Without occupancy, price strategies are pointless

23/06/2020

webinar-revenue-management

“What strategies and tactics can revenue management use to face a phenomenon like COVID-19?” This question was addressed by the experts who spoke at the 9th #HTSIwebinar organized by the School of Tourism and Hospitality Management Sant Ignasi (URL).

All three speakers agreed that the pillars of Revenue Management (RM) remain applicable, and that “the only change is that new macroeconomic data has been added, such as a country’s reservation levels once confinement is relaxed.” According to Marta Varela, director of Barceló Hotel Group’s Revenue Zone for central Spain and Portugal, this has to do with globalization, which has suddenly become much more latent.

Now, it is extremely important to focus on our target segment. In other words, we need in-depth knowledge of where customers are coming from, and what is happing in destination countries. “We need to focus on locals; not just in Spain, but internationally. We’ll be investing in domestic customers”, Varela stated.

Olga Cherepanova, professor of Revenue Management at HTSI and regional director of Revenue Management & E-Commerce at Comfort Hotel Management, was asked whether it would be possible for Europe to achieve 47% hotel occupancy in 3 months as happened in China. She responded that “Europe will take longer than that—because of the differences between different countries, among other things.”

Trends in how reservations are made have also changed. Now, most are last-minute because tourism is more local, and this has the potential to lead to price wars. Varela believes it is important to restore occupancy; otherwise, pricing strategies are pointless. “Even if prices drop, the demand won’t rise. That’s because the most important thing right now is the safety of customers and workers, safe distances, etc.”

The expert in Revenue Management explained that it will be time to increase prices once occupancy is consolidated, “but if we reduce prices by more than 20%, it will be very hard for us to recover.”

Similarly, Aida Muñoz, director of Revenue Strategy at HI Partners, believes in generating demand. How? By taking consumer behaviour into account and making our hotels more attractive to encourage reservations. “We need to review distribution channels and strategies with tour operators. They provide plenty of customers and make cancellations more flexible”, Muñoz stated. For Varela, REVPAV is key; in other words, “we don’t want occupancy at any cost or high prices and no occupancy.” Instead, we need to encourage profitability.

Olga Cherepanova suggested using creativity as a solution. European consumers have changed quite a bit, so we need to change the tactics used to attract them: “constantly announce hygiene and operational changes on the internet and social networks, encourage cancellation policies, be more flexible about refunds, and make local offers for local customers.”

Muñoz also recommended reviewing whether businesses need post-COVID adaptations like certifications. “We need to let people know our hotel is safe, emphasize our quality, promote our online reputation, etc.”

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