Insights Type: Articles

What’s on the Minds of Revenue Leaders?

By Juli Jones, CAE, Vice President, Hospitality Sales & Marketing Association International (HSMAI)

HSMAI’s Revenue Optimization Advisory Board (ROAB) held its annual retreat last month to identify the most pressing issues facing hotels on the revenue front and outline plans to provide revenue professionals the insights, tools, and best practices they need to address them. Here are a few key discussions ROAB members had:

Top issues: What are the top issues facing the revenue optimization discipline today? ROAB members identified:

Technology — finding the balance between the art and science, and a balance between owner and brand interests.
Technology and talent — with changes in technology, talent has to evolve in terms of skills and approach.
All skills for talent, including soft skills such as changing management and communications styles, and hard skills such as understanding technology and revenue management fundamentals.
Blurry lines amongst sales, marketing, and revenue groups.
Too much technology, and not enough use of it.
Today’s talent is not prepared for different market conditions.
Distribution disruption — like with Google and Amazon — which gets between hotels and guests.

On the horizon: What is the next thing coming at us? Is it an opportunity or a challenge? ROAB members said:

Technology — we have to define the skills needed to determine where we need it and don’t.
Data — the effective and efficient use of it.
Remote workforce management — stressing the importance of communication, collaboration, and ensuring both market and industry knowledge.
Understanding demand in a shifting supply environment.
Intermediary technology that disrupts pricing and buying behaviors — bots, voice, filters, etc.
Short-term rentals — we need to realize they are impacting hotel rentals and focus on the generational factors, impact on pricing, and potential development opportunities.
Economics and training talent that is new to a downturn environment.

Data & Analytics for Sales Leaders: Data Scientists

At HSMAI’s Sales Leader Forum on Nov. 5–6, Dr. Kelly McGuire, principal with McRevenue LLC, presented a breakout session on “Data and Analytics for Sales Leaders.” Here is the first of four key takeaways:

What are data scientists? Data scientists have three interlocking skill sets, McGuire said. They fully understand advanced algorithms and statistics knowledge, have coding and hacking skills, and have business expertise to translate business problems into math and produce useful results. “This is an extremely valuable yet incredibly unique skill set,” she said.

However, McGuire continued, not every problem needs a data scientist. There are other analysts out there who can help wrangle your data without having to wait to hire a data scientist or pay a data scientist’s salary.

Marketing Professionals’ Top Concerns

By Kaitlin Dunn, Writer, Hospitality Sales & Marketing Association International (HSMAI)

How to differentiate vs. the competition and keeping up with technology are among the biggest concerns facing marketing professionals today. HSMAI asked registrants for the upcoming Marketing Strategy Conference for their opinions ahead of the event. Below are the results, including additional comments from respondents:

Comments:

“Really all listed are pretty equally concerning.”
“I would say it’s a mix between ‘Keeping up with technology’ and ‘Costs.’ But it goes further than that. In real time, hoteliers need to understand all the technology products available in the market and then they need guidance on how best to invest in those technologies to meet their unique primary objectives and thus maximize their potential return on investment.”
“I think it’s the cost of keeping up with technology, but also differentiating our products. I live in the independent hotel world. I don’t have the brand support or dollars to keep changing programs or installing new ones. We continue to define what makes us different and capitalize on that.

Comments:

“I see growth slowing a bit, but I don’t have major concerns. The industry isn’t known to have a lot of thought leaders, which is what leads industries.”
“Election, national/worldwide economic indicators, even the hint of the word recession, and we will see a slowdown.”
Another respondent said they were very optimistic because of “continued positivity in the economy and a smaller chance of recession in 2020.”

Finding Economic Opportunities in 2020

By Kaitlin Dunn, Writer, Hospitality Sales & Marketing Association International (HSMAI)

It may not always feel like it, but the United States is seeing one of the longest periods of economic expansion in history, according to best-selling author and renowned speaker Shawn DuBravac. DuBravac will be giving a keynote presentation at HSMAI’s Marketing Strategy Conference in New York City on January 22, where he will offer predictions for the coming year and insights on the economy.

DuBravac is also the president and founder of Astra Insights, which provides consulting, research, and advisory services on topics such as digital transformation, technological change, and business model disruption. A widely sought after speaker due to his background in the fields of finance, technology, and economics, who presented at HSMAI’s Revenue Optimization Conference in Minneapolis last June, DuBravac recently spoke to HSMAI about what to expect from his upcoming presentation.

What is your presentation going to be about?

Basically, it’s going to be an update on the economy and how that retaliates to the hospitality industry. It’s the start of the new decade, and we’re starting out on solid footing, in one of the most optimistic periods in our history. There are some uncertainties that weigh on businesses, such as trade tensions, that we are going to discuss, but overall the consumer looks pretty good in a number of ways. The global concerns are there, but domestically, things continue to move in a positive direction.

You gave a similar presentation at ROC last June. How will this one be different?

Essentially it will be an updated version of that presentation, taking into account all that has happened since then that affects the economy. In the last six months, we’ve seen uncertainties rise a bit because of global concerns. We have uncertainties in the Middle East that have particularly been exacerbated in the past month, and trade concerns that have also been exacerbated.

How will this help marketing professionals specifically?

What happens in the underlying economy is going to drive the decisions consumers are making and how freely they make those decisions to spend. Paying close attention can help marketers understand the environment in which they are operating and how their message might resonate with individuals.

As marketers and hospitality look to expand their business and look to which households are ripe to spend, they need to keep in mind that we’re seeing things grow broadly across all households, not just high-income households. Aggregated household net worth is up 9.5 percent from the first three quarters of last year, and good stock market increases will likely help accelerate that even further. This puts the U.S. consumer in a strong position to take advantage of the hospitality services.

However, it’s clear there are uncertainties, so when marketers are looking to allocate budget, they need to have a firm understanding of broad themes in the economy

What personally interests you most about this topic?

If you look broadly at the economy, consumers are driven by the economic underpinning of the country and their individual households. It ends up dictating a lot of what consumers can do. We are in the midst of (six months ago when I was at ROC, we were on the cusp of) the longest period of economic expansion in U.S. history. It’s important to know all of the information to make informed decisions and have a good understanding of the economy as a whole.

Jonah Berger on Why ‘Word of Mouth Is So Much More Important Than You Might Think’

By Kaitlin Dunn, Writer, Hospitality Sales & Marketing Association International (HSMAI)

Jonah Berger has spent more than 15 years studying social influence. A marketing professor at the Wharton School at the University of Pennsylvania, he is the New York Times and Wall Street Journal bestselling author of Contagious: Why Things Catch On and Invisible Influence: The Hidden Forces That Shape Behavior. His research has been featured in The New York Times Magazine’s, and he has consulted for organizations such as Apple, Google, GE, Coca-Cola, Vanguard, 3M, and the Gates Foundation, helping them to drive new products, sharpen effective messaging, and develop marketing strategy.

Berger will bring that expertise to HSMAI’s Marketing Strategy Conference on Jan. 22 in New York City, where he will present a general session. Recently, he talked to HSMAI about what he wants to impress on attendees.

What will your presentation be about?

Everyone has something they want to catch on. It might me a particular hotel or resort that they’re trying to make more successful. It might be an idea they want to share, or it might even be a service they want to offer at their hotel. Everyone has something they want to succeed and to catch on. The question is, how do we do that?

It’s not about advertising or having the highest-quality offering. It’s about social influence and word-of-mouth. The reason things succeed is that people talk to each other. What I’ll talk about is the science behind word-of-mouth — why people talk, why they share, and how it leads all sorts of products and ideas to succeed. I’ll share six key ways the audience can use to get anything to catch on.

What is the one thing you want the audience to take away from the presentation?

Word-of-mouth is so much more important than you might think. Hotels typically spend a lot of time and money on advertising, but people don’t always trust traditional advertising. They know ads will try to convince them and might not tell it to them straight, but their friend will. If your friend says something, you’re much more likely to trust what your friend says, because they have your best interests at heart. The trust benefit of word-of-mouth, and the target benefit makes it much more impactful, so I just want them to understand how important word-of-mouth is.

How do your life experiences contribute to where you are now in life?

I grew up studying the hard sciences — I thought I wanted to be an environmental engineer, but I was lucky enough to take a psychology class and learned a lot about behavioral science. Now I get to apply the rich tools of behavioral science, such as data analysis, experimentation, and statistics, to the social sciences.

I’m quite excited about the event and sharing the science and the stories with the audience, and I look forward to seeing everyone there.

4 Priority Sales Issues for 2020

By Kaaren Hamilton, CMP, Vice President of Global Sales, RLH Corporation, and chair of HSMAI’s Sales Advisory Board

HSMAI’s Sales Advisory Board (SAB) meets every month to discuss issues relevant to hospitality sales professionals. In December, SAB members compared notes on what they saw as the most pressing issues in 2020. Here are four of the most talked-about topics:

1. Third-party commissions: Several SAB members threw out the idea of discussing the way third parties are paid. One example given was lead generation, which can add up quickly if a company is paying multiple sources for the same lead. Another was the commission-based model, and companies pushing back on the equal amounts of commissions that are paid to third parties for bringing groups in, regardless of the effort of the meeting planner or organization.

“The compensation should be different at one end of the extreme to the other,” one member said. Another member added: “I think that whole model is falling apart. But we’ve seen some indications of hotel companies really wanting to change that.”

2. Staff commissions: SAB members also discussed commissions for staff salespeople. One member brought up sales managers drawing commissions simply for following up on a lead. “Do we need to pay somebody with a sales manager skillset and a sales manager salary and bonus to catch that lead and respond to it?” the member asked. Another SAB member added: “If you have a repeat piece of business, why do you commission a salesperson on that repeat business?”

“I think it’s a fascinating topic and an issue that we are encountering every day, and that’s when the economy is strong,” another SAB member said. “Imagine what will happen when it declines a little bit.”

3. USALI requirements: Several members noted that a 12th edition of the Uniform System of Accounts for the Lodging Industry (USALI) is in the works, and said they are interested in giving input into the sales and marketing section. “I think it’s a great opportunity,” one member said. “I think you need to look at the previous edition and see what you can actually change or improve.”

4. Turnover: Staff turnover was one topic that several SAB members mentioned they struggle with. Both with good people leaving and less competent people continuously cycling through, it is something that sales leaders are constantly dealing with. “Turnover is a huge cost of sales intake,” one member said. “If you turn over your salespeople, it’s ongoing. It’s costing you to retrain and everything else. There are a lot of issues there.”

Another member said: “It impacts cost of acquisition and it often is overlooked in terms of the cost, because it’s really more of an opportunity cost.”

Here’s to a Well Fueled, Inspired, and Optimized 2020!

By Robert A. Gilbert, CHME, CHBA, President and CEO, Hospitality Sales & Marketing Association International (HSMAI)

Happy New Year! I hope you had a wonderful holiday and are looking forward to an exciting, successful 2020. At HSMAI, our plan is to keep doing what we do, but even better. We remain focused on economic uncertainty as the biggest challenge facing our members — and committed to developing tools to help them navigate it. From events and certification programs to content and other resources, we will continue to elevate the hospitality industry in a way that fuels sales, inspires marketing, and optimizes revenue.

In 2019, we expanded our portfolio of offerings — which already included the Adrian Awards, the Marketing Strategy Conference, ROC, the CHDM and CRME certifications, seven Executive Roundtable programs, Curate, and the Insights and Executive Insights newsletters — with a new Sales Leader Forum, a new CRMA certification, a newly updated study guide for the CRME, a new line of HSMAI Special Report publications, and a new, HSMAI Foundation–produced CHRO Executive Roundtable.

Heading into 2020, we are better positioned than we’ve ever been. Our work is always determined by what our members need, and this year what they need will be influenced in large part by the economy — so tracking this moving target will remain a high priority for us. Over the last year we have devoted event programs and articles to economic forecasts and analysis, and that continues with this issue of Insights, which includes forecasts curated from a variety of trusted sources. My wish is that you find this information — and everything else HSMAI offers in 2020 — timely, relevant, and actionable.

4 Imperatives for Hospitality Sales Leaders

By Kaitlin Dunn, Writer, Hospitality Sales & Marketing Association International (HSMAI)

At HSMAI’s Sales Leader Forum on Nov. 5–6, Cindy Novotny, managing partner at Master Connection Associates and recipient of HSMAI’s Award for Lifetime Achievement in Sales, presented a keynote address on “Sales Imperatives for Today’s World.” Here are four key takeaways:

1. LEADERSHIP

“If you don’t like helping people, growing people, role playing with people, going out and making sales calls with them,” Novotny said, “then you really shouldn’t be a sales leader.” She also suggested that the reason people are leaving the industry is because of bad leaders, who hire without explaining the realities of the job first. “They’re not leaving the company, they’re leaving people,” she said. “You didn’t hire them right.”

2. BUSINESS KNOWLEDGE

As a sales leader, you have to know not just what customers need but what you can offer them that your competitors can’t. “You have to know your customer,” Novotny said. “You have to know their divisions. You have to know who they compete with, how you can get more referrals from them.” Indeed, Novotny noted, referrals from existing business are some of the best leads she gets and shouldn’t be overlooked or underutilized.

3. CUSTOMER FOCUS

Novotny shared that she constantly hears that hotels make it more difficult than it should be for customers — guests, meeting planners, travel agents — to do business with them. “Just answer the phone, talk to the customer, and then have a team that works on them and get everybody involved,” Novotny said. “Don’t make the customer work for this.”

4. ADVANCEMENT

No matter how big or small your team is, you need to be on the lookout for ways to elevate everyone working for you — because at the end of the day, you have to be able to show the numbers, and the numbers come from the salespeople on your team. “Those who say it can’t be done,” Novotny said, “better get out of the way of those who are doing it.”

5 Things to Know About HSMAI Lifetime Honoree Bjorn Hanson

Bjorn Hanson, Ph.D., has enjoyed a legendary career in hospitality consulting and education, and it all started with a trashy book: Hotel, by Arthur Hailey, which Hanson read when he was in high school in the 1960s. The world that Hailey described in his bestselling novel about a fictitious New Orleans hotel “sounded interesting,” Hanson recently told HSMAI, and prompted him to spend what today would be called a shadow day with a family friend who worked as the director of sales and marketing for Loews’ Americana Hotel — now the Sheraton Times Square — in New York City.

“After he spent a little time in the office telling me about his job, he took me into the front office and said, ‘I’ll come back in an hour or so,’” Hanson remembered. “It was a great first front-office experience, because this was before computers, so there was no computer reservation system. They had a 300-person convention not entered into the reservation book, so the hotel was overbooked by 300 rooms. My first day on the job was learning how to say to people, ‘We have no available rooms, but I’m authorized to give you $3.50 for cab fare for you to go to another hotel.’ So, I learned to not stand too close to the front desk.”

In the afternoon, the sales and marketing director took Hanson to another hotel — for a conference luncheon for the Hotel Sales Managers Association (HSMA, which today is HSMAI), where he met a group of hospitality students from Cornell University. “My first day working in a hotel,” Hanson said, “I had the worst front-desk experience one could have and the best HSMAI experience one could have.”

Eventually, Hanson himself attended Cornell, where he served as HSMA’s student chapter president, helping organize the school’s first-ever HSMA student conference. After graduation, he served as general manager of a hotel in northern New Jersey, but his true interests were finance and consulting, and he soon took a job as a hospitality consultant with Laventhol & Horwath, the major accounting firm that specialized in hotels. He stayed there for 17 years, moved to Wall Street to work in hospitality banking, then joined PricewaterhouseCoopers, where he founded the hospitality and leisure practice. After retiring in 2008, he promptly joined the full-time faculty at the New York University School of Continuing and Professional Studies, and two years later became dean of NYU’s Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management.

He retired from NYU in 2018, but nonetheless finds himself with two full-time jobs: executive director of the 795 Fifth Avenue Corporation, which owns The Pierre hotel in New York City, and member of the board of directors for Summit Hotel Properties, which owns 80 hotels. And he’s still not done. At the Adrian Awards Dinner Reception and Gala on Jan. 21, HSMAI will honor Hanson with the Winthrop W. Grice Award for Lifetime Achievement in Hospitality Public Relations — recognizing his status as an industry expert who has been quoted in countless newspaper, radio, and TV interviews. For Hanson, the award brings things full circle. “One of the people I had speak at that [HSMA student] conference was Bud Grice, and I’m getting the Bud Grice Lifetime Achievement award,” Hanson said. “To receive an award with his name means more than it probably could to almost anyone else. My career started with HSMAI, and here I am.”

Here are five other things we learned during an interview with Hanson:

1. He loves hospitality because it matters to people. “When I was trying to decide what to do when I was in high school, the thing about hotels for me was the theater of it —when you walk into a hotel, there should be an experience. But then, I’ve learned that hotels are so important in so many people’s lives. If it’s a business hotel and people are staying there for business, it might be someone’s first day on the job — they’re going to an orientation and training program, which maybe is being held at a hotel. If a group has been working for months on a new product announcement, it happens at a convention hotel. People’s retirement dinners and annual partner meetings — so much important business happens at hotels. And then in people’s personal lives, it’s wedding rehearsal dinners and wedding receptions and anniversary parties, and when people go on vacations and honeymoons and take their kids the first time to Disney World. This theater that I first associated with hotels became not so much theater but an opportunity to create some of the more important moments in people’s lives.”

2. He thinks the industry has changed for worse and for better. “The separation between ownership and management in some ways is sad. The person who wanted to own a hotel to be the host is rare. It still does happen, but it happens almost more at the economy level than it does at the luxury level. That person who wanted to be the host and run the business day-to-day, it’s become so much of a challenge, and I find that to be a bit of a loss. But the same thing that’s the bad also is the good. The business has become so much more sophisticated and able to deliver so much more because of the separation of ownership, management, and brand, because now we can have specialists whose career lives are based on knowing how to be the best owner and invest capital. And there’s a management company that knows how to do the day-to-day things, including book computer systems, revenue management systems, and property management systems, and how to recruit and train and retain people. And there’s the brand that knows how to create the image in the marketplace and gets involved in distribution. So, the same thing that I find disappointing also is one of the good things about the industry.”

3. He always wanted to teach. “My first day after graduation, it was a long-term objective. I graduated in 1973, in 1978 I started teaching at NYU, and in 1979 I became a visiting assistant professor at Cornell. It was something I wanted to do, and I have a couple of reasons. One is, my view of universities as an undergraduate was that the next level of education — master’s and Ph.D. — related to research, and we were an industry that I thought would benefit from the kinds of research that were being applied to other sectors of the economy. I also felt my experience at Cornell was truly lifechanging. It was such a positive experience for me to have those four years and feel like I learned new things that I could go out and apply, and the idea of trying to help others have that experience — to be part of that process, I felt it would be a positive life experience.”

4. He’s a hotel careerist. “This is an industry that has so many different channels. There are all kinds of jobs — ones where you’ll interact with people, ones where you won’t interact with people, ones where you can go home after work and not even think about what you do during the day, and others where you can apply your greatest creative talents and make things happen. You can be in a hotel, you can be in a corporate office, you can do what I did, which was consulting with one of the major accounting firms or working on Wall Street. If you find you really like food, there’s a place to go, or if you find you’re really interested in advertising, hotel advertising is a unique specialty. It’s one of those industries that creates more ways for someone to find his or her way to have an enjoyable career. I can’t imagine there are too many that are better or more flexible or offer more opportunities.”

5. He is a nontraditional PR person. “I’m not a CEO of a company who gets quoted in the company’s public relations. I’m more of an industry researcher and analyst who just had the opportunity to talk about the industry more than many people do. Even though I’m semi-retired in some ways, it’s rare that I don’t have between three and seven media interviews a week. I think it’s just the fact that my passion and interest and excitement for the industry make me quotable.”

The Once and Future History of Distribution in 5 Parts

For most of her long and accomplished career, Flo Lugli, founder and principal of Navesink Advisory Group, has worked at the intersection of hospitality, travel, and technology. During that time, she has seen distribution become perhaps the defining issue of hospitality industry disruption, with everyone from hotel companies and technology platforms to OTAs and tour operators struggling to understand and master this shifting landscape.

On a recent call for HSMAI’s Faculty Roundtable, Lugli presented an overview of distribution, from its history, to its evolution across platforms, to its convergence with revenue optimization and marketing. Here are excerpts from her presentation:

1. THE DAWN OF DISTRIBUTION

In the beginning, it was all about the GDS [global distribution system], and there was a focus on connectivity: How do we manage and connect and provide our rates, availability, and inventory out to the GDS? This is around the mid-’80s, once Sabre and Galileo came out with a new hotel platform. In most cases, it was managed by database teams that lived within a central reservation call center. This was also around the time that you had the launch of companies like THISCO, WizCom, and Lanyon to help hoteliers distribute their rates, inventory, and content. There were a few direct-connects at the time, but as the new hotel platforms came out, it was more and more difficult for the hotel companies to support those direct-connects, and so it was really THISCO and WizCom that were driving most of that connectivity.

At the time, content was — and quite frankly it still is — a challenge for the industry. When I was running WizCom, we were trying to address the issue of content management. With the five GDSs at the time, you would literally have to load properties and all of their rules and policies and room information and local information five different times. I developed something called Easy Access Plus, which basically created a switch for content, but it was very limited. It was very focused on the GDS. There were a limited number of fields that the GDS actually supported. And of course, with the advent of the internet and widespread distribution, it certainly wasn’t designed for consumer-friendly type of content.

As the internet evolved — I’m talking around mid-’90s to mid-2000s — brand.com efforts were managed separately from other third-party efforts, such as OTAs. So, you had a group of folks that were focused on brand.com, and then you the distribution folks, still primarily driven by database and connectivity people, managing the third-party relationships. After 9/11, as business dropped and the OTAs started to play a much more visible role in hotel distribution, the hotel industry began to think about how to better manage their distribution needs.

From around 2005 on, metasearch players — TripAdvisor, Kayak, Google — started to play increasingly important roles. Hotel companies began to assess what their organizational structure should be between distribution and commercial. There were a lot of conflicts between the brand.com department and the distribution department. Brand.com wanted to drive more business to the brand websites, and distribution wanted to drive more business to the OTAs. There was this internal conflict that needed to be resolved.

2. GETTING SERIOUS ABOUT DISTRIBUTION

As we moved into the first half of this decade, obviously OTAs continued to get stronger, as did other third parties, such as Google and TripAdvisor. As the hotel industry started to get more serious around distribution, it began to become a topic in the executive suite. Hotel companies ramped up their investments in brand.com and mobile sites. For example, when I joined Wyndham [as executive vice president of marketing in 2009], we undertook a $100-million capital investment in technology — digital, mobile, and so forth.

The conversation at the time centered around “The OTAs are the enemy.” Rate parity started to get a lot of attention, and Roomkey was formed in an effort by the major hotel companies to try and gain a little bit more control over their distribution, and perhaps to provide a little bit more leverage in their negotiations with the OTAs, although that was never an admitted goal. And then, of course, channel managers became more and more important. As more third parties came into the mix, it was becoming increasingly difficult, especially for independent hotels and small chains, to manage their distribution.

This was during the time when hotel companies aligned distribution under commercial. The execution of managing the connectivity and perhaps the database components of distribution still resided under the call centers, because that’s where most of these people were located, but the actual strategic development and plans were moved under commercial. There was a lot of education going on within the hotel companies about distribution and its implications and complexity, but I don’t think most people in the C suite really understood how complex it was — the need for multiple connections, how to distribute content, and so on.

As we fast-forward to the past four or five years, distribution has become front and center in most discussions. It has become much more commercially focused, but there remains a technical and operational component that must be understood and actually managed. You obviously have more and more investment in brand.com mobile and book-direct campaigns, as an example. And then, beyond book-direct, hotel companies are now saying it’s less about discounts and more about customer engagement, and OTAs have moved for the most part from being the enemy to being the partner. Hence, as an example, the recent Marriott deal with Expedia.

3. THE DISCIPLINES AND DISTRIBUTION

Organizational realignments continue, and revenue management has moved to focus on revenue optimization. Heads of marketing have evolved to roles that are more chief commercial officers or chief revenue officers, depending upon the hotel company, and there’s been a real focus on how to optimize revenues. There’s also been a renewed effort to understand channel costs and optimal channel mix, because distribution is really about understanding what does it actually cost me to get that sale.

For me, distribution today is about how hotel product can be sold to consumers. And when I say “hotel product,” I don’t necessarily mean a room, I mean any service or amenity within the hotel. That could be the swimming pool, or the cabanas, or the meeting rooms and the restaurants, and so forth. It includes all channels — not just GDS and third party, but brand.com and voice, and even to some extent direct to the local property. It also includes all disciplines. Distribution isn’t just focused on how do I make that connection and how do I get that content out there, but it needs to be thought of throughout all disciplines: marketing, loyalty, sales, revenue management, and technology. Everybody needs to be aware of how ARI and content is distributed and the costs thereof, so that they can create a much broader channel-mix strategy.

To summarize, distribution is the overarching strategy of how a hotel or a hotel brand actually markets and sells, with a true understanding of channel costs and ROI. One of the biggest challenges in understanding channel costs and ROI, quite frankly, is the chart of accounts that the industry uses, where you have different departments tracking different costs of distribution. In the reservations department, you have the res fees, and in SG&A, you have the credit-card fees, and in marketing, you have some of the distribution fees. But it’s really difficult for an individual hotel to pull all of those together and understand true cost of distribution.

4. THE CHALLENGES OF DISTRIBUTION

There are other unique challenges within the hotel industry. The fragmented structure masks the real cost of distribution, and the fact that you have local-level decision making on what rates you’re going to offer and what inventory you’re going to offer complicates things. Can you imagine if there were an airline that was franchised, where every single plane was owned by somebody different, and they decided where they wanted to fly and what they wanted to charge? There’s also a lack of consistent technology investment across the industry. The brands are making some investments, but the hotel owners generally don’t have the money, and certainly the management companies are not usually incentivized to make those investments.

This industry is overly dependent upon content. Consumers want to see videos. They want to see photos. They want to really understand what the experience is at the hotel versus the kind of content that you need for an airline seat or even a rental car. The leisure skew plays into the strengths of the OTAs, who have billions of dollars to spend and who have very strong consumer brands. And then, of course, we’re highly dependent on Google and metasearch for customer acquisition. Another of the biggest challenges in the industry today is that the cost of customer acquisition continues to rise.

5. REVENUE OPTIMIZATION, MARKETING, AND DISTRIBUTION

From a revenue management, revenue optimization perspective, what we’ve started to see is a real focus on driving a revenue management culture and approach throughout the entire business — getting people to understand exactly what do we mean by revenue management, why is it important, why digital marketers need to talk to revenue management before launching any promotion. Again, understanding the real costs of each channel and the ROI is important, because brand.com is not free and, in many cases, can be the most expensive channel for owners when you factor in discounts, PFP fees, and the amenities they need to deliver for loyalty. In some cases, it could be more expensive than an OTA booking. So, I think it’s important for revenue management to take the lead in driving better organizational alignment and collaboration across the enterprise and make sure that incentives are aligned, because what gets measured gets done.

Last year I completed a nine-month engagement as interim chief commercial officer for the Americas for Radisson, and one of the things that we did while I was there is build a strong collaborative environment between marketing and revenue management. There were weekly meetings to talk about things like need periods, what kind of offers should we give, what were the results of those offers, how long should they run, what should we test. And there was a lot of effort around understanding, when we did do a promotion, what was the actual ROI on that? We looked at not just how much it costs to place the ad and what was the revenue that was generated, but also what were some of the other costs that went into that promotion?

It’s tough to undarstand ROI for branding exercises. The old marketing saying goes, “I know that only half of my marketing works. I just don’t know which half.” There are ways to look at branding exercises and branding spend versus revenue-driving efforts by doing some cross-channel analysis — when you’re doing some branding efforts, whether that’s radio or TV or whatever, tie that to did we see a spike in call volume and did we see a spike in visits to the website.

So, in summary, over the last 30 years, distribution has moved from an operational and technology focus to a commercial focus, but understanding the operational, technical issues and the cost is important to help define what that optimal channel mix should be for an organization. Organizational alignment and collaboration has never been more important or more critical to optimizing revenue.