have on the customer's journey available to everyone and to be fairly draconian on achieving the cross-functional priorities we've set for ourselves. That way, everyone feels involved; is aware of what we're working on and understands they can contribute without needing to be directed. The wealth of data that is now available on the customer makes it possible to engage everyone into finding better ways to meet needs. By having an open book policy internally we ensure we maximise that opportunity.

Disruptive technologies that will shape the future of revenue management
Mobile is obviously on everyone's mind, but so far we've seen it used a lot more for looking than for booking. Currently it is being used as a means to communicate and not necessarily to transact. As a result, we're adjusting our mobile strategy accordingly. That said, the growth of mobile payments and ID technology is around the corner, and that has the potential to turn modern mobile devices into a booking engine, wallet, room keycard and ID. At that point, a lot of convenience could be added to delivering the product, but the cost to a hotel it's not yet clear around how much the customer is willing to pay for that.

The other technology on our radar screen is customer profiling. Our ability to set best pricing optimally relies on correctly assessing its elasticity. Social media has the potential to provide us with useful insight into the customer's state of mind, and hence elasticity. Today we simply reflect the total of all of the customer's considerations into a single elasticity number. But we'd like to understand the components around this number. Social media can provide insight into just that.

Preparing your organisation - the basics you should have in place to be business-ready
Overall, I think that the best way to prepare is to start familiarising yourself with the modern customer. A customer now has access to qualitative data at a higher level of detail about each hotel ‒including rates ‒ and makes choices at the last minute. The implications for us hoteliers are that our internal processes need to become nimbler; our data must be kept fresh and should be accessible on a daily basis.

We have to be right about what the customer is willing to pay for, under any circumstance. In a nutshell: hoteliers must become familiar with big data, or both competition and customer will outsmart you.

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