Is it time to think rethink RM as ‘profit management’?

Online travel agents wield a lot of power but it doesn’t have to be a one-sided relationship, writes Mariam Sharp

Stop pressing the snooze button and get out of bed. This was the pointed message to hoteliers from Carl Oldsberg, VP Revenue and Distribution, Nordic Choice Hotels who was presenting at this year’s Travel Distribution Summit, Europe.

Oldsberg was talking about how his chain, and others in Scandinavia and the Baltics, went about clawing back control from online travel agents. Post 9/11 the OTAs had spotted a gap in the market, taken the bit between the teeth and control of hotel pricing, inventory and brand equity. They kept running and who could blame them, says Oldsberg.

He can say that now, but as they were heading into a dark hole, losing ownership of the customer and witnessing rapidly decreasing margins, it wasn’t so easy. It took until 2011 before NCH took action and it did so alongside several other Scandinavian hotel groupings including Thon Hotels, Scandic Hotels and First Hotels.

“Commission levels had become outrageous, so property owners started to put up a fight,” Oldsberg said.

Among the combative first steps were to:

  • Introduce rate disparity
  • Eliminate room availability clauses
  • Lower commission levels to no more than 4%
  • Take action on unethical search practices

In 2012 after the first Office of Fair Trade ruling, negotiations got underway. Unsurprisingly, not all OTAs agreed to the conditions but the turnaround in has started. Hotels in the region started to increase investment in direct channels, improve loyal programmes and boost marketing spend.

The effect of working in this way has led to OTAs having significantly lower share of the market in Scandinavia and the Baltic regions, which at the time was viewed as a growth region. What is more hotels, says Oldsberg, now have more leverage.

Although initially the OTAs tried to play hardball, today new partnerships are emerging and on more beneficial terms.

“We’re no longer angry hoteliers and the OTAs are back at the negotiating table,” says Oldsberg who has these four back to basics tips.

  • Recognised that the hotel owns the customer relationship and build on this
  • Use loyalty programmes to deepen the customer relationship
  • Draw on data to personalise the customer experience
  • Over deliver on service; truly add value to the guest experience

How RM is changing

According to Oldsberg the discipline of revenue management is changing. By rethinking of the process as ‘profit management’ greater emphasis is placed on gross margins and other better indicators of business growth. In other words, NCH has moved from a RevPAR to GOPPAR model.

In this environment, revenue managers are increasingly seeing further demands on their time. Indeed, the traditional RM role is increasingly moving into distribution and towards managing e-commerce functions. So revenue managers need to be commercially able and willing to engage across all aspects of the business. This has implications for other roles. For example, the general manager role is about raising new standards of quality, service and engagement in order to drive customer loyalty.

What certainly helped NCH’s strategic turnaround was making good use of its available data. Moving forward, Oldsberg was clear that that ‘big data’ would become increasingly important in helping to segment the audience and make more personalised offers to customers.

What is certain is that the industry will not stand still. And while in Scandinavia, the OTAs may have been reined in for now at least, Oldsberg admits that Google’s move into the hotel space is cause for concern, but more on this in the coming weeks.

Guest columnist Mariam Sharp is a business consultant focusing on projects that promote international exchange. She can be found on LinkedIn and Twitter

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