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Segmentation and Psychographic Profiles in the New Media “Continuum”

Segmentation and segmentation strategy in the hospitality industry vary widely. Even as you identify psychographic profiles and segments for your target customers, keep in mind that there are often sub-segments within larger segments. It’s pretty complex, but Professor Bill Carroll recommends viewing segmentation as taking place within a “continuum”.

Here, Professor Bill Carroll from Cornell’s School of Hotel Administration discusses market segmentation in depth. This video is part of eCornell’s free online course Marketing the Hospitality Brand through New Media: Social, Mobile & Search. This course is your virtual toolkit for driving revenue through new media. It’s 100% free. 100% online.

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The Cheapest and Best Approach to Overbooking

This week’s theme on the Hospitality Blog is overbooking. Here’s an exercise taken directly from my eCornell course Overbooking Practices in Hotel Revenue Management. The overbooking-ratio method is a very, very popular and successful method that many hotels use for their overbooking policy. When you’ve completed this exercise, be sure to download this free step-by-step guide to overbooking. 

Now, sometimes people talk about overbooking as being evil. Why would anyone ever overbook, because that’s not fair to the customer? Let’s think about this. If you never overbook—you say that I’m a good and pure person, and I would never, ever do anything like that—what happens if you have a 5% no-show rate?

You have those rooms sitting there empty—it actually might end up costing you more than if you overbook just a little bit. And so when we try to look at overbooking, we try to come up with the least expensive overbooking policy, realizing that whatever we do with this, we’re still going to be making a guess. It’s kind of like gambling—we’re going to come up with a forecast of how many no-shows, and come up with our best bet on what the overbooking policy should be. So, when we look at coming up with an overbooking policy, there are more than several factors to consider.

Read More

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Revenue Management Strategy: Demand-Control Charts

No matter what size hotel you work in, all successful revenue management strategies are based on the ability to forecast demand accurately and, therefore, predict the optimal rate based on that demand. This is where a demand-control chart can come in handy to help determine when to change your rate based on demand, separating the “hot” zones (high reservations-on-hand) from the “cold” zones (low reservations-on-hand). Knowing how and when to use a demand-control chart can enable you to plan your room rates for top revenue every time.

Demand-Control Charts

The major use of a demand-control chart is to help determine when to change your rate based on demand. When your forecast, or estimated demand, is above a certain level, you will close (or raise) room rates. When the forecast is below a certain level, you will open up (or lower) room rates. Similar to most approaches to setting rates, this one has advantages and disadvantages.

Advantages

  • easy to use and implement (a simple spreadsheet will do)
  • can be applied to other parts of the business (ballrooms, restaurants, etc.)

Disadvantages

  • does not consider length of stay
  • lumps all demand together even though different market segments might have different demand

Steps in Creating a Demand-Control Chart

To develop a demand-control chart, we develop the forecast, determine trigger points, and then determine the minimum rates to quote.

1. Develop the Forecast

The best way to develop your forecast is based on past experience. Take a look at your reservations from the last several years. What was your demand? What was your actual occupancy? Using historical data, you can make a pretty good prediction, or forecast, for what the demand will be for the future.

For example, you may calculate the forecast for each day for the next few months based on the same days for the past five years. The demand-control chart to the left shows the forecast for a 250-room hotel for part of the month of June, in both numbers and percentages.

2. Determine the Trigger Points

Trigger points signal the opening or closing of a rate class—the hot and cold periods. If the forecast predicts that demand will be above a trigger point (a hot period), close (raise) the appropriate rate classes; if predicted demand is below a trigger point (a cold period), open (lower) the appropriate rate classes. Your firm may have multiple trigger points. For our example hotel, our trigger points are:

  • Cold Period: 70% occupancy or below
  • Hot Period: 100% occupancy or above

3. Determine the Minimum Rate

Determine the minimum rate to quote based on the forecast and trigger points. In this chart we have two trigger points: 70% and 100% (which makes 71%-99% occupancy our Warm Period). For each hot, warm, and cold period, you will want to determine your minimum rate.

  • If our forecast is under 70%, it’s cold and we set the minimum rate at €250.
  • If the forecast is hot, the minimum rate is €425.
  • If the forecast is between 70% and 100%, it is a warm period, and our minimum rate is €325.

Develop Your Own Demand-Control Chart

Try your own hand at developing a demand chart for your hotel to get a better understanding of how you can easily and simply predict demand and determine the best pricing strategy for you. Click the thumbnail to the right to download the Demand-Control Chart used in Dr. Chris Anderson’s eCornell course Price and Inventory Control. It has already been filled in with example data to get you started, but you can easily plug in your hotel’s forecast, determine your own trigger points, and set your minimum rates depending on your hot and cold periods.

Note: The demand-control chart is a spreadsheet in .xls format and opens best in Microsoft Excel or OpenOffice Calc.

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The Dos and Don’ts of Length of Stay

How far in advance can you predict demand for your hotel? In hotel management, we continually stress the importance of creating demand, rather than simply responding to it. How to do it?

Well, proper use of length of stay controls during high-demand periods enables you to control customer demand, plan for the future, and maximize revenue.

Minimum Length of Stay

When to use

Minimum length of stay can be used at any hotel where there will be a period of high demand (a string of busy nights) followed by a period of low demand. Some example scenarios are: a resort hotel over a winter holiday or any hotel in the vicinity of a major national festival or conference.

What to do

Implement a rule to accept longer-duration reservations and reject shorter-duration reservations for arrival during a hot period. That way you can fine-tune demand during hot times to increase occupancy during the slow period that follows.

Potential problems

You may not have anybody who wants to stay longer than the minimum you have in mind. Also, your guests may decide to leave early.

Requirements

Be sure you have sufficient demand for longer lengths of stay. Otherwise, use of this control could have a detrimental effect on RevPAR instead of improving it.

Maximum Length of Stay

When to use

This control is used when you are expecting to be able to sell out your rooms at higher rates. Using maximum length of stay, you can limit the number of rooms sold at large discounts during the high rate time period by limiting the (discounted) multi-night stays extending into that time period.

What to do

Do not accept reservations at specific discounted rates for multiple-night stays extending into the sold-out period. To do this, use the start of the sold-out period as a guide to determine the maximum length of stay allowable for discount customers. To accommodate guests who would like to stay at the hotel longer than the maximum length, it is possible to charge two rates: the discount rate for nights up to the maximum and the rack rate for subsequent nights.

Potential problems

Your guests may decide to stay longer. By law, you can’t force them out of their rooms.

Requirements

Be sure you have high demand. Otherwise, you could decrease RevPAR instead of improving it.

Closed to Arrival

When to use

This control can be used to restrict arrivals during a time when you expect to reach maximum occupancy through guests staying on at the hotel for multiple nights (through “stayovers” as opposed to through new arrivals). Using this control would only make sense if you believed you would achieve higher occupancy by selecting a particular set of guests (i.e. those arriving before the closed-to-arrival date).

What to do

Do not accept reservations for arrivals on the day in question. Allow guests staying through from previous nights only.

Potential problems

Be very, very careful with this control, because using it will have an impact on the day you’ve closed to arrivals, and the day after, and the day after that. You may end up improving revenue on some days, but decreasing it on others.

Requirements

Be sure you have extremely high demand.

Fill Your Hotel

To better understand how length of stay controls actually work, we suggest you try your hand with the interactive activity, Fill Your Hotel, used in eCornell’s course, “Forecasting and Availability Controls in Hotel Revenue Management,” taught by Dr. Sheryl Kimes. This activity simulates a length-of-stay tool as it relates to variable demand and overall occupancy rate. Learn how you can not only predict, but control for your hotel’s demand.

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100% Occupancy? Let’s See If You Can Achieve It

Price and duration, or length of stay, are the two fundamental levers for revenue management. Successfully striking a balance between the two by managing length of stay is how you get your hotel closer to full occupancy.

See if you can achieve 100% occupancy in our Fill Your Hotel simulation by clicking the game below.

There are several different types of length-of-stay controls. One thing you might want to use during a busy period is called a “minimum length of stay.” Let’s say you have four busy nights and that you’re going to have some slow periods. You’re trying to decide which reservations to accept at the beginning of those four busy nights. If you have people who are willing to stay four nights, you’re going to be a lot more open to having them at your hotel than someone who’s only willing to stay one or even two nights.

Of course, leveraging length-of-stay controls is a delicate proposition: The last thing you want to do is turn away demand to the point where you end up with empty rooms.

To better understand how length-of-stay controls actually work, we suggest you try your hand with the Fill Your Hotel simulation, used in eCornell’s course, “Forecasting and Availability Controls in Hotel Revenue Management,” taught by Dr. Sheryl Kimes. This activity simulates a length-of-stay tool as it relates to variable demand and overall occupancy rate.

 

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The Crystal Clear Benefit of an Opaque Selling Strategy

Opaque online travel agents, which we call opaque OTAs, have recently become an integral part of many hotel properties’ distribution strategy. To clear excess inventory, hotels sell rooms at reduced rates via OTAs, hoping to reach price sensitive customers, while simultaneously selling rooms at “normal” rates to regular brand loyal customers via their traditional channels, including their own websites.

In this report we outline a simple model for setting multiple prices and booking limits at Priceline. Learn how an opaque selling strategy can increase your bottom line through the same advanced revenue management strategies as taught in Dr. Anderson’s eCornell series called Advanced Hospitality Revenue Management: Pricing and Demand Strategies.

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Increase Your Brand Site Bookings with The Billboard Effect

When it comes to online distribution, hotels typically prefer to sell rooms through their own websites. Third-party sites, particularly those of online travel agents (OTAs), tend to be seen as competitors in terms of distribution—even though OTAs are instrumental in filling rooms that might otherwise go unsold.

When hotels are able to increase brand-site bookings by listing with an OTA, they are essentially tapping what’s called the “billboard effect.” This reservation benefit enables hotels to quickly tap wider markets through alignment with the right third-party OTAs.

For example, Intercontinental Hotel Group listed their properties on Expedia during the summer months of 2009-2011 and saw increases between 7% and 26% in reservations through their own channel. And remember: These are brand-site reservations that are increasing, not reservations made on the OTA sites.

Dr. Chris Anderson, an associate professor at Cornell University’s School of Hotel Administration, had published a small test of the billboard effect’s on the hospitality industry in a 2009 Center for Hospitality Research study. Now Anderson is back with a new and considerably larger analysis. And it confirms the power of the billboard effect in gaining additional brand-site bookings for hotels listed with OTAs.

Click here to receive both the original and expanded research studies from Cornell’s Center for Hospitality Research and learn how you can quickly increase your brand-site bookings through OTAs.

 

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Recapping the Effect of Online Reputation on Revenue

Last week, Revinate and eCornell co-hosted a webinar that outlined five ways hotels can improve their online reputation. By measuring their reputation management efforts, involving the entire operations team, and tying compensation rewards to reputation achievements, hoteliers will see improvements in their overall guest satisfaction scores and, in turn, will receive higher review ratings. In case you missed this informative session, you can listen to the recording and view the presentation deck.

As our Cornell University co-host published in a recent study, proactive online reputation has a direct impact on your hotel’s revenue; their Center for Hospitality Research (CHR) report shows that a one-point increase in a hotel’s average user rating on a 5-point scale makes potential customers 13.5% more likely to book that hotel. Moreover, hotels with great online reviews can charge more than those that do not rate as high. Finally, hotels that use social media for service and engage in the space to surprise and delight customers earn more positive guest sentiment scores, which positively effects hotel revenue .

As mentioned during the webinar, eCornell has, in partnership with Cornell’s School of Hotel Administration, developed 14 professional certificates and 38 courses in hospitality management. Among them is the new Hospitality Marketing & New Media Strategies for Revenue Growth. This course in new media marketing, called Marketing the Hospitality Brand through New Media: Social, Mobile & Search, is free and open to all.

Revinate received a number of questions that came in during the session via live Twitter chat that are answered in greater depth here:

How again can property management be awarded bonuses or compensation benefits for better online reputation?

By paying close attention to Revinate‘s guest satisfaction (Gs2) reports, hotels can leverage aggregated hotel review data to set goals for hotel staff to meet across all functional areas. Overall guest sentiment scores, for example, can make a valuable incentive for hotel general managers. Department heads could be awarded bonuses based upon departmental sentiment, while front desk managers could be given goals around response time or social media management. To learn how social media will change hospitality compensation plans, have a look at our blog post on the topic.

What are some ways that hotels can involve their entire hotel team when it comes to online reputation management?

A few ideas that we covered during the webinar included having your front desk employees engage with guests on social media to maintain responsiveness or offering spot bonuses to employees who are recognized by name in online reviews. To ensure that all employees see this feedback, one of our webinar attendees shared that her hotel posts all positive reviews in employee elevators, locker rooms and cafeteria. Ideas like these will guarantee staff involvement and engagement.

Is there any data available that is focused on the limited service or economy hotel sectors? A lot of the studies discussing the relationship between online reputation management and property performance seem to focus on the luxury segment.

While the Cornell Center for Hospitality Research study showed a direct relationship between revenue per available room and online reputation scores, the report did not include the economy segment. Nevertheless, the study showed that revenue grew by chain scale from the top down: A 1% boost in reputation led to a .49% increase in RevPAR at luxury hotels, .74% at upper upscale, .83% at upscale, 1.13% at upper midscale and 1.42% at midscale. Moreover, about 20% of Revinate’s 15,000+ customer base fall into this limited service segment and firmly believe that online reputation is equally, if not more important, in the category.

re-posted via the Revinate blog.

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7 Ways You Can Use Vine to Market Your Hotel

It’s been nearly a month since Twitter launched its new video-sharing mobile application Vine, and it’s not just individuals taking advantage of these six second looping video clips, companies and hotels are joining in this new marketing opportunity too. This app, which is currently only available for the iPhone and iPod touch, allows users create videos which can be straight shots or stop-motion format (which is very popular) with no editing capabilities. Similar to Instagram, the videos can be tracked by hashtags and subject matter as well as Vine’s 12 organization categories such as food, travel, and even how-to.

In just a few weeks, one of the major groups to attach to the new app is not surprisingly travelers, many posting brag-like videos of how great their hotels are. Six seconds can capture an entire tour from the front of your building, through the lobby, into the bar, into the room, and even a view from the balcony. Of the 30 or so videos I watched, at least ⅔ of them showed the bathroom amenities.

So how can you use Vine to market your hotel?

1. Virtual Tours

Make them yourself or encourage your guests to make them and tag your hotel to show off your space. You can do this with your different guest rooms, ballrooms, dining facilities, and even fun things to do around the property.

2. Welcome Message

Record from the point of view of an arriving guest to show prospective customers what a warm welcome you give the second they arrive at the front of the building.

3. How-To

Serving a special drink at the bar or specialty dessert at dinner? Try filming a short “how-to” make it and post it for all your guests so they can take their experience home with them.

4. Daily Menu

Why just post your beautiful nightly specials in just the printed menu? Why not show them off in a short series of styled stop motion videos to give guests something to think about all day?

5. Weather Reports

First thing in the morning, hop outside and film a few views from your hotel to show what it’s going to be like outside that day.

6. Contests

Ask your potential guests to submit their own Vine videos under a certain theme like “what is love” or “fun in the sun” and award the best video with a weekend getaway.

7. You: Behind the Scenes

Take the opportunity to show off your employees doing what they do best. Show off a little personality and you will humanize your brand and give customers a reason to connect emotionally with you.

While it is just starting to find it’s legs in a crowded media market and it’s unknown whether it will stick around, Vine is quite an entertaining opportunity to engage with your customers. Have you already jumped on the bandwagon? How are you using Vine? Or, if you’re new to the game, how would you use it to market your hotel?

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Responsive Web Design, Demystified

Background

The explosion of the mobile and social media channels and the emergence of the new tablet channel present a major challenge to hotel marketers: Creating and managing digital content across three distinct distribution and marketing channels (desktop, mobile, tablet), as well as publishing the hotel’s latest special offers and promotions on the hotel’s social media profiles.

Over the past few years, industry experts have projected staggering growth rates in leisure and unmanaged business travel bookings via the mobile channel: from $753 million in 2011 to $1,368 million in 2012 (PhoCusWright), and have advised hoteliers repeatedly to embrace the mobile channel.

And yet, a careful analysis of industry statistics and projections reveals a very interesting picture that not all hoteliers fully understand: The majority of “mobile” bookings, room nights and revenue are generated by tablet devices such as the iPad, Samsung Galaxy and Google Nexus, not by “pure” mobile devices like the iPhone and Android- and Windows Mobile-based smartphones.

According to Google’s data, 7% of all searches now come from tablets, vs. 14% from mobile devices and 79% via desktops (2012). Google projects hotel queries from tablets will increase this year by more than 180%, while queries from mobile devices will jump by 68% and desktop searches will decline by 4%.

Online travel consumers and Internet users in general exhibit a variety of behavioral patterns when browsing the Internet. For all practical purposes, the desktop, mobile device and tablet address different needs at different times of the day and week. According to Google, users searching Google utilize:

  • Desktop during the day (office)
  • Mobile during lunch break + happy hour
  • Tablet later in the evening when lounging, i.e., the tablet is a “lounging” device

The New Multi-Device World Requires New Solutions

In this multi-channel, multi-device world in which we live, hoteliers are overwhelmed by the variety of marketing and distribution channels and devices on which they need to establish and maintain a presence. It is difficult for many properties to keep their “old fashioned” desktop website up-to-date, let alone  the three different versions of the property website necessary today to accommodate the unique usability and content requirements in each of the three distinct device categories: desktop, mobile (smartphone) and tablet. This is why some hoteliers are becoming receptive to the “one site fits all” solution promoted by some web design vendors.

Many web development vendors with no experience in hospitality have been promoting Responsive Web Design (RWD) as the recommended approach to provide optimal viewing experiences across a wide range of devices, from desktop to smartphones. Coined by author and web designer Ethan Marcotte back in 2010, RWD has become a favorite sales pitch topic in the industry of late.

In my view, for content-rich and revenue-focused websites like the hotel website, fitting the desktop website into different screen sizes, achieved via traditional Responsive Web Design (RWD), is not good enough.  Just imagine using simple responsive design and trying to fit Marriott’s desktop website (Marriott.com) and all of its 22,700,000 pages indexed by Google onto the iPhone 4S’ 640×960 screen, or even into the iPhone 5’s 640×1136 screen. Or fitting all of NewYorkPalace.com’s 22,200 pages into a Samsung Galaxy S’ 480×600 screen. Obviously, this is an unmanageable task.

Hotels should serve the correct website content for each device category (desktop, mobile, tablet) while ensuring the maximum user experience, relevancy of information and conversions. This is achieved via RESS (Responsive Design on Server Side), the next generation of RWD. This is why here at HeBS Digital, we do not use simple RWD capability for content-rich, revenue-driven hotel websites. We recommend the use of RESS instead.

RESS vs. RWD

The main difference between RWD and RESS is the type of web content served in the different devices: desktop, mobile (smartphones) and tablet. The traditional responsive design (RWD) will serve the desktop website across all devices while attempting to optimize the “viewing” experience. This may work for some small, non-revenue focused websites.

Responsive design on the serve side (RESS) will serve different content on different devices thus addressing not only the viewing experience, but also the critically important issues of relevancy and type of information presented to the user, and the visual presentation of the hotel product; while achieving maximum user experience, conversions and website revenue in the process.

Further analysis of online travel consumers and the unique characteristics of each of the “three screens” explains the need for specialized content on each device, and why fitting the desktop website into the smartphone screen or the hi-res touch screen iPad is not a smart idea after all:

Desktop users

The traditional “desktop” travel consumers need as much information as possible, including a minimum of 25-50 content pages per property and another 50-100 specialized marketing and landing pages featuring special packages, promotions, and events. Desktop users also place high value on visual galleries with photos and videos, customer reviews, and other in-depth information.

Mobile Users

The always-on-the-go mobile traveler requires short, slimmed-down content with an emphasis on property location, area maps and directions, real time “smart rates” and availability, an easy-to-use mobile booking engine, and a click-to-call property reservation number. Due to usability and security issues, six of every ten mobile bookings actually happen via the voice channel. Very few people are comfortable entering their credit card information into their iPhone in a public place. Very few hotel mobile websites provide an alternative to guaranteeing your booking without entering your credit card.

Tablet users

Tablet users require deep, visually enhanced content about the property and its destination. A well-structured, highly visual hotel tablet-optimized website can generate conversion rates several times higher than those of mobile devices. In contrast, tablet users have no issues booking a hotel via their device. A well-structured, highly visual hotel tablet-optimized website can generate conversion rates several times higher than those of mobile devices. Across HeBS Digital’s hotel client portfolio, tablets generate 200% more room nights and 430% more revenue than the “pure” mobile devices:

Sources of Traffic and Bookings by Device Category in 2012

Source

 Pageviews

 Visits

 Bookings

 Nights

 Revenue

Mobile

10.46%

13.98%

2.64%

1.79%

1.11%

Tablet

8.75%

8.52%

5.52%

5.24%

5.84%

Desktop

80.79%

77.50%

91.84%

92.97%

93.06%

Total

100%

100%

100%

100%

100%

Apple’s iPad rules the tablet world: More than 91% of tablet visitors, 96% of tablet bookings and 98% of tablet revenue come from iPad devices.

Recommendations

The desktop, mobile and tablet devices and their respective marketing and distribution channels should be treated as separate device categories. Three distinct device categories constitute the “Three Screens” to which hoteliers should pay special attention in 2013: desktop, mobile and tablet.

In 2013, upgrade your website technology to the next generation of Content Management System (CMS) to enable:

  • Management of desktop, mobile and tablet website content (copy, photos, special offers, events and happenings) via a single centralized dashboard.
  • Adopt Responsive Design on the Server Side (RESS), which enables specialized/different content to be served on different devices – addressing not only the viewing experience, but also the critically important relevancy of information and visual appeal of the hotel product, and achieving maximum user experience and conversions in the process.
  • Use analytics tools such as Adobe Omniture SiteCatalyst to determine contributions from and the dynamics of each of the three channels.

Of course, all three device channels must be integrated in the hotel’s multi-channel marketing strategy.