Daniel Sánchez, revenue manager at Paraty Tech, details his experience managing distribution channels. Daniel goes into depth on questions about parity, average prices and the price/quality ratio and clearly states that the revenue manager at a hotel develops a key task at the establishment, as far as the direct channel is concerned.
Average prices. Just how far can they go?
It’s common knowledge that the sector is at a pivotal moment. Nobody doubts this but just like a hotel inventory has a limited share, ADR does too, even if it is harder to recognise it.
Today, the average price of hotels in Spain has reached historic levels. As a result, we run the risk of reducing the quality/price ratio and the client will realise this sooner or later.
As such, we can’t forget that the tourist’s perception of product is the factor that sets the ceiling in terms of average price and, despite the fact the law of offer and demand can lead to us continuing to “demand” with the increase of prices, the service must equip its value to the rate defined. Remember that consumers don’t perceive a clear difference between what a product or service “costs” and what it’s “worth”.
For this reason, large chains are focusing all their sales and marketing efforts on the direct sale. And they have every reason to. This channel is, and will be, the main ally of any revenue manager in optimising profitability as maintaining the rack rate (maximum sale price) will enable a higher net ADR to be achieved and, therefore, better revPAR results.
That’s not forgetting that if the quality/price ratio begins to lose value, this may be damaging in the long run (brand image, degree of satisfaction, loyalty, etc.).
In conclusion, backing direct sales will help to improve revPAR, maintaining a higher RRP (saving on intermediation costs) that does not impact on the hotel’s reputation.
- What do you believe is the key to closing sales?
I have always believed that closing sales appropriately can help make the hotel’s inventory more profitable.
If channels charge commissions of between 15% and 25%, why close all sales at once? Why sell your last rooms on the channel that charges 25% commission if you can do so on your own website at 3%, or any other more profitable channel?
In my opinion, the perfect way to close sales consists of a prior knowledge the product, its demand and the market, and the ability to establish a formula that sets you apart when closing each channel. This is also applicable to opening sales.
In my case specifically, I have always liked leaving the last rooms available for the website and one or two more channels in order to afford them more visibility.
How does technology help revenue managers?
I have spoken a lot on this subject and I could continue for hours more! However, in short, the answer can be defined in a word: TIME.
Hours are needed to monitor the great quantity of information a revenue manager requires to make the right decision. In fact, there is no human way of gathering all the data tools such as PriceSeeker and DMS can offer, especially in terms of external factors that cannot be extracted from our PMS (space occupancy, compset occupancy, ADR of the compset v. your ADR, etc.).
However, I have always enjoyed humanising the profession of the revenue manager, which will always have that element that no machine can provide, despite it being completely linked to technology.
Sell more v. sell better. What do you prefer?
Everyone enjoys seeing inflated numbers, figures that convince the owner or investor that everything is going swimmingly and that they’ll earn a lot of money through the chosen management model. However, often when you sit down to look at the numbers you realise you have sold at a loss or even discredited your brand image just to have a few more Euros in the bank.
I like selling better and attracting quality clients, capturing that valuable market share that appears profitable and in which loyalty can be built. It also provides general revenue that can be used. Above all, I enjoy promoting direct sales, which will is the best and easiest way to reach all of this. Adjusting distribution to achieve this is no mean feat and every hotel will have a different casuistry.
Utopias aside, revenue managers must find the balances between “more” and “better”, and technology will be one of their best allies.