Wes AndersonRegional Director Revenue Management, North America

InterContinental Hotels

Caribbean Hotel & Tourism Association Agenda

• The New Revenue Management• Linkages to Marketing/Sales• Questions

Revenue Management Fundamentals

• Price Optimization

• Optimize Channels of Distribution

• Optimal Business Mix & Yielding

• Product Class Opportunity

Revenue Management Methodology

• Data Consolidation and Analysis

• Strategy Development and Buy-in

• Tactical Application

• Measure Success (via Data Consolidation and Analysis)

Revenue Management FundamentalsPrice Optimization

• Consumer Based Pricing Model

• Competitive Based Pricing Model

• Niche Pricing Model

• Margin Based Pricing Model

Consumer Based Pricing Model

• Pricing Elasticity of Demand

– When markets are elastic, lower rates

– When markets are inelastic, raise rates

Competitor Based Pricing Model

• Peg rates off of competitor’s rates

• Assumes you are not the market leader

• Risk of “Greater Fool” effect

– Use a rate shopping service to ensure no anti-trust infringement

Niche Pricing Model

You’ve got to pay my rates to keep the company I’m offering at my hotels…

-Isadore Sharp, Founder of Four Seasons Hotels

• Risk of occupancy depletion in Elastic Markets• Requires clear marketing message or

positioning

Margin Based Pricing Model

• Fluctuates by Supply and Demand

• Assumes minimum acceptable profit level

• Works for mid market and luxury hotels

Optimizing Channels of Distribution

Its about Discovery and Persuasion

Optimizing Channels of Distribution

Demand is inherent in channels

Optimizing Channels of Distribution

• GDS

• Retail Internet (Expedia/Travelocity)

• Opaque (Priceline/Hotwire)

• Hotel Web Site

• Hotel Direct (Voice Reservation Services)

Optimizing Channels, GDS

• Discovery– Marketing in the GDS

– Biasing shelf space placement

• Persuasion– Content and Pricing

Optimizing Channels, Retail Internet

• Discovery– Conversion Percentage– Social Media Presence– Parity Compliance / discount online forwarding – Market Manager Involvement– TravelAds

• Persuasion– Content and Pricing

Optimizing Channels, Opaque

• Discovery– Pricing

• Persuasion– Pricing and Content

Optimizing Channels, Hotel Web Site

• Discovery– Search Engine Optimization

• Organic vs. Pay Per Click

– Measuring Effectiveness• Google Analytics

• Persuasion– Content & Pricing

Optimizing Channels, Hotel Direct

• Discovery– Marketing– Public Relations– Sales Efforts– Affiliation with Associations

• Persuasion– Well Trained Staff– Staff Incentives– Promotions

Optimizing Business Mix

• Yielding, the root of Revenue Management

• Segmenting your business

• Business Mix / Channels of Distribution / Lead Time

Product Class Optimization

• Product Class - rooms priced at different levels

• Goal against ADR capture of Price Differential

• Balanced Inventory vs. Fractured Inventory

Linkages Between Revenue Management and Marketing

• Marketing/PR generates Demand

• Revenue Management manipulates Demand

Linkages Between Revenue Management and Marketing

• Social Media Responsibilities– Incoming (Trip Advisor)

vs.– Outgoing (Facebook)

Marketing owns Facebook/Twitter

Outgoing Social Media

• Marketing owns Facebook / Twitter, etc

• Revenue Management prices offers

Incoming Social Media

• PR or Departments owns review response

• Revenue Management owns increasing review volume (Optimizing Channels)