I recently found a great panel discussion about economy hotels’ rates, generating demand and loyalty of customers.
The discussion started with very important statement that RM is not only software! RM is combination of distribution environment, property management system, software and PEOPLE! Moreover, RM is often misunderstood by hoteliers as they want to have as high rates as possible. However, maximizing revenue is not about rising rates but managing the relationship between rates and occupancy. All participants also denied the myth that RM works only during busy times.
They also discussed an important issue of managing demand during special events, when the rates could be risen significantly. However, what is also in line with my own perception, increasing rates over the certain level could actually harm the hotel as it will not be consistent with its image (brand promise) and long-term strategy . On the other hand, during tough times low rates will not create demand where is no demand.
Opinion about flash sales (like groupon) is divided. While Norbert and John believed that it makes more harm than good, Phillip has different view. He thinks that flash sales might be seen as marketing cost rather than mean of generating profits but all of them agreed that you need to be very caution about it.
The last matter that they discussed was loyalty among customers of budget hotels. It is a common wise that cost of acquisition of new customer is much higher than cost of retaining existing one. However, loyalty in budget sector is out of the question in its traditional sense. Customers are driven by price and location. But, I fully agree with John who stated that a new way to distinguish yourself from competitors (when the rates are highly similar) is to offer an outstanding service that will make customer loyal.
In the end, they emphasized an important relationship between budget airlines and budget hotels. The first group created completely new group of tourist and significantly increased the demand for hotels.
The participants were:
- Phillip Schaetz, Kosmopolito Hotels International, Hong Kong
- John Augustin, The Everly Group, Malaysia
- Norbert Vas, Aston International, Indonesia
- Grahame Tate (moderator), IDeaS a SAS, Australia