HSMAI SPECIAL REPORT: Innovation in Hospitality Advertising, Digital Marketing, and Public Relations

Every year, HSMAI’s Adrian Awards competition honors hospitality brands and agencies for creative excellence in advertising, digital marketing, and public relations. A relatively new addition to our program is the Innovation category, which spotlights work in all three areas that is doing something new, different, or both.

In this HSMAI Special Report — made possible with the support of HSMAI’s Organizational Member companies — you’ll find short profiles of Gold winners for Innovation from the 2019 Adrian Awards. Our hope is that they’ll inspire you not just with their imaginativeness and originality but with their frequently modest size and scope. You’ll see that innovation can happen at any level and any price, and often blurs the lines between traditional advertising, marketing, and PR.

Congratulations to all of our 2019 Adrian Award winners! It’s thanks to you that we keep finding new ways to tell the story of hospitality.

HSMAI Special Report_2019 Adrian Awards Innovation

Custom GIFs and Other Secrets of Hospitality Marketing Innovation

Custom GIFs and Other Secrets of Hospitality Marketing Innovation

Hospitality marketing has always been a fast-moving game. To help the industry stay ahead of the curve, HSMAI created an Innovation category in its Adrian Awards program, which honors creativity in hotel advertising, digital marketing, and public relations. A new HSMAI Special Report profiles this year’s Gold winners in this category, offering insights and best practices for hospitality marketing professionals at every level. Here are three — one each for advertising, digital marketing, and PR:

ADVERTISING: Pushing out a survey.

Partnering with AFAR travel media platform, the Aruba Tourism Authority surveyed visitors on what makes them happy — so it could make them happier and increase visitation, particularly among an affluent base in key U.S. markets. The Travel Happiness Survey launched with newsletters, emails, social media, and website takeovers. More than 15,000 people took the survey, the results of which were revealed on Afar.com and in AFAR magazine’s 10th-anniversary “Happiness Issue,” with an Aruba sponsorship print ad introducing the results spread.

The project exceeded benchmarks in many categories, including 30,000 page views, 15,000 entries, and five minutes or more spent on the survey page. Email blasts were 69 percent higher than the AFAR benchmark, while newsletters were 99 percent higher. A total of 12,000 emails were added to the Aruba database, and Aruba has used the survey results to better target visitors — and as a result, U.S. visitation is up by 9 to 10 percent in 2019, RevPAR is up 7.8 percent, and on-island spend is up 5 to 6 percent.

DIGITAL MARKETING: Having fun with social media.

In 2018, W Hotels partnered with GIPHY to create W-themed GIFs, reaction GIFs, and GIF stickers. Building off that work, in 2019, W and GIPHY created GIFs to drive awareness for Wake Up Call (WUC), a W Hotels music festival, and distributed them via GIPHY Search Keywords, Search Categories, and Trending Rotational placement — capitalizing on search terms related to “wakeup calls,” music, and key emotions related to WUC, namely excitement. W and GIPHY also engaged VIP festivalgoers by allowing them to produce their own personalized GIFs and GIF stickers at WUC.

W’s 133 GIFs have amassed 1.5 billion organic views across GIPHY and its API partners, including Instagram, Snapchat, FB Messenger, and iMessage. The campaign’s paid media component generated 27.3 million views of WUC-related GIFs and drove a 3.5-percent engagement rate on GIPHY Search (compared to W’s 1.89-percent benchmark), and a Nielsen Brand Lift Study showed lifts across all attributes.

PUBLIC RELATIONS: Making beautiful music.

Travel Michigan created Pure Sounds of Michigan, an ambient album, to showcase the sounds of Michigan through its state parks and inspire travel to these locations by highlighting diverse elements of the Wolverine State, including local artists. Produced with Assemble Sound, a Detroit-based media company, Pure Sounds of Michigan spawned three singles that were promoted via outlets including Billboard magazine and the website Stereogum, with paid audio ads on streaming platforms used to drive traffic to michigan.org.

After debuting at number nine on Billboard’s New Age chart, Pure Sounds of Michigan has been streamed/downloaded more than 88,000 times on Spotify and Soundcloud, while paid campaigns on Soundcloud, Pandora, and Spotify delivered more than 3 million impressions. More than 190 media placements led to an additional 10 million impressions, with social media posts producing another 4 million.

Download Innovation in Hospitality Advertising, Digital Marketing, and Public Relations, an HSMAI Special Report, here.

HSMAI Special Report: Hotel Management Company Sales Incentive Plans

Take a deep dive into the state of hospitality incentives in a new HSMAI Special Report: Hotel Management Company Sales Incentive Plans, released by HSMAI and ZS to discover key findings in incentive compensation structure, metrics, revenue, goal attainment, and more. The report, which is made possible with the
support of HSMAI Organizational Member companies, is designed to help hospitality leaders make informed decisions to maximize the design and success of incentive plans.

The latest research first outlines the framework for sales incentive plan design. The report finds that at its core, a good incentive plan is strategic, motivational, fair, simple, and fiscally responsible. Additionally, incentive plans should ideally have metrics that are strategic, controllable, and measurable. The study further outlines the advantages and disadvantages of each incentive plan type, what drives top performers, payout curves, and more. The report shares important data on compensation structure, the metrics used to determine incentive compensation, incentive payout, and goal attainment.

HSMAI Special Report: Hotel Management Company Sales Incentive Plans is an excellent resource for special projects and a strong reference for hospitality incentive program design metrics and key insights.

Access the Report

A New Hotel Sales Commission Model

HSMAI Executive Roundtable Case Study

How is it possible that the hospitality industry is one of the few industries where sales people are not commissioned on their sales?

In the hotel industry, we traditionally pay our sales people a substantial base pay and then give them a kicker incentive of anywhere from 25-40% if they achieve pre-determined revenue goals. In comparison to other industries where the bulk of pay is based upon the commissions earned from sales, I would suggest our sales people have it pretty good. The truth is based on the current compensation model, where sales people are getting paid whether they make a sale or not.  Now, under-performing sales people may not hold their salaried position for long if they can’t close deals aligned with goals, but they will still get paid while employed.

First, we need to take a close look at pre-determined sales goals.  The merit of the plan is entirely based on the accuracy of these goals, when for the most part, the ability to set goals requires reading a non-existent crystal ball.

So, what would it look like if the industry shifted to a commission based platform?  Personally, I’ve been tossing around this idea for years, but when I try to convince sales people that if they switch to this model they can earn an uncapped salary, they still shy away from the “guaranteed base” pay.  Is that because I don’t have the right sales people, or is that because they are conditioned from years in the industry to think that’s the best way to work?

Well, I decided to put the idea to test.  With a hotel in the midst of a challenging renovation and a schedule and scope proving difficult to set accurate goals, it was the perfect petri dish for my experiment to put everyone on the team on a commissioned sales model.  What happened, the direct correlation between sale and paycheck resulted in a hunger for a close that I had never seen before.  Our sales team was calculating their commission with each site tour and each proposal.  Instead of the closed sale taking them to 68% or 75% of their goal, the closed sale earned them $325, which seemed to make a real difference in the timeliness and quality of follow up.  I’m pretty sure that due to the strength of the sales team, the sale may have still occurred in most cases even if they weren’t commissioned, but the commission model unquestionably shortened the sales cycle due to behavior.  They were personally invested in each sale and it showed. In short, our bottom line was their bottom line.

The obvious question here after this experiment is if I adopted the model company wide, and unfortunately the answer is no. The reason for this, which I learned directly from my test case, because unlike selling widgets or subscriptions where there is an endless supply to sell, we are selling a product that is finite and expires. This results in our teams being selective in the business we book through our revenue management and yield process.  The specifics of “selecting” the business they would take had the propensity to conflict with the hunger to earn commission.  In short, when the idea of declining a booking conveyed a loss of commission, the disappointment was at times in conflict with our team-first culture.

But, I haven’t given up the idea of commission based sales in our industry.  The new model I’m testing is a commission based lead generator.  More to come on the success of this role…stay tuned.

Case Study Contributor:

 Allison Handy, Senior Vice President of Marketing, Prism Hotels & Resorts, attendee at HSMAI’s Hotel Management Company Sales & Marketing Executive Roundtable, Fall, 2017

Learn more about HSMAI’s Executive Roundtables

 

Strategic Thinking and the Chief Revenue Officer

by  Dr. Lalia Rach and Bonnie Buckhiester

Executive Summary

When one poses the question “What’s keeping you up at night?” there is a reasonable expectation that serious issues will be raised.  This was the case recently when invitees to HSMAI’s annual Chief Revenue Officer Roundtable symposium responded to a survey designed around this question.  The questions were highly targeted; searching for insights about challenges the hospitality industry faces in general, and more specifically, those of particular concern to senior revenue management professionals.  Participants represented over 20,000 properties from large and small brands, management companies, and ownership groups – all in all, a vast array of perspectives from professionals facing tough issues on a day-to-day basis.

So, what exactly did these experienced individuals have to say about the state of the industry?  Perhaps, not unexpected, the usual suspects were mentioned: issues like the challenges of dealing with OTA’s and rising acquisition costs, and the perennial shortage of qualified revenue management talent.  But in a more profound way, the major themes centered on disruption, uncertainty, and a diminishment of control.  Disruption appeared in various forms – alternative accommodation, adaptation to rising consumer expectations, and the increasing pressure for the revenue management discipline to encompass all commercial functions.

Uncertainty centered on both economic and governmental issues, and the competitive environment.  How will the current political climate impact the industry?  How is the threat of terrorism going to be handled?  How will we deal with over supply?  Much like the stock market, the hospitality industry detests uncertainty.

But the primary theme was the loss of control.  The pervasiveness of this theme manifested as multiple challenges including: brand proliferation, data overload, the rise of powerful adversaries, the absence of innovation, advancing product commoditization, inadequate technology, and the need for advanced, prescriptive decision making.  The answer to the question “What’s keeping you up at night?” highlights that the industry must decide what it can and cannot control.  Traditionally the industry has been inclined to do more harm to itself than whatever is done by outsiders.   The key is for the industry and organizations to have the will to solve decades-old issues with new, vibrant, innovative thinking.  Hotel revenue management professionals certainly possess the brainpower to do this.

Introduction

Surveys were sent to 50 hotel revenue management executives on May 31, 2017 with a reminder sent on June 7 to non-respondents.  Of the 50 invitations, 27 were sent to management company professionals, 21 were sent to brands and 2 to ownership groups.  The survey closed at 5pm on Tuesday, June 13, 2017 with 36 responses (72%) of which 16 were from management companies, 15 from brands, and 5 identified as from ownership groups.  There were six questions in the survey, three closed-ended and three open-ended (see Appendix A).

The purpose of the survey was to provide insight into the challenges and concerns of senior revenue management professionals relative to their discipline and to the industry.  Last year a survey was sent to executives with the focus on establishing a professional profile and a comprehensive view of the work of the senior leadership of revenue management in brands and management companies.  Among the information gathered last year were reporting lines, responsibilities, and discipline challenges and concerns.  Correlations that exist between this year and last will be included in this report where appropriate.

The results of the survey are reported in the aggregate (N=36) and where appropriate in comparison (brand versus management company versus owners).

Profile of Respondents

  • Affiliation: 44% work for Management Companies, 42% work for Brands, and 14% for Owners.
  • Current title: The most prevalent title is Vice President (42%).
  • Rank within company: 25% are among their company’s senior management (Chief Revenue Officer, Chief Revenue and Marketing Officer, Executive Vice President, and Senior Vice President).
  • Title Descriptor: The generic description “revenue management” has given way to greater focus on what is expected of the professional in charge moving from managing revenue, a one-dimensional approach to revenue within organizations, to a multi-dimensional approach requiring dynamic valuation of revenue at every juncture.
  • The #1 strategic challenge facing the hotel industry, identified by nearly two-fifths of respondents, was competition also recognized as the diminishment of control. A close second was the supply challenge followed in a distant third by demand.
  • The #1 challenge facing hotel revenue management is advancing the decision-making process, identified by half of respondents (18) as the need to “move from reactive to proactive and prescriptive decision making” while “increasing the application of science to decision-making across the enterprise.”
  • The #1 emerging concern for the industry’s is supply both new and alternative followed closely by governmental policy and the economy’s effect on tourism (international and domestic).

Results and Analysis

1. What is your current title?

The respondents reported eleven different titles with vice president (see Table 1) identified as the most common (42%).  One-quarter have titles that indicate they are among their company’s senior management (Chief Revenue Officer, Chief Revenue and Marketing Officer, Executive Vice President, and Senior Vice President), which is the same percentage as last year   Nearly one-third of respondents (33%) are currently middle management reporting titles of associate or assistant vice president, corporate, regional and senior director, and director.  Depending on the size of the company an individual with the title Vice President, Regional Vice President, Senior Director, or Director could be middle or senior management.

Amongst the sub-groups slightly more than one-quarter of brand, one-sixth of management company and two-fifths of owner groups respondents are in senior leadership position.

 

Table 1:  Current Title

 

In addition to measuring titles by rank within the corporate hierarchy, evaluating title descriptors of responsibility in rising disciplines provides insight on its changing prominence within the organization and the industry.  Of the 32 respondents with revenue in their title, half have the classic “revenue/revenue management”, equal to last year’s results.  One-sixth reported titles combining revenue with another discipline, either distribution or marketing.  The absence of sales as a discipline responsibility is the only difference between this year and last year’s results.  This may point to a growing recognition that while disciplines are related, there is a need for expert oversight to ensure maximum results.

Revenue management has been the accepted descriptor for two decades plus but reflects a passive, narrow responsibility for the professional and the field.  The recent recession advanced the expectation for a more effective and vigorous scrutiny of revenue throughout the enterprises.

The remaining eleven title descriptions represent progressive responsibilities for revenue generation, optimization and strategy (see Table 2).  This is an increase over last year when nine titles combined revenue with the terms optimization or strategy.  The generic description “revenue management” has given way to greater focus on what is expected of the professional in charge moving from managing revenue, a one-dimensional approach to revenue within organizations, to a multi-dimensional approach requiring dynamic valuation of revenue at every juncture.  Hence title descriptors are evolving to represent the expansive expectations and responsibility of optimizing, strategizing and generating revenue within the enterprise.

 

Table 2:  Titles with Revenue.

Three respondent’s titles were simply expressions of their position (senior vice president, corporate director and director) and one, executive vice president and principle of sales and marketing, is an example of the lingering uncertainty of where revenue management belongs and if it should manage other disciplines or be managed.

2. What type of company do you work for?

Respondents were given three choices of the type of company they work for:  a brand, a management company or an owners group.  Last year two choices, brand and management company, were provided.  This year the question was expanded to include owner groups as a third category.  Respondents affiliation is almost evenly split between management companies (16 respondents) and brands (15) with the remainder (5) employed with an owner group (see Table 3).

 

Table 3:  What type of company do you work for? 

 

3. What is the #1 strategic challenge facing the hotel industry?

The purpose of this question was to establish the thinking of senior revenue managers around critical industry-wide issues.  Over the past ten years, revenue professionals’ analytical mindset has brought a different voice to the entire decision-making process within organizations.  Being part of overall strategy development, in turn, has enhanced the revenue professional’s thinking about the industry.  As a result, the revenue professionals often faulted for a myopic view now contribute a broader understanding of structural and systemic challenges.

Replies to this question highlight the highly disruptive challenges affecting the hotel industry forcing organizations to identify and adapt rapidly to what is a new or continuing threat to long-term success.  Based on responses, three macro factors — competition, demand, and supply – are ongoing disruptors of foremost concern to the revenue professionals (see Table 4).  The top challenge identified by nearly two-fifths of respondents was competition also recognized as the diminishment of control.  A close second was the supply challenge followed in a distant third by demand.

For all, staying relevant in an evolving lodging environment is directly connected to reducing costs (distribution, acquisition) to ensure sustainable profit growth.  Further competitive issues are an interesting blend with brand and owner groups identifying the universal burden of maintaining brand value in a highly commoditized environment with aggressive intermediaries and 3rd parties.  Management company and owner group respondents identified the common challenge of not adapting quickly enough to technology advancements.  The crux of this issue is getting hotels to embrace and accept technological changes to pricing and inventory management.

One brand respondent described an ongoing challenge in the industry – the need for greater innovation.  With unflinching honesty, the respondent encapsulated the reality of the situation, “We have been a “me too” industry, we have to find ways to think differently and to deliver what the guest actually wants rather than what we want to deliver to them.”  For management company professionals the hot button issue was supply or more specifically it is the condition of supply that matters.  Repeatedly respondents highlighted the proliferation of new brands, overbuilding in many markets, and the surge in alternative accommodations as the root challenge.

Demand, while a distant third among the macro factors, is a most interesting challenge as it is still to be decided whether the hotel industry and individual organizations can adapt to consumer expectations and provide choice and robust experiences.  One puzzling aspect of demand described was the outdated belief that the industry can “own” their customers.  About a decade ago the buyer with greater experience, education, sophistication, and knowledge utilized technology to shift into the driver’s seat with sellers pushed into the role of influencer and collaborator.  Persistent demand and supply challenges appear in every cycle but now are complicated by powerful adversaries (e.g. HomeAway which was astutely acquired by Expedia Inc. in 2015 for $3.9B) unbound by the conventions of the industry. It is time to realize that control has and continues to shift to the consumer.  Hoteliers need to aspire to become collaborators with their guests, providing expert advice based on local knowledge and customer preferences.  What remains to be addressed is whether the industry repeats mistakes of the past or embraces the new reality of consumer behavior and employs analytics to advance the quality of decisions.

 

Table 4: Challenges facing the hotel industry

 

Competition Challenges (impacting control)             

Brand

  • Staying relevant in an evolving lodging environment in light of:
    • Intermediation throughout the entire customer journey leading to loss of control over inventory and rates and confusion between hotel brand & booking brand
    • Digital disruption; need to reduce distribution costs, drive brand loyalty and have our customers book directly
    • Management brands continuing to show value in a highly commoditized environment
  • Need for greater innovation. We have been a “me too” industry, have to find ways to think differently and to deliver what guest actually wants rather than what we want to deliver to them

Management Company

  • Meeting owners’ expectations in light of:
    • Cost of acquisition and diminishing profit margins
    • Not adapting fast enough with technology
    • Obsolescence of positioning
    • The lack of funds spent to win the customer to brand direct

Owner

  • Non-traditional approach to common challenges needed to ensure sustainable profit growth
  • Technology advancements and getting hotels to embrace the changes and accept especially as it relates to pricing/inventory management
  • The loss of brand value from intermediaries and 3rd parties

Supply Challenges

Brand

  • Competing with added supply from hotels & alternative options (AirBnB)
  • Driving strong net revenue results

Management Company

  • Continue to grow ADR
  • Increased, new, over supply outpacing demand in many markets (primary, secondary, tertiary)
  • Proliferation of different brands within hotel chains. Extremely hard to reduce the cost of sale of our business when multiple hotels are feeding in the same brand contribution pools

Owner

  • Supply growth

Demand Challenges

Brand

  • Adapting to constantly changing consumer preferences (technology, booking channels, demographics)
  • Domestically, seeing less inbound travel & less outbound travel to countries perceived as unsafe or in the mix with terrorist activities
  • Owning our customers

Management Company

  • Demand flux driven by economic/political factors, short booking windows, makes trends hard to find & harder to rely upon
  • The changing dynamic of our customer base. Younger customers don’t want traditional hotels, they want experiences.

4. What is the #1 challenge facing hotel revenue management?

From the large-scale industry analysis of question 3, this question shifts focus to the discipline asking respondents to identify the number one challenge facing hotel revenue management.

Last year the question was worded differently, (Which strategic change will be the MOST important within your area over the next three years?) with specific degree (most) and time frame (next three years), and was closed-ended providing five choices (aligning revenue management with IT, consolidating revenue management into business strategy, fully integrating revenue management with sales and marketing, moving beyond revenue management to predictive analytics, and other).  Two-fifths of respondents (18 of 45) selected “moving beyond revenue management to predictive analytics” as the most important strategic change.

This year the question was open-ended and responses revealed four major challenges:  advancing decision-making, discipline awareness, talent acquisition, and operational investments (see Table 5).  The top challenge, advancing decision-making, identified by half of respondents (18) as the need to “move from reactive to proactive and prescriptive decision making” while “increasing the application of science to decision-making across the enterprise.”   While a necessary advancement, convincing others within their organization may turn into a Sisyphean task for revenue management professionals as it will be futile unless top leadership fully supports the effort.  Similarly, wholesale changes to property management systems have been advocated by IT and operations leadership for decades and yet the will to undertake such a monumental but critical advancement has been absent in many organizations.  It will take a concentrated, sustained effort to develop a master plan detailing process and outcomes and then have the wherewithal to effectively make their case.

A more immediate decision-making challenge was raised by management company respondents around the issue of the quality of data — is it meaningful, useful, useable, and timely.  Two aspects of this issue are 1) the need for data from the brands that is useful and useable, and 2) providing properties with data that is timely and valid.

The second greatest challenge swirls around the concept of discipline awareness.  In a “be careful what you wish for moment”, brand respondents indicate there is “increasing pressure to have influence across all commercial functions to drive topline room revenue and other revenue streams”.  Management company replies reinforce the “changing role with revenue management on everyone’s mind with teams are pulled in many directions, AWAY from driving revenue.”

Respondents from all groups identified the never-ending challenge of talent acquisition and retention.  Talent, both quantity and quality, has been an issue for Revenue Management for over two decades and while there are examples of success, it remains a foundational problem for the discipline with a “one step forward, at least a half step back” reality.

Table 5:  Challenges facing hotel revenue management

 

  1. Advancing Decision-Making

Brand

  • Increasing the application of science to decision making across the enterprise; Moving from reactive to proactive & prescriptive decision making, not being afraid to leverage our data to evaluate & take a few risks
  • Operational or Tactical decisions:
    • Distribution – B2B sales on OTA, online distribution & channel management & reputation management
    • How to best segment business to attain optimal revenue for the hotel to drive optimal ROI; Managing the mix of business
    • To bring in additional data points around source of business in a way that is actionable & uniform (meta vs. OTA vs. banner ads, etc.)

Management Company

  • Brands not providing enough data; How to consolidate different data sources to make it meaningful & be available to help make quick decisions; ensuring the hotel has a comprehensive property strategy to support the yield decisions of RM.
  • Containing distribution costs in a manner acceptable to potential guests
  • Continuing to find affordable technology to aggregate data; to determine what the strategies are; have to be able to analyze performance. Yet with reporting now available in ALL areas it’s hard to make sense of it especially across channels, segments, etc.
  • Digital marketing knowledge & understanding, no ROI on digital.

Owner

  • Operational or Tactical decisions:
    • Rising cancellation rates
    • Unpredictable/lackluster corporate transient travel

2. Discipline Awareness

Brand

  • Increasing pressure to have influence across all commercial functions to drive topline room revenue & other revenue streams

Management Company

  • Changing role, including ecommerce & sales
  • RM is on everyone’s mind, teams are pulled in many directions, AWAY from driving revenue. Distractions take time from the core task of driving revenue.
  • Exposure & Discipline Recognition; Lack of understanding of the discipline importance by other divisions

3. Talent Acquisition 

Brand

  • Finding great talent & staying focused on the basics & developing them into revenue leaders
  • Lack of good talent to choose from

Management Company

  • Continuing to find people to create reports from data that result in actionable items.

Owner

  • Talent acquisition, use of on the job training as come up through FO, Res or Sales. Those successful a few years ago but haven’t adapted to “today” are being exposed & aren’t willing to change.

4. Operational Investments

Brand

  • Investing in technology

Management Company

  • Staying in sync with technology and what the competition is rolling out

 

5. The #1 emerging concern for the industry is ___ & it will impact future success by ___.

Respondents were asked to identify the number one emerging concern for the industry and then to indicate how the concern will impact future success.  The question was an opportunity to highlight issues that are on the horizon.  Replies forecast that the concerns of today are likely to be the foremost problems of tomorrow lead by the competitive environment, cost containment, economic and governmental issues, and supply hurdles (See Table 6).

Competitive environment is the leading category with fourteen respondents (39%) presenting the 4 C’s — commoditization, confusion, consolidation, and control — delineating the underlying concern for the industry moving forward is staying relevant to guests to wrest control from intermediaries and 3rd parties.   But relevance also underlies the accelerating frenzy to create new brands especially those categorized as lifestyle and Millennial to circumvent the unattractiveness of legacy brands.  According to respondents solving one problem is creating others including brand blur and the confusing of brand value leading to greater commoditization.  If this were not enough, consolidation within the industry is generating greater barriers for brands outside the big three combined with consolidation within 3rd party channels impacting profitability.  As one brand respondent stated, “Maintaining share in growing markets and increasingly competitive markets [may force us to look] at how we do business in different ways.”

Supply hurdles was the second emerging concern as the growing popularity of alternative accommodations gives rise to an interconnected impact.  Oversupply is a continuous ebb and flow reality but it is one thing when an industry causes its own problems and a completely different set of challenges when outsiders disrupt the cycle.   Among the disruptors are AirBnB, HomeAway, VRBO, onefinestay, and Travel Keys and as they acquire market share the hotel industry is struggling to maintain much less grow margins.  This connects directly to the issues raised in the competitive environment category as the challenge to traditional stay options is driven by customers desire to garner experiences not stays.

Perhaps the connective tissue among all responses was the concerns expressed in the Economic and Governmental Issues category.  What will government policy mean to visitation?  Will policy diminish the economic engine of international travel which in turn could exacerbate supply hurdles and intensify competition leading to a need for greater cost containment.  At the core is the concern for the impact of eroding profit margins triggering increased operational cost cutting resulting in decreased customer satisfaction.  This challenge looks to the future so the chain reaction of events described above can be altered.  It falls to revenue professionals to further the transition to proactive and prescriptive decision-making identified in a previous question moving from a rooms-centric revenue management approach to an enterprise revenue strategy.

Table 6: Emerging concerns and impact

 

Competitive Environment

Brand

  • Commoditization of brands causing brand blur
  • Consolidation of hotels and brands creating greater barriers for brands outside the top 3 due to loyalty, efficiencies of scale, buying power.
  • Control of 3rd party channels limiting profitability; Disrupted from every side dramatically shrinking formerly, fat margins in our business model; Staying relevant and exciting to guests slowly eroding profits as we pay 3rd parties for access to what should be our guest
  • Digital disruption intermediating customers and loyalty and drawing fees for acquisition
  • Growth of OTA business impacts our future success by not owning our customers; Losing control of guest experience to 3rd parties making hotels the holder of the expensive asset and none of the profit; OTA consolidation encouraging all of us to be more creative across the board
  • Maintaining share in growing markets & increasingly competitive markets potentially looking at how we do business in different ways.

Management

  • Brand confusion blurring lines of value
  • Consolidation of distribution creating cost increase thru duopoly or monopoly
  • Managing mix of sales with so many options for consumers to buy mid-lower tier channels, which have additional expenses (margins) causing inability to grow ADR as occupancy levels reach peak.
  • Technology our ability to harness it

 

Cost Containment       

Brand

  • Containment driving success in business models with flexibility in this area
  • Rising cost of acquisition decreasing profit
  • Rising cost of marketing with search, AI, social media, etc. making cost of acquisition continue to rise and margins shrink

Management Company

  • Escalating brand operating expenses and the cost of customer acquisition further reducing the ROI delivered to the property level
  • Increase in fixed costs continue to cut cost on operation side

 

Economic & Governmental Issues

Brand

  • S. Government reducing visitors to NA

Management Company

  • The economy and our ability to not do what we did the last time
  • Travel ban laptops on planes will diminish travel

Owner

  • Cyber terrorism constraining our ability to gather info online
  • Global economic factors hindering demand/ADR growth

 

Supply Hurdles

Brand

  • Growing popularity of alternative accommodations with unknown consequences

Management Company

  • Additional lodging solutions like HomeAway stealing market share; Stay options impacting traditional stay options
  • Increased supply driving down occupancy/RevPAR; Oversupply impacting top line; New supply and growing OTA and alternative lodging growing non-direct bookings; Oversupply and brands being too restrictive in policy reducing options to own the market

Owner

  • Alternative lodging threats requiring brand to differentiate themselves via technology (IOT)

Conclusion

Ultimately revenue management professionals must lead the change offensive but there are certain realities that must be overcome for success.  One such reality was confirmed during a recent HSMAI Chief Revenue Officer Roundtable.  Nearly all participants indicated they had risen through the ranks of the hospitality business which is both a strength and a weakness.  The strength emanates from the extraordinary amount of experience and expertise while the weakness stems from inbred thinking and practices that stifle innovation.  The industry would benefit from a steady stream of “outsiders” who question the status quo, offer differing approaches to advance the widespread usage of analytics, allowing greater sophistication of thought in response to changing consumer desires and wants.

Another reality that must be addressed is the permanent disruption of powerful adversaries. Taking a protectionist approach to OTA’s, intermediaries, and alternative accommodation is, at best, a short-term solution, which only handicaps the industry in the long term.  It is common knowledge that even hotel executives utilize alternative lodging and OTA’s when traveling yet rail against both as the cause of most problems.  The answer to shrinking margins goes way beyond acquisition costs.  Organizations must search for the most profitable guest and the most profitable mix of business, which entails a total revenue management approach – managing all revenue streams in tandem to the NOI level.

The upheaval of fault lines is felt most clearly in revenue management as professionals are dealing with ongoing and extensive change including:

  • Loss of control is a pervasive challenge and can only be conquered using a long view.
  • Lifestyle and millennial-focused brand proliferation is a reality and success or failure will ultimately be determined by consumers.
  • Data overload is here to stay. The key is to make the financial commitment to business intelligence tools and human resources to harness, organize, analyze, and interpret information in order to support prescriptive decision-making.  This will necessitate looking outside the industry for talent and then having the patience to onboard and integrate during the inevitable learning curve.

 

As organizations struggle with rapidly shifting reality, revenue management professionals must step to the forefront and lead their organizations and the industry to new thinking, foregoing antiquated status quo responses to find new solutions to decades-old issues.

Appendix A Survey Questions

  1. What is your current title?
  2. What type of company do you work for?
  3. What is the #1 strategic challenge facing the hotel industry?
  4. What is the # 1 strategic challenge facing hotel revenue management?
  5. The #1 emerging concern for the industry is ___ & it will impact future success by ___.

About the authors

Dr. Lalia Rach.   As founder and partner of Rach Enterprises, Lalia serves as a trusted advisor to senior level executives at many of America’s leading companies and is a source of motivational inspiration to professionals searching for originality and reality.  A proven innovator, she specializes in assisting executives in advancing their leadership strategies and building effective and efficient teams.  Her “genuine ideas and uncommon sense”Ô on issues of strategy and leadership produce insightful and distinctive thinking advancing the ability of emerging and established executives.  She also service on the HSMAI Americas Board of Directors.

Bonnie Buckhiester.   Bonnie Buckhiester is the principal of Buckhiester Management, the leading Revenue Management consulting firm in North America for the hospitality industry.    Her diverse product knowledge of hotel, tour, cruise, air, rail and car rental inventories offers a unique cross-fertilization of industry strategies.

She holds a Bachelor Degree from the University of Illinois, a Certification in Revenue Management from Cornell University, and a Certification from Guelph University’s Hospitality Managers Development Course.  She’s a member of the prestigious industry organization, the International Society of Hospitality Consultants, and has acted as a Board Member for several years, including President & Chairman.  She is also a multi-year member of HSMAI’s Revenue Management Advisory Board.

About HSMAI Roundtables
HSMAI Executive Roundtables provide senior executives access to experts and an opportunity to interact with their peers. HSMAI brings together Chief Marketing Officers, Chief Digital Marketing Officers, Chief Sales Officers, Chief Revenue Officers, and Hotel Management Company Sales & Marketing Executives through the year. The session was sponsored by booking.com, IDeaS, Rainmaker, STR, Tambourine and ZS Associates.

About HSMAI
The Hospitality Sales and Marketing Association International (HSMAI) is committed to growing business for hotels and their partners, and is the industry’s leading advocate for intelligent, sustainable hotel revenue growth. The association provides hotel professionals & their partners with tools, insights, and expertise to fuel sales, inspire marketing, and optimize revenue through programs such as HSMAI ROCETAdrian Awards, and Revenue Optimization Conference. Founded in 1927 and celebrating 90 years in 2017, HSMAI is an individual membership organization comprising more than 7,000 members worldwide, with 40 chapters in the Americas Region. Connect with HSMAI at http://www.hsmai.orgwww.facebook.com/hsmaiwww.twitter.com/hsmai, and www.youtube.com/hsmai1.