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Controlling acquisition costs focus of RSS

Marriott Senior Vice President Shafiq Khan described the biggest challenge facing the hotel industry as “our profitability and the impact of mediation costs.” His comments served as a perfect backdrop for the second Revenue Strategy Summit (RSS) that drew more than 250 people on October 16 at the Affinia Manhattan in New York City.

Speakers that examined the latest trends in hotel revenue, distribution, sales and marketing included executives from brands such as Fairmont Raffles, Host Hotels, Marriott, La Quinta and CitizenM, as well as technology innovators such as Duetto and Adara and industry “disruptors” like tripBAM and HotelTonight.

During an opening panel entitled “Disruption 2020,” Kalibri Labs’ Mark Lomanno made the challenge specific, producing data that revealed the cost of customer acquisition for the hotel industry ranges from 15% to 20%. This compares with 3% to 6% for the airline industry and 4% to 6% in the auto-rental business.

The implication was clear: If the cost of customer acquisition continues to outpace revenues by multiples, hotel profitability will become harder and harder to sustain. In good times for the industry, this will pose a continuing challenge. In the next downturn, it could prove to be a disaster.

Disruptors’ impact 

The core issue remains the role and impact of third-party intermediaries, who are eating into hotel revenues, disassociating hotels from their guests and continuing to remap the booking landscape.

RSS gave three companies a platform to present their visions for making the landscape better — or worse — for the industry.

Duetto CEO and Co-Founder Patrick Bosworth observed, “One of the areas that is most troublesome is the web-booking experience. Consumers want choice, and they are looking at eight to 22 sites and probably visiting [branded sites], too. Yet too many consumers leave the branded site and book elsewhere. That’s a huge missed opportunity.”

Steve Reynolds, founder and CEO of hotel booking site tripBAM.com, offered a vision in which consumers as well as managed travel providers can search the best rates available for any city at any time by selecting a “cluster” of hotels in a particular location, as well as a price to beat. Any time any of the selected cluster hotels’ advertised price falls below the specified price, the traveler receives an alert. According to Reynolds, the process can play out many times for a single search, saving consumers hundreds of dollars — and of course, often forcing the hotels in the cluster to lower their prices several times to compete for the business.

The new innovation was described as a “hoteliers nightmare” by a member of the RSS audience, as Reynolds held out the prospect that the service — already being using by several large travel-management companies — could soon launch for consumers as well.

At the other end of the spectrum, Nor1, a Silicon Valley, California-based company, described a path to generating ancillary revenue by helping hotels upsell premium inventory to interested consumers through a technology that helps send relevant offers to qualified consumers at the most appropriate times.

New disciplines

During a subsequent panel, Cindy Estis Green, CEO and Co-Founder of Kalibri Labs, said, “Revenue strategy is not a fancy new name for revenue management. It’s a new discipline.”

Alise Deeb, senior vice president of revenue management at La Quinta Inns & Suites, supported the contention that in some instances radical steps might be necessary in helping major brands keep up. According to Deeb, “The landscape does keep changing. What’s good today isn’t necessarily good tomorrow. We need more analytics around consumer behavior.”

The RSS concluded with a passionate keynote presentation by Jeffrey Katz, the founder of Orbitz and one-time CEO of Swiss Air. Katz reviewed current threats to the industry and noted that Google should not be underestimated. “Don’t think Google doesn’t understand travel,” Katz said. 

Katz’s advice to hotel innovators in the audience? “Implement a real strategy,” he recommended. “Steady as she goes is a losing strategy. … There are a lot of opportunities and a lot of challenges. Or there is the status quo.”

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