Revenue Management Does Not Apply for Resort Hotels

revenue management_does_not_apply_to_resort_hotelsI kid you not, there are still people convinced that revenue management is not applicable to resort hotels and belongs in city markets only. Last week I was blown away when a ‘senior contract manager’ of an important UK based OTA claimed rate yielding is not for resort hotels.

We requested access to the extranet to manage rates and availability for 2 of our large resort hotels in Spain, so we could maintain rate parity with our distributors and manage this ourselves instead of sending emails. We thought this was just a normal request considering we will get this for our resort in Crete, Greece, as well.

Well it wasn't apparently. Below the response we got form the ‘senior contract manager’ in question.

Hola Jean,

Es un placer y es cierto que no nos conocemos, antes de nada comentarte que el negocio de mi empresa y el de cualquier empresa que se aprecie no puede trabajar bajo conceptos de paridad,eso va bien para hoteles de ciudad o para los academicos, pero la realidad es muy distinta.

La paridad no hace justicia ni mas siquiera ventas, por lo que no trabajaremos via extranet contigo ni con nadie que quiera ver incrementados sus numeros. Con los hoteles que me comentas ya trabajamos con contratos y asi seguiremos haciendolo.

Saludos,

XXXX

He basically states that hotels can sign a net rate contract and should not be allowed to manage their rates according to demand. Neither will they apply a minimum mark-up.

Strange no, considering that when we contact his Greek colleague to contract a new hotel in Crete it seems to be no problem at all and they fully understand the hotel’s need for flexible rate and availability management.

OK, it happens sometimes a sales manager at a distribution channel misunderstands our request, so we decided to give it another try. See our email below:

Dear XXXX,

Thank you very much for your response.

Please do understand that we need to be able to manage prices and availability according to demand. Yielding down and up for low and high demand days is a necessary requisite for Resort hotels to be able to optimize it's revenues.

If we can't manage rates in a flexible way, we will be left with no choice but to close your channel when we are experiencing a surplus in demand, which of course would not serve your interests either.

Therefore once again we request you urgently to send us extranet access for the hotels below.

We would also like to discuss this matter for the rest of our hotel portfolio in Europe. If you can't accommodate our request please refer me to someone at executive level to discuss this matter.

Again we are looking for mutual beneficial relations with all our distributors across the board, which entails we will be able to manage rates and availability through an extranet.

Thank you & best regards,

Patrick Landman

We tried to make clear our need for a mutual beneficial relationship in which we can manage rates flexibly according to demand.

Why does a hotel need this? It is impossible to contract your rates absolutely correct a year in advance. As time goes by market circumstances change and a hotel needs to be able to adapt in order not to lose revenues. If there are periods demand is low a hotel needs to be able to launch more competitive offers, and if demand is much higher than estimated rates need to be moved upwards.

A hotel does not sell products that have unlimited inventory or for which more stock can be ordered. A hotel room is a perishable product that can only be sold once. Any missed opportunity is revenue lost. Also a hotel can only sell a maximum of 100% of its inventory each day. It cannot increase its stock. So it is essential prices can be managed dynamically so the hotel does not sell out too soon at too low a rate. So hotel revenue management basically comes down to the art of matching supply and demand by dynamic price management.

Here the reaction of our friend:

Dear Patrick,

Sorry but you are not looking for mutual benefits, we work with net rates and that is mutual benefits...

You can close sales at any time (I can see your mutual benefits), but you are not going to be in first page for sure, this is only for partners.

Regarding executive level, you are talking to that... I take that decision.

regards

XXXX

He clearly does not share our idea, and does not want to give us access to the extranet. He even threatens to take the hotels of the first page if we try to actually manage the pricing and availability in the best interest of the hotels.

What does he expect? We just sign a net rate contract long in advance and not be able to manage the rates and availability. He wants the hotel to take in large volumes of bookings without having some form of control?

Mind you we are not talking about a wholesaler or tour operator package rates here. This is an online travel agency… It seems to us he tries to hold his market hostage by threats and out of date methods of distributor pressure. What era is our friend living? Most surprisingly his colleague for the Crete / Greek market has no issues as at all with our simple request and fully understands us.

We decided to probe a bit further as we found his answers unsatisfactory. We asked him if he does not trust the hotel to manage their rates themselves. In the rates and rooms belong to the hotel, and he would only benefit of a higher commission amount if rooms are sold at a higher average rate.

Below his response:

The same question I can ask you, don’t you trust XXXXXX? The own rate?... sorry but I never heard that before, the rates (selling rates) doesn’t belong to the hotels... but to the customers. But you are not a hotel, isn’t it?

If demands goes up... fantastic, then stop sales like always

I know better that you my company, and if I give you the XXXXXX tools you will sell 0 with us because we feed from other as well... and if one of those, like Serhs or NT incoming or Urbis... or whatever have net rates... We, XXXXXX will use that one.

We blacked out the name of the agency and person in question as we do not intend to harm their image publicly.

No, apparently he does not trust hotels to manage their rates according to their needs. He doesn’t seem to understand he will benefit of a hotel that implements a good revenue management strategy.

He also admits to something interesting, if we would close his rates and availability he would simply feed in rates and availability from another wholesaler. Probably these are package rates which he would then sell online on a room only basis. He clearly does not understand how hotel revenue management really works. If his lower rate tiers will be closed, this will be the case for all distributors.

So far for a hotel friendly distributor I guess ... A shame that some travel agents can’t seem a bit further and are stuck in their old ways of bullying and pressuring hoteliers. Our industry is in desperate need for an overhaul and more business smart people. The reactions we got from this ‘senior contract manager’ are totally out of date.

If distributors want to survive they need to quickly change their business model and become more flexible. They have to also retrain their staff, and get them to adjust to the current times. Otherwise they are nothing more than dinosaurs, a dying species waiting to become extinct.

Maybe one day we can visit them in a museum and explain our kids or grand children what went wrong with these inflexible old-school travel agencies.

Cheers,

Patrick Landman - Xotels


PS. For more inspiring articles, visit our hotel blog

Posted in Blog, Syndicated
  • http://www.egenergy.com/peak-demand-management Demand Control

    I
    enjoy gathering useful information; this post has got me even more info!