revenue: the distribution dilemma

Introductions Goals

Revenue Management (RM) Review Questions and discussion

History of Electronic Distribution Questions and discussion

Self-Assessment ActivityBreak

Every act of management is an act of marketing.

Selling the right product to the right customer at the right time for the right price through the right channel….to optimize the inventory and maximize revenue.

• GDS Originates in Airline Industry• SABRE created by American Airlines 1960/70s– CAB sets US airline rates– Hotel, Rental Cars added

• Airline Deregulation• Airline Deregulation Act of 1978• Increase in competition - Price wars

• Legacy of GDS• Delivers travel products to 780K travel agents• Powers many OTAs, higher ADRs despite little

growth

• 1980s: – Hotel industry responds to 1982 and SBLA crisis

• 1990s– Hotel industry responds to first Gulf War and

economy• 2000s

– Hotel industry responds to 9/11 and post millennial economic slow down

• 2010 and beyond– Hotel industry faces convergence of distribution

and marketing: Demand Management

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• A secret formula

• A technology or computer system

• A specialist sitting in front of a computer, in the basement, of your hotel

• An isolated team at “central command”

Revenue Management is NOT:

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It’s about Revenue Management.AND

It’s about Expense Management.

• Revenue Management today must focus equally on driving revenue and controlling expenses.

• Periodic capital investments in technology are a permanent reality.

• Disparate devices and new platforms proliferate.

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• Search engines changed the field/Review sites changed the field

• Online Travel Agency (OTA) balance of distribution power with branded sites

• Hotel chain distribution mix growth in both GDS and branded supplier sites projected*

*PhoCusWright, Inc.

• Conversation economy – social media

• Growth in mobile globally – still being figured out domestically, technology yet to catch up

• IT and brand management culture of communication

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• Revenue Management (RM) =– Demand Analysis + Pricing + Restrictions

• Past Web 2.0 Marketing =• Distribution + Channel/Internet Marketing

• Demand Management* =– RM + Demand Creation + Distribution

Management + CRM + Internet Marketing

*Adapted from Anderson and Carroll, Journal of Pricing and Revenue Management, 2007

Demand creation Sales force; single-image inventory

management Traditional brand and marketing:

▪ Advertising, Sales Promotion, PR GDS placement, agency relations CRM, keeping past guests coming back Internet marketing

▪ Distribution channels AND marketing channels▪ They ARE BOTH simultaneously

Demand Forecasting• Involves the historical patterns and current

trends to determine revenue decisions. • Separate forecasts must be created for group

and transient travel. • Unconstrained demand: the request for rooms

for given nights by prospective guests that are not affiliated with a group event or seasonality.

• Must be calculated by market segments to determine proper demand.

Inventory Control Strategies

Channel Management Both marketing to and acquisition of

customers Search engines are windows to channel Group sales and small group sales websites Customer acquisition by channel

▪ Pay attention to the many costs▪ Transaction fees, GDS, switch▪ Marketing/placement fees▪ Production and competitor analysis by channel

Customer Relationship Management It costs less to keep a customer than

acquire or create a new customer. Beyond email Social media meets frequent traveler:

Reviews Groople.com/other group travel platforms Mobile technologies, “App me” Measuring success of loyalty promotions Reducing cost of customer acquisition

• Channel/Internet Marketing– Every distribution channel is a media channel– Search engines and the cost of finding you– Chain websites and vanity URLs– Media sharing sites– DMOs, Chambers of Commerce, Business

Improvement Districts– ROI on all of them – monitor the cost as well

as the revenue production– But is this the channel where my customer

shops?

SUMMARY

Morphing and merging of many disciplines

Revenue management and demand management

Channel explosion = proliferation

Revenue is only half of the equation, managing expenses and understanding the ROI of every RM effort is essential to decision making.

All of these trends can make an impact in the face of slowing travel demand.

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Today’s evolution of Revenue Management into Demand Management demonstrates the power of this statement:

Every Act of Management is an Act of Marketing or Demand Management