Recently, Revinate sat down with Joris Beerten, Global Commercial Director at OTA Insight to talk about how hotels can and should be thinking about the channels they use to drive bookings and revenue.
Joris is a long-time veteran of the hospitality industry, having started at Hilton as the chief steward of a hotel in Belgium. From there, he moved to Booking.com, where he first realized his interest in and passion for distribution and revenue management. Finally, he joined OTA Insight as their first sales rep, leveraging his experience in the industry to help build the company up to 40,000 hotels across the world. He shared some of the knowledge he’s gained along the way.
Hotels and OTAs are often referred to as “Frenemies”. From your perspective, how should hotels be approaching/viewing OTAs (Online Travel Agencies)? How should they be thinking of them in terms of the overall big picture/in relation to their other channels?
First of all, OTAs did a great job in focussing what was really important for their success: making hotel reservations as easy as possible for the guest. I remember several years ago when I was trying to book on a hotel website and had to fill in six pages before my booking was confirmed, the next day I had to make another booking and I really didn’t want to go through the entire process again, so on Google I typed in “book hotel” and discovered an OTA website, and within five minutes, I’d compared three hotels, seen photos, facilities, the location and review scores, and made my booking. It was so simple!
I think from 2005 to 2012 a lot of traffic switched from hotel websites to OTAs, and for hotels they were great in filling up gaps and giving global visibility. OTAs were delivering business from countries where hotels had not invested in marketing. Sounds great, right?
The OTAs did such a good job that today a large part of the business is coming from them, but there is, of course, a cost of acquisition—a commission—on these bookings. But you get a lot in return, such as marketing and global visibility. I believe OTAs can be great partners and bring in business from different continents. That means longer stays and greater visibility on your properties globally. During low seasons, they can be particularly valuable, with millions of people looking for hotels on their website. I believe it is important as a revenue manager to understand the value of the channels.
For example, let’s say OTA 1 charges a 10% commission and OTA 2 [charges] 15%. At first sight, OTA 1 looks more interesting but maybe after analysing the data you realise it brings business during high demand dates, LOS1 (length of stay: 1 night) business or domestic business, while OTA 2 brings you business during low demand periods, international travellers and longer lengths of stay. Suddenly the image changes. OTA 2 is more interesting, even if they have a higher commission cost.
I believe that, as a hotelier, it’s crucial to understand your business mix and market mix, and make data-driven decisions that create value for your hotel and drive profitability.
You cannot expect that simply connecting with all OTA channels but not managing and understanding them will suddenly fill your hotels during all low-demand periods, and during high-demand days your website will drive direct business. It takes time to understand what channels are bringing what business and how to maximise this in a smart way.
So, more friends than foes but friends that you need to keep an eye on.
What’s the number one mistake you see hoteliers making when it comes to revenue and distribution?
What I think is fascinating about this industry is how quickly the landscape has changed in the past 15 years. Every day there are new ways to sell and distribute rooms and for a hotelier, so it’s kind of survival of the fittest. In 2005 we had the rise of the OTAs, in 2012, the rise of metasearch, in 2016, member rates took off, and we’re now seeing innovations in mobile, voice-search and the like.
But some hoteliers haven’t moved with the times. More need to embrace technology to help make data-driven decisions.
There are so many awesome systems today that can really make an impact on your RevPAR and GOP (gross operating profit). Of course, there’s an associated cost and it might frighten some people to change the way they have been working but so much money is left on the table today.
Another point that can be difficult to understand is that hoteliers often look at the cost of technology. If someone tells me tomorrow “Joris, if you buy this solution for $1,000 it will bring you $3,000, or you can buy this other solution for $1 million and it will bring you $5 million”, you can be sure I will find a way to get that $1 million.
It should all be about ROI (return on investment) and seeing the bigger picture. More and more hoteliers are seeing great results with technology and there is certainly a big increase and understanding from hoteliers, but we still have a long way to go.
What are the most critical KPIs (key performance indicators) that hotel management should be looking at to ensure their success?
One of the most important company objectives is a high GOP. As a manager, you should ask what our company objectives are. If GOP is a company objective, the next question you should ask is which of my department’s objectives influence that overall company objective.
If you’re a revenue manager, your revenue management objectives are probably to drive RevPAR (revenue per available room) and occupancy. Those are RM objectives. You can’t immediately manage them but they influence the overall company objective. You should ask yourself what actions will drive RevPAR and occupancy, [what actions will help drive] other departments’ objectives and what you can do to manage or influence these actions.
KPIs are different for each department. As a revenue manager, you must understand what actions are needed to influence these KPIs, whether it’s connecting to certain OTAs, developing LOS promotions to fill up shoulder dates, marketing campaigns, ensuring an easy booking process for customers on your website or offering incentives for guests to leave good reviews.
What metric are revenue managers not paying enough attention to that perhaps they should, and why? For example, we see at Revinate that guest information provides a rich source of actionable insight, though it’s often overlooked or locked away in the property management system.
I think you guys at Revinate do offer tonnes of valuable data and information. It’s so important that hotels understand their customers and know what they like or dislike. We’re working in the hospitality sector and the customer is king. At the end of the day, customers make or break your business, and all successful companies today take data-driven decisions.
The challenge today for many revenue managers is to find time, as there’s so much data available and so many different systems to analyse. The days when all a revenue manager had to do was load rates and update availability are long gone revenue managers are a key part of hotel management today and what they do is a key factor in driving profitability.
What are the tools that every hotelier needs in their toolbox?
This varies from market to market. If you operate a hotel in the desert, you probably don’t need the same tools as a hotel in New York City. It comes back again to understanding your business mix and how you want to achieve or exceed your KPIs, and what data and insights you need for that.
The best tools help you break down, combine and make sense of information silos. By tapping into real-time data on the likes of your competitors and distributors, and presenting it in a digestible format, these tools also provide actionable insight. This is vital for strategic decision-making. But, as I said earlier, too many hoteliers aren’t using the right tools.
I mentioned before that revenue management is crucial today and a key role in every hotel, and I believe that if a hotel buys a tool they also need to focus on the user interface (UI) and ease of use.
Revenue management is no longer done solely by the revenue manager; it should be part of the hotel’s culture, and there are great tools that will also help to give front office insights on what the market is doing in case they get walk-ins or tools that show sales managers all the wholesale rates that are undercutting their own brand.com prices on higher demand dates.
Good technology is cool and gives you what you need but great technology makes lives easier and helps you to make smarter revenue and distribution decisions.