Best Western Central Europe Conference 2011

Revenue Management Workshop

Your trainer for today:

3

Four hours of hard work await you:

Welcome13h00 – 13h30

The Best Western Quizzer13h30 – 14h00

Online Distribution Trends 2011 from a RM perspective

14h00 – 15h00 Rate Management

• Which factors influence our room rates?• How do we differentiate rates and products?• Do you know your cost of distribution?

Coffee & communication break15h20 –17h00

KPIs in Revenue Management Revenue tools to capture KPIs

The end

Welcome13h00 – 13h30

The Best Western Quizzer13h30 – 14h00

Online Distribution Trends 2011 from a RM perspective

14h00 – 15h00 Rate Management

• Which factors influence our room rates?• How do we differentiate rates and products?• Do you know your cost of distribution?

Coffee & communication break15h20 –17h00

KPIs in Revenue Management Revenue tools to capture KPIs

The end

Warm-up: The Best Western Quizzer

Revenue Management Workshop

Online Distribution Trends 2011

from anRM perspective

Online Distribution Trend No. 1

New search options

The ( good ) old Google Display

SEM = Advertisements at a cost

Google Commerce Search•Enterprises Search/ Google Places•Criteria such as location and hotel reviews are important

Organic Search•Internet sites are being offered•Criteria such as page rank, Content are relevant, inbound links, domain name and CONTENT is important

The new Google (beta version)

The traditional AdWords are still around

New AdWords options are available:•Linkages to Google Places•¾ of the page consists of commercially influenced results•Linkage straight to booking sites

Organic Search•SEO is of low importance•Few results at the end of the page (lower ¼)

Google Maps: from bad to worse..

Direct rate comparison as part of the search

results, no need for the clients to leave the page

and pull up Trivago, Kayak etc. for rate checks.

Another fine opportunity to divert customers

Click on hotel name = client will be directed to hotel site???

No, he will be directed to Google Places!

Places Profile is crammed with user

generated content & 1.000 links to

external pages!

An interesting new feature: Google Instant Preview

Google knows my whereabouts

What does that mean for our online marketing activities and budgets?

Our annual budget is the major German OTAs & TOs weekly budget

It is getting increasingly difficult to buy good placements with our limited budgets

Our branches most popular search criteria „hotel“ will get unaffordable

Google Advertising as the only online-marketing activity will not be enough

What are the consequences?

Our annual budget is the major German OTAs & TOs weekly budget

It is getting increasingly difficult to buy good placements with our limited budgets

Our branches most popular search criteria „hotel“ will get unaffordable

Google Advertising as the only online-marketing activity will not be enough

What are the consequences?

Online Distribution Trend No. 2

Niche Marketing: Affiliate &

Recommendation Marketing

Niche Marketing PART 1

Affiliate Marketing – what are we talking bout Affiliate marketing is a marketing practice in which a business rewards one or

more affiliates for each visitor or customer brought about by the affiliate's own marketing efforts. Affiliate marketing—using one website to drive traffic to another—is a form of online marketing, which is frequently overlooked by advertisers.[1] While search engines, e-mail, and website syndication capture much of the attention of online retailers, affiliate marketing carries a much lower profile. Still, affiliates continue to play a significant role in e-retailers' marketing strategies

In concrete terms: We produce advertising material (e.g. banner) A partner manages the distribution on adequate

partner sites A commission is paid whenever a client visits and

books via the affiliate site

Examples of Affiliate Marketing

• Traditional ( banner ) ads• No costs for advertising place• Performance related payments

Niche Marketing PART 2: Recommendation Marketing

Best Western clients act as our ambassadors

More intense and focused than Affiliate Marketing

„I already bought the product“ is THE recommendation seal of approval

Examples for the integration into a website

Integration into the hotel‘s home page

Confirmation page once the client has completed the booking

3 steps to gain a new ambassador

A click opens the widget

1. Teaser with reward

2. Recommen-dation

3. Send

Example: Customer touch point: hotel website

Online Distribution Trend No. 3

User generated contentin motion

Consolidated semantic search for hotel reviews

20Revenue Management Workshop Central Europe Conference 2011

Consolidated Hotel Reviews

Example: TrustYouConsolidation of six

portals: HRS, Booking, hotel.de, Trivago, HolidayCheck, Expedia

No linking to external sites away from our own booking functions

User generated content in motion

Law suit A&O Hostels

22Revenue Management Workshop Central Europe Conference 2011

User generated content in motion

Sponsored mystery checks by amateurs.. Who is the sponsor?

24Revenue Management Workshop Central Europe Conference 2011

Online Distribution Trend No. 4

The end of rate parity?

Rate parity practise under review

The UK’s Office of Fair Trading, a government regulatory body which examines business practice and its effect on consumers and industry, is currently investigating complaints triggered in part by hotel booking firm Skoosh in September 2010 over hotel room pricing on travel websites.

British newspaper The Daily Telegraph named three major hotel groups last weekend as being involved (though not confirmed) in the OFT’s investigation – a probe which is looking to establish whether a breach of both UK and European competition law has taken place when hoteliers have asked hotel distributors to charge the same price across websites.

“Rate parity” is frowned upon by many as it restricts the ability to differentiate a product based on price. Others simply call it “price fixing”.

Rate parity law suit UK

Online Distribution Trend No. 5

Tour Operator Business goes online

Rate parity – increasingly hard to maintain

www.expedia.co.uk www.thomascook.nl

www.przeloty.plwww.thomascook.fr

www.opodo.at

www.tui.com/de

.. and here is the reason why maintaining rate parity is an issue

TT Showroom

Thomas Cook IBE

Rate & product comparison of various tour operators

Hotel details with photos and descriptions

Hotel reviews of guests who stayed at the hotel

Why do tour operator products appear on rate comparison site like Trivago?

Internet

Lastminute

Pauschal

Hotel

Ferienwohnung

Charterflug

Flugdaten

Reiseangebote

dynamisch

paketiert

Lastminute/Pauschal

IBE Kernel

Veranstalter-Systeme Hotel

Veranstalter-Systeme Flug

Reiseangebote

TOMA

Reisebüros

Frontend

*

Statische Reiseangebote

Kernel Schnitt-

stelleTOMA

Hoteldaten und Berechnungsregeln

* TT-DataMix – Dynamic Packaging-Modul für Reiseveranstalter, online und offline Vertrieb

Hoteldaten und Berechnungsregeln

Why do tour operator products appear on rate comparison site like Trivago?

How can you avoid rate parity issues with wholesaler products

Internet

Lastminute

Package

Hotel

Holiday apartment

Charter flight

IBE Kernel Travel offers

TOMA

Travel agencies

Frontend

Static travel offers

Situation today:TO send contracted hotel products to TT. These hotel products will be displayed in B2C and B2B distribution channels.

Challenge: In some cases the rate given to a wholesaler are better than the rates shown on the hotel’s own website or other portals.

Option: TO can mark the hotel offers that should only display on B2B channels when the send the contracted hotel products. This requires additional programming on both side but the feature is implemented and available.

… or alternatively:

No more static „Rooms only“ rates

for online distribution!§ §BW Germany: as of 2012: central negotiations of the basic contract conditions as a frame for the

individual hotel negotiations

+

New products of online distribution

What are our options?

38

Pro‘s & Con‘s of various distribution channels

We alone decides on products & distributionNo competitive environment

Limited reach/ contatcsA reasonable marketing budget is a must

Self Distribution

Excellent reachExcellent presence in search engines

Distribution costs hard to controlFew portals for leisure products

Online-Travel Agencies/Portals

Very high leisure travel competenceStill No. 1 booking option for leisure travellers

Relatively high margin / Only limited number of hotels, limited product flexibility

Traditional Tour Operators

Very high leisure travel competenceCan generate demand in need periods

Extremely low profit margin Distribution partner selects hotels

Direct Marketers

Clear distribution structure, 10% CommissionEasy to maintain.

No leisure bookingsNot very user friendly handling & content

GDSs

What leisure products are best sold in which distribution channel?

Self Distribution• Basically whatever we are able to display and sell on our own site• Focus on marketing of exclusive products (Rate but no product parity!)

Online-Travel Agencies/Portales•Straight, simple products, clear rate structure

• Long booking periods, no seasonal products, Maintain rate parity

Traditional TOs• Leisure products , with multiple components, fixed rates, allotments, etc.• No room only rates

Direct Marketers• Products with low profit margin but high volume. No risk of segment mix.• Contracts may contain exclusivity clause. No self distribution of product

possible.

GDS• All standard rates (RATES not products), self explanatory, commissionable• No high revenue expectation

One product for all distribution channels?

TOs

Direct Marketer

GDS/Travel Agency

Online-Travel Agency/Portale

Self Distribution

One product for all distribution channels?

TOs

Direct Marketer

GDS/Travel Agency

Online-Travel Agency/Portale

Self Distribution

We are in the process of creating new products

Best Western Conference Central Europe

Rate Management asthe key component of

Revenue Management

What factors influence our pricing?

The ingredients of pricingThe price differentiationThe market segmentationThe distribution channelsRevenue - Costs = Profit

The ingredients of pricing

Price differentiation

The basis of Revenue Management: Rate Integrity

Price segments

non confidential rates: BAR, SR, Early Web Special

confidential rates: Opaque, Tour Operator, Wholesaler

contracted rates: BBS, BBSL, LCR, Consortia, MICE,

conditioned rates: Packages, Promotions, Gov/Military

Price conditions

Tour Operator Rates

Calculation:

Net rate + Margin = Rate to consumer Gross rate - Commission = Net Rate

Margin approx. 25% off BARBookable via catalogue and various electronic

distribution channelsRelevant for electronic distribution:

Online catalogue rates can cause parity issues with retail & merchant channels

Wholesale Rates

Calculation:

Net Rate + Margin + Margin = Rate to ConsumerMargin min. 30 %, due to higher costs for e.g.

the production of B2B confidential catalogues, payment processes with the intermediaries/re-sellers, production of travel documents, etc.

Bookable via catalogue and various electronic distribution channels , e.g. Octopus Travel

Relevant for the electronic distribution channels of the wholesaler’s B2C portals: rate parity

Wholesaler

Careful evaluation of the cooperation with wholesalers like Gulliver‘s, hotelbeds.com, transhotel etc.

Protect rates by conditioning the publication on electronic consumer portals, e.g. by adding a minimum-mark-up in the contract

Today‘s Online Distribution Landscape

Self Distribution

Retail Portals

GDSs

Merchant Portals

TO Portals

Four elements on your way to a strategic rate and distribution strategy

Four elements on your way to a strategic rate and distribution strategy

Four elements on your way to a strategic rate and distribution strategy

Knowledge is the key

Best Western Central Europe Conference 2011

The“Costs of

Doing Business” Exercise

The costs of doing business

How to re-gain price control

• Establish and improve price knowledge

• Establish, communicate & train price strategy

• Enforce rate conditions on all distribution channels

• Thoroughly examine partner contracts

• Respect framework contract conditions

• Regularly evaluate distribution channels

• Where ever possible: strengthen self distribution

Best Western Conference Central Europe

Revenue Management KPIs

Revenue Management KPIs

The Forecast Calculation

Case Study Forecasting

Best Western Tool for Forecasting

Revenue Management KPIs

The Group Displacement

Calculation

Definition: transient business is being rejected because group business has been accepted

Necessary KPIs: Length of Stay Room Revenue Meeting Rooms Availability/Occupancy/Estimated pick-up F&B revenue

Case Study: The Group Displacement Analysis

Case Study The Group Displacement Analysis

Best Western Tool for Group Displacement Analysis

Best Western Central Europe Conference 2011

Revenue Management Workshop:

THE END

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