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Did hotels discount too soon and too much?

The economic downturn created pressure to maintain market share, and many hotels reduced rate in an attempt to attract additional customers.

In its 2010 survey, released in association with EyeforTravel, Cornell Nanyang Institute of Hospitality Management says the effectiveness of tactics that revenue management professionals used to survive the economic downturn showed that while discounting was the most frequent strategy used, marketing approaches were considered to be the most effective. The goal of RM is still the same, to maximise revenue. All that has changed is that there is less demand than before. Revenue managers should concentrate on the fundamentals and remember that RM is about selling the right room, at the right price.

According to Sherri Kimes, Singapore Tourism Board Distinguished Professor of Asian Hospitality Management, Cornell-Nanyang Institute of Hospitality, the lessons from this study are as follows: 

• Don’t panic. Instead be strategic.
• Beware of broadscale discounting.
• Maintain marketing efforts.
• Focus on market-based initiatives.
• Consider rate-obscuring practices.
• Maintain service levels.

Kimes, who conducted an online survey of hotel revenue management (RM) professionals in December 2009 and January 2010, spoke to EyeforTravel’s Ritesh Gupta about how the industry has fared in the past year or so. Excerpts:

How do you think RM professionals have handled critical issues - customer rate resistance, contract renegotiations, competition or price wars – over the past year or so?

Sherri Kimes: I would say that the results were mixed.  The survey respondents said that their biggest regret was that they discounted too soon and too much and that if they had it to do over again, they would not have done this. That being said, hotels came up with a variety of creative packages to help obscure the room rate, worked hard with groups/corporate accounts to keep their business and did use some interesting marketing approaches to help build demand.

Hotels are often negotiating for group and contract business multiple years in advance. Last year, RM professionals acknowledged that they might be willing to accept significantly reduced group rates during the downturn in exchange for occupancy, but they also need to be very careful that they are not lowering the rate expectations for dates beyond the foreseeable future. How do you assess the situation today?

Sherri Kimes: I think hotels will be living with the negotiated discounts they made for a few years.  Some hotels played smart and while they gave the better deals last year in an attempt to hold on to the business, they put qualifications on those deals and have been able to start growing their rate back this year.   

When key competitors resort to guerrilla pricing for unqualified business, revenue managers are sometimes forced to do the same to retain a respectable market share.  This does not generate any additional market demand, and simply drives down the revenues for all. To what extent has been the market adversely impacted through such tactics?

Sherri Kimes: Rather than just offering discounts, the smart revenue managers used creative packaging and marketing approaches to help bring in demand while at the same time not cutting back on customer service.

In down economies RM does everything to stimulate incremental demand, ensure all channels are maximised, all segments are priced effectively, and all systems are set up appropriately to capture whatever demand there is to capture. Looking back, what do you think has been the most critical aspect of some the decisions RM professionals have taken?

Sherri Kimes: That’s a hard one. I think the most important thing that successful hotels have done is to really focus in on the marketing side of things.  They have tried to develop new market segments, tried to develop additional revenue streams and have focused in on providing value to their existing customers.  In addition, respondents in some parts of the world used opaque channels more (and for the most part liked them!) and started using more pay per click advertising.

A senior RM executive last year told me – consumer's reaction to price strategy changes can vary so much depending on the price sensitivity, demand situation and market segment that the only way to answer that question is to track consumer behaviour changes in relation to demand and include the result of this analysis in the next pricing discussion. What's your viewpoint regarding the same?

Sherri Kimes: I completely agree.  This comes back to understanding your customers and taking more of a marketing approach. 

It is said that brand loyalty certainly diminishes during a recession.  Guests are searching for value, and brand loyalty has always been somewhat disingenuous. Are we at risk of new loyalties being formed with the lowest priced brands only?

Sherri Kimes: Brand loyalty doesn't need to go down provided a hotel focuses in on providing the best possible customer service to their existing base.  

Respondents emphasised the need to not cut costs in areas that affected the guest because of the long-term effect it could have on satisfaction and loyalty.  

During a recession, there probably aren’t lots of new customers--the emphasis is on maintaining the loyalty of your existing guests so that they come back to you in the future once the recession is over.  I don’t think there’s much of a risk of customers forming loyalties with the lowest price brands because if customers are looking for a cheaper rate, they can always find a hotel that will offer it. 

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Expedia’s Q1 profit up by 51pc

Expedia’s first-quarter profit rose more than 50 percent and its revenue more than 13 percent. The online travel company reported a profit of $59.4 million, up from $39.4 million a year earlier. Revenue rose to $717.9 million.

The company saw significant growth in its international business, particularly in hotel bookings. 

Gross bookings from Expedia, Inc.’s international businesses were a record $2.37 billion in the first quarter, accounting for 36 percent of worldwide bookings, up from 32 percent in the prior year period. International revenues were $250 million, representing 35 percent of worldwide revenue, up from 30 percent in the prior year period.

Meanwhile, domestic revenue grew only five percent due to lower gross bookings.

“Whatever the peak and trough of quarterly earnings, dependent upon world economic and secular events, Expedia is a consistently delivering cash machine – this quarter returning over $200 million in excess cash to our shareholders,” said Barry Diller, Expedia, Inc.’s chairman and senior executive.

Gross bookings increased 27 percent  for the first quarter of 2010 compared with the first quarter of 2009, driven primarily by 18 percent growth in transactions and a 9 percent increase in average airfares.

Worldwide hotel revenue increased 12 percent for the first quarter primarily due to an 18 percent increase in room nights stayed, including rooms delivered as a component of packages, partially offset by a 5 percent decline in revenue per room night. Revenue per room night declined due in part to lower hotel service fees in first quarter 2010 compared with the prior year period.

Growth

Hotel revenues accounted for 58 percent of worldwide revenues in the first quarter of 2010, while air, advertising & media and all other revenues each accounted for 14 percent of worldwide revenues in the first quarter.

Advertising and media revenue (including net revenue from TripAdvisor Media Network) increased 34 percent for the first quarter, driven by a 39 percent increase in third-party revenue for TripAdvisor Media Network and a 24 percent increase in advertising revenue generated by our transaction sites.

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Starwood Q1 profit rises

After Marriott International, Starwood Hotels & Resorts Worldwide has reported positive first quarter 2010 financial results.

Starwood -- whose brands include W Hotels, Westin and Sheraton -- reported a profit of $30 million, or 16 cents a share, up from $6 million, or 3 cents a share, a year earlier.

Revenue climbed 5 percent to $1.19 billion from $1.13 billion.

Frits van Paasschen, CEO said, “Lodging demand for our nine global brands accelerated as we moved through the first quarter, allowing us to beat expectations on robust top-line growth. We continued to hold the line on costs. Most encouraging for us was that occupancy gains were led by the luxury market. This benefits Starwood, thanks to our leading presence in the four and five star categories. With the depths of the downturn behind us, we have a long runway ahead as we move into the upcycle.”

Some of the highlights

• Worldwide System-wide RevPAR for Same-Store Hotels increased 6.3 percent compared to the first quarter of 2009. System-wide RevPAR for Same-Store Hotels in North America increased 2.8 percent (1.2 percent in constant dollars).
• Management and franchise revenues increased 5.6 percent compared to 2009.
• Worldwide RevPAR for Starwood branded Same-Store Owned Hotels increased 6.6 percent (2.1 percent in constant dollars) compared to the first quarter of 2009. RevPAR for Starwood branded Same-Store Owned Hotels in North America increased 5.8 percent.

Recently, Marriott International returned to a first-quarter profit, exceeding its revenue per available room (RevPAR). For the three months that ended March 26, Marriott earned $83 million. That compares with a loss of $23 million in the same period last year.

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First airline BlackBerry App launched in Asia Pacific

Virgin Blue has launched new mobile services developed by Dublin-based specialist Mobile Travel Technologies Ltd (MTT).

The  range of services includes check-in, seat selection, mobile boarding pass, change and booking and is available on virtually all mobile devices.

Additionally, BlackBerry users can choose to download a custom-built BlackBerry App from the BlackBerry App World store. The downloadable Virgin Blue Application for BlackBerry is free to Guests. 

According to MTT, using the App, in a few easy steps, a guest can select an onboard seat using interactive seat maps, check-in and obtain a mobile barcode boarding pass, vital for business people when on-the-move and away from PC and printer. The App capitalises on the features of the BlackBerry device to offer additional services, such as allowing users to store itineraries to their calendar, save mobile boarding passes to their device and send their flight details to a contact.  

For its part, Virgin Blue says it has launched a “revolutionary” new process to check in and board on domestic flights via a traveller’s mobile called “Check-Mate”.

The airline says with the new Check-Mate process it is eliminating all paper boarding passes in favour of electronic boarding passes on mobile devices including mobile phones, BlackBerry Smartphones and iPhones. New technology will enable Virgin Blue travellers to make flight bookings, changes and cancellations across the entire Virgin Blue domestic network from their personal devices.

Phase one of the innovative project was launched via “mobile.virginblue.com.au” and a special BlackBerry Virgin Blue application. It offers mobile check-in, seat selection and boarding via 2D barcode scanning on personal handheld mobile devices for Virgin Blue passengers travelling on direct flights between Sydney, Melbourne and Brisbane.

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Cheapflights enhances its newsletter marketing campaign

Travel price comparison site Cheapflights has enhanced its newsletter marketing campaign. Cheapflights has worked with lead generation specialist Clash-Media for highly relevant leads to Cheapflights.com and Cheapflights.co.uk, which have helped increase open rates, click-throughs and conversions.

The campaign started in the UK and has now rolled out across the US through Clash-Media’s international network.

Approach 

Clash-Media qualifies potential customers by region, desired destinations and holiday type preferences.

This detailed information enables Cheapflights to personalise its marketing newsletter based on user preferences, which is its primary channel for customer engagement.

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JetBlue derives additional revenue benefits from its customer service system

JetBlue Airways posted a net loss of $1 million in the first quarter, compared to a net profit of $12 million in the year-earlier quarter as its operating costs soared 15 percent.

Revenue rose nearly 10 percent to $870 million.

The first quarter presented many challenges including rising fuel prices and several winter storms in the Northeast. In addition, the airline also implemented a new customer service and reservations system. Despite record first quarter revenues, these factors contributed to a net loss of $1 million.

David Barger, CEO, JetBlue Airways mentioned that the revenue environment has certainly been improving. 

“Passenger unit revenues for the quarter were up approximately five percent versus last year, driven by a four percent increase in yield. We had an average one way fare of $142, our second highest quarterly average fare ever,” said Barger, during the airline’s Q1 2010 Earnings Call (transcript on SeekingAlpha). 

New investment

“During the quarter, we successfully transitioned to a new customer service and reservations system, Sabre, a company wide effort that we began working on in early 2009,” said Barger. 

The airline also integrated new revenue management, revenue accounting, and customer loyalty systems, said Barger, who also added that “these large scale transitions typically don’t go smoothly”. 

“While customers have experienced a longer than usual call hold times for certain transactions, we’re working diligently to complete the key remaining customer touching phases of Sabre, including the enhancements to our website made last week. We’re excited about the revenue opportunities Sabre presents, both in the near and long-term,” Barger said.                                                                                                  

“We’re also starting to see the benefits of real-time, GDS connectivity, resulting in higher yielding traffic. We plan to add more functionality to the Sabre platform as we move into the second half of this year. When fully implemented, the Sabre system will provide an important engine for JetBlue’s future revenue growth. It will provide pricing flexibility that we believe will enable us to attract more business customers and broaden ancillary revenue and partnership opportunities, all core JetBlue initiatives.”

According to CFO Edward Barnes, “one time Sabre related expenses during the quarter were approximately $15 million”. 

“Further, we estimate approximately $8 million in lost revenue related to flight load caps, fee waivers and schedule adjustments made to insure a successful cutover. These factors, along with rising fuel prices, drove a $31 million year-over-year decline in operating income. Total revenue for the quarter increased 9.7% year-over-year to a record $870 million,” added Barnes. 

Ancillary Revenues

“We believe Sabre will also help us maximise ancillary revenues. For example, we recently began testing our variable pricing approach to even more leg room offering. The new Sabre functionality allows us to set unique EML prices for different markets, regardless of length of haul, to better match price with demand, similar to the way we set fares,” said Barnes.

The airline is currently testing various pricing changes in select markets. JetBlue believes this change to EML pricing could increase revenue by nearly $20 million on an annual basis.

Total ancillary revenue for the first quarter was about $18 per passenger.

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Royal Caribbean returns to profit, sees improvement in bookings

Royal Caribbean Cruises’ first quarter net income increased to $87.4 million, compared to a net loss of $36.2 million in the year-earlier quarter.

Revenues were better than expectations on the strength of close-in bookings, stated the company. Cost containment efforts were effective across fuel, cruise operating, and selling, general & administrative expenses. Absent the legal settlement, first quarter 2010 net income improved by approximately $40 million versus the first quarter of 2009. 

Revenues improved year over year to $1.5 billion in the first quarter of 2010 compared to $1.3 billion in the first quarter of 2009 as a result of capacity increases combined with Net Yield improvements. Net Yields improved 2.6 percent.

Bookings

Brian Rice, chief financial officer and executive vice president of the company, said that the initial guidance (provided on January 28), when the company was about a month into the wave season and felt confident that it would see yields improve between 3-6% for the year, has proven to be fairly accurate.

“Clearly, we are not back to pre-recession demand levels, but pricing leverage is slowly returning. Sales since the start of the year had been very healthy, with booking volumes running about 20% ahead of the same time last year. We have also seen a modest improvement in the booking window, with European and Alaska itineraries being the biggest beneficiaries,” Rice said, during the company’s Q1 2010 Earnings Call (transcript on SeekingAlpha).

The company expects all of its major product groups to show yield improvement this year. 

“These products are targeted largely to new customers outside of North America, and has been, and will continue to be, a focus of our capacity growth. Our newest vessels continued to command pricing premiums in the market, but the success of our developmental itineraries is also enabling us to see improved yields with the balance of our fleet,” shared Rice. 

Developmental products comprised six Royal Caribbean International ships that operated primarily in Brazil, Australia, Singapore, Dubai and Panama during the first quarter. These products are important to the strategic development of the company’s brands because of their focus on local or regional market sourcing in rapidly growing cruise markets.

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Travelocity offers exclusive deals and promotions on Facebook

Online travel company Travelocity has introduced a new Travel Insider tab on The Roaming Gnome’s Facebook page.

“Friends”, according to the company, have now access to deals and promotions not available anywhere else. The first offer gives customers $75 off when booking a vacation package of three nights or more to California. 

“There are a host of reasons why travelers become friends with The Roaming Gnome on a social network like Facebook,” said Troy Whitsett, vice president design and innovation, Travelocity. “Many just want to keep up with The Roaming Gnome and his adventures, but we also know that people want access to travel deals and this is a great way to reward our fans for their loyalty.”

There are other new upgrades, too. 

Users are being allowed to use Travelocity’s popular “Deals on a Map” feature to shop for their next vacation within the Facebook environment. Friends can access this from the “Travel Deals” tab. Once friends find a flight, hotel or vacation package and are ready to book, they will be directed to Travelocity to complete their purchase. 

The company also shared that “Friends” of the Roaming Gnome can insert a personal photo into one of nine different Travelocity Roaming Gnome costumes and then share the image with their Facebook friends. Friends have the option of taking a photo with a Web cam, uploading a picture from a computer or selecting a Facebook photo.

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Travelport appoints Michael Buhr as CEO, Consumer and New Ventures

Travelport Limited has chosen Michael Buhr for the new position of CEO, Consumer and New Ventures.

The new role has been set up to capitalise on growth opportunities, especially as Travelport’s core business-to-business products are being increasingly exposed directly to the ‘end user’ consumers of travel. 

Buhr will lead Travelport’s strategic activities focused on identifying and exploiting new opportunities and new channels to market across the company’s entire portfolio of businesses.  He will be responsible for evaluating and executing consumer- and venture-related partnerships, joint ventures and acquisitions.

Buhr reports to both Jeff Clarke, CEO and president, Travelport and Gordon Wilson, Deputy CEO, Travelport and president and CEO, Travelport GDS and Airline IT Solutions.  

He is based in the San Francisco Bay area, California. 

Most recently, Buhr was Entrepreneur in Residence at early-stage venture capital firm Shasta Ventures where he advised companies in the Shasta portfolio and evaluated prospective investments in the areas of consumer Internet, online discovery and mobile.

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Finding ways to meet consumers in emerging spaces

IN-DEPTH: Loyalty-based CRM can’t simply be pushed from a brand; it has to be pulled through from associates

Travel businesses continue to gather customer preferences and have been looking to provide improved personalised features.

Significantly, there is a continued struggle as consumers have moved away from traditional digital assets and moved to social space.

For their part, marketers have become a lot more attuned to using data and presenting personalisation and customisations in digital assets, according to John Gardner, President and CEO, Integrative Logic.

Gardner says now the challenge is finding ways to meet consumers in emerging spaces; namely in the realm of social media and mobile channels.

“While these mediums don’t lend themselves as effectively to personalisation and customisation, the travel businesses that are able to accomplish personalisation and customisation will have a critical edge over competitors in the travel space,” says Gardner, who is scheduled to speak at the Online Marketing Strategies for Travel USA conference which will take place in Miami (2-3 June).

Gardner spoke to EyeforTravel’s Ritesh Gupta about developing true one-to-one marketing communications, personalisation of web and digital experience and much more. Excerpts:

How should one go about developing true one-to-one marketing communications and customer experiences across a varied customer base?

John Gardner: The critical step to developing true one-to-one marketing communications is in organising analysing and segmenting the database.  Many companies make the mistake of rushing through these strategic steps in order to implement the tactical portion of their marketing plan. This is a critical mistake. A one-to one marketing communications plan goes much deeper than finding out what your customers last clicked on and their name. It is a 360-degree examination of the customer: their intent, motivations, demographics and psychographics, geography, media consumption, as well as transactions. The key to one-to one communications is developing true attitudinal segmentation methodology that ties into a segmented channel strategy that allows you to take advantage of ways consumers utilize content and make sure the content they receive is as relevant as possible. 

Effectively implementing and managing is no mean feat and requires experience. What should one be wary of?

John Gardner: Firstly, one should be wary of the fact that there is no quick fix or shortcut when it comes to cleaning and collating data. You cannot turn this marketing challenge into a technical exercise. Technology is an enabler but it is not the end-all-be all.

Second, one should be wary to make sure to focus on the difference between relevance and trying to create one-to-one marketing for the sake of creating a tactic. Experience has shown that organizations tend to look for a “plug and play” solution that never will adapt to existing business process of data collection or ongoing touch point management. Finally, don’t be so tied to specific channel, part of 1:1 experience is understanding how at different points of a brand relationship, different channels play better role at different times. You must leverage this into your strategies.

It is surely the objective of every company to garner as much information from all consumer touch points, both online and offline. Has it really formed the back bone of customised communications strategy for all brand users?

John Gardner: Info gathering is critical; it is the way to create relevance. Collection of information forms the marketing backbone of everything that has to be done for a brand. If you don’t have data you can’t create relevance, if you are not relevant, you don’t stand out in the market against competitors. In the travel space, with every incremental dollar and customer being critical, not having data to create relevance is a deal breaker.

Last year an executive told me: Every page of the website in the future will effectively be individual to the user, a major move towards this,  this year will be the release of TLD’s, companies that can afford and know how to effectively utilise this technology will undoubtedly be  industry leaders. What do you make of such developments?

John Gardner: I equate this to personal URL’s (PURL’s). The personalisation  of web and digital experience is critical because more people are gathering information and engaging with brands online. For example, in the travel space, for every one booking you make, you may have three to six visits to brand assets. The more personalized we are able to make these assets, the more relevant we become and the more quickly we can move people from “look to book.” We are looking into PURL’s for not only what our customers like, but also for the predictive aspect to supply inferred preferences to our customers in order to enhance brand experience.

Behaviour analytics help us understand and predict customers’ desires and to more effectively serve relevant content and products in real time, ultimately increasing satisfaction and conversion. How do you assess the adoption of behaviour analytics at this stage?

John Gardner: It is critical.

Behaviour analytics is the critical heart of database marketing. It goes back to the days when retailers used transactional (RFM) analytics to make sure they took care of their best customers; those who bought more and shopped more departments. Behaviour analytics has now expanded to engagement analytics on websites, referrals, and social commentary on a brand. In recent years there has been a movement from behaviour being purely financial to analysis of behaviour engagement across transactional metrics, responses, engagements, referrals, clicks and in-store purchases. This is the most critical element of brand metrics. It is the one thing marketers can affect in analytics. The rest has to do with understanding who the customer is and their motivation for purchasing, which is difficult to control.

The hotel associates are an integral part of the CRM process and it is important that they understand the complete “engine” in which they are involved from the very beginning, through ongoing training and incentives. Are hotels undermining the potential of this workforce in impacting a customer much more significantly than an email communication? Or should they complement each other?

John Gardner: By nature, CRM is managing customer relationships with a brand from point of introduction to brand advocacy. In the hotel space, a critical touch-point is the associate. They are the face of the brand and first human pull-through of a data marketing initiative. The travel industry can look to the example set by the retail industry where store associates create impact with customers by knowing a customer’s buying habits and how they respond to offers and using this knowledge as a way to stay connected. Loyalty-based CRM can’t simply be pushed from a brand; it has to be pulled through from associates.

Online Marketing Strategies for Travel USA 2010 Conference

EyeforTravel’s Online Marketing Strategies for Travel USA conference will take place in Miami (2-3 June).

For more information, click here or contact:

Gina Baillie
VP Global Marketing & Events
+44 (0) 207 375 7197 (UK)
gina@eyefortravel.com

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