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Revenue challenges in a COVID-19 world: the changing roles and opportunities for ecommerce, technology integration and revenue management

Revenue challenges in a COVID-19 world: the changing roles and opportunities for ecommerce, technology integration and revenue management

Hotel distribution is reaching a crucial point according to Andrew McGregor, CEO of Guestline, with power and control shifting significantly to those who maximise e-commerce and let guests take control. Industry trends have been intensified and accelerated over the months of the 2020 COVID-19 pandemic and the consequence is, in fact, easier routes to doing business for the hoteliers who embrace these changes. 

Left without a source of revenue for many months during the COVID-19 outbreak, hotels planning for their future are reassessing how they make money and the level of investment placed into technology to achieve this. The stark impact of enforced closures has meant that on-premises software that constrains innovation and cannot be accessed remotely has a very limited future. 

Spurred on by the accelerated changes brought on by the pandemic, those hoteliers who were slow to embrace the digital revolution, are arguably now becoming some of the fastest adopters of the integrated technology tools on the market to drive revenue. Operating hotels on integrated technology platforms require change and new ways of working. But many of the trends impacting the market faster than before are also forcing these changes. 

Shifting from space to e-commerce – maximising profit in the hotel industry of the future 

Revenue per available room (RevPAR) is the dynamic that hotel industry distribution is built on. However, operating on a room revenue basis is challenging for hotels, especially in this new world where occupancy levels may take a long time to return to pre-COVID-19 levels. McGregor is working with hotels to ensure they can demonstrate more creativity and sell more than rooms and he believes that the future is about offering a portfolio of services via improved e-commerce platforms.

He explains, “The world has fallen sharply into an economic downturn, with both financial and health and safety reasons significantly impacting travel. Hotels need to take a holistic view of what contribution to their revenue rooms bring, and explore opportunities for other sources of income. The key factor for recovery is to really understand how to access new customers directly, and how to access the additional revenue they may bring outside of just a room stay.”

With huge industry changes come the need for re-thinking traditional roles in the hotel sector. McGregor continues, “The role of the revenue manager is changing. These skills will need to shift towards customer acquisition and looking at the value of each stay. The guest interaction with a hotel’s e-commerce platform should be about much more than a room booking engine on the website. The world is moving more direct and there are so many other elements that can be monetised within a strong e-commerce platform that are beneficial to the guest. For example, booking tee times for the golf course, adding spa treatments to a stay, reserving restaurant tables and more. With each of these transactions is also an opportunity to prompt an upgrade or even think about where to add more in-room experiences.”

The message to hoteliers from McGregor is all about embracing incremental income. “There is a long way to go in the hospitality and travel sector to ensure that everyone is thinking with an e-commerce frame of mind. This means being focused on how to achieve the maximum basket size and delivering a multi-product offer, not just considering how to sell rooms.” In fact, some big spenders may not stay in a room at all, a concept that certainly wouldn’t be the norm pre the COVID-19 pandemic.

Changing roles for revenue management technology – addressing more than inventory 

What these trends – be they short or long term – have shown, is that the hospitality sector is dependent on flexible technology that can empower swift changes without a huge investment. 

McGregor notes the explosion in the market of new revenue management systems over the last three-four years with clear caution. “All these new systems are based on trying to identify the optimum room rate to maximise sales. But increasingly the room rate isn’t the only important factor. You can discount a room rate and still make money on food and beverages. There are limited tools that can pull together the data and give a true picture of the revenue from a booking. And there are even fewer tools that consider the varying costs of acquiring that revenue and can, therefore, optimise a hotel’s business to maximise profit. With the fragmentation of distribution channels and the growth of direct, each at different ‘commission’ costs, understanding and determining decisions to drive profit will become much more important.”

Revenue management is fragmented. Much existing technology is all about generating revenue from one function of the hotels such as rooms, meeting space or restaurants. McGregor is passionate that this level of segmentation is too much and that there needs to be a pricing approach that takes into account all the elements in order to allow hoteliers to play around with the components that mix together to generate revenue. “The future of revenue management is about looking across all of the revenue streams with the goal of maximising spend per stay or per guest. Hotels need to understand the cost of acquisition per client, and use that data to inform their pricing.” 

As well as integration, technology investment for hoteliers is also about efficiency. When hotels are finding ways to operate with fewer people, then there is a reality that dealing with fewer suppliers is also one way to drive efficiency. McGregor’s belief is that the technology partners who can offer more complete solutions will be easier for hotel businesses to manage and work with long term, rather than having to juggle multiple different relationships. 

The movement to direct – the changing hotel distribution channels and patterns 

For some time hoteliers have sought to increase the direct share of bookings and to find new and creative ways to compete with OTAs who are trying to become the point of loyalty. Over time hotel booking has shifted from being via a tour operator using a global distribution system (GDS), to guests self-servicing their booking either via an online travel agent (OTA), or direct. The market challenges presented in 2020 have also seen hoteliers thinking about preferences in long term partners due to how they have been supported, or otherwise, during the COVID-19 pandemic. 

McGregor explains, “In this environment, we hear from hoteliers who are upset with some of the OTAs for the lack of communication and accurate information, let alone support, during these most difficult of times. However, platforms such as Google have been reaching out and are keen to aid hoteliers in developing more direct relationships. The future of the distribution mix had already been changing. This is certainly something that we see continuing with a little more pace than before.”

Of course, in a trading environment packed with risks, hoteliers are keen to ensure their distribution reaches many different channels. But they are very clear about only focusing investment – time and capital – into the channels that they believe can work for them into the long term. As direct sell continues to grow, guests demand more and different services, commonly with an element of flexibility. Hotels can deliver this when they own the relationship, especially as the e-commerce opportunities from mobile devices are brought into the mainstream. 

Maximising the return on investment for integrated technology isn’t the hard bit for those who embrace the opportunities it brings. McGregor sums up, “Existing market trends have converged with a dramatic event that has fundamentally changed how people experience travel and hotels to create an interesting crunch point. In a COVID-19 world, hotel guests demand certain things to protect their wellbeing. For hoteliers, the key is implementing these new services in a manner that also opens up routes to offer new services and revenue opportunities. Those who empower guests to take control will lead the market.”

Hospitality’s catch up – the central role of mobile devices in contact-free hotel experiences 

For some years international travel has normalised using mobile devices for check-in, we all think nothing of checking-in for flights via our phones and using our phones to move more efficiently through airport security and plane embarkation. Compared to other areas in the leisure and travel industry, hotels have been playing catch up. Digital check-in as part of a hotel stay was starting to emerge but was not mainstream. 

Replacing front-desk processes with letting guests take control of check-in from their phone is just one area in which hotels re-opening in a COVID-safe manner are speeding up the implementation of these trends. Guests complete pre-registration ahead of arriving, including providing their credit card details, and their phone alerts them when their room is ready, and also acts as their key.  

Contactless check-in is one way in which hotels are safer for guests and staff alike as the world navigates operating alongside COVID-19. Long term, McGregor expects a solution that offers a combination of the two. “The hospitality industry is about people and we should expect to see a hybrid experience where there will be some face-to-face time, but check-in will move away from being about data-capture and information, becoming focused on service and welcome alone. Guests can complete all the detail elements online prior to their arrival, and it isn’t just about saving time, it’s about enhancing the experience.”

There are also considerable opportunities for e-commerce as mobile devices become a more important component in a hotel stay. For example, in the way that airlines offer merchandising during the downtime of a flight, a hotel can do similar during the duration of a stay. McGregor adds, “Consumers have certain expectations of e-commerce, it’s how they spend in the rest of their lives, and so the big challenge for hoteliers is moving to think about driving up the basket size rather than revenue per square foot.”

Responding to new ways of working – new trends for the hotel industry 

Working from home is now the norm for almost all areas of industry where it is possible, and some of the world’s largest businesses have publicly stated that they are reviewing if they will have offices in the same way in the future. A worldwide pandemic has fundamentally changed how many of us expect to work. But, it has not changed the human need for social contact and for teams to want to collaborate face-to-face from time to time. 

“Hotels have an opportunity to become environments where teams meet, in a world where fewer businesses have any physical presence” explains McGregor. “Co-working spaces were extremely popular pre-2020, and hotels are able to use their meetings and event spaces creatively to offer something similar, with the addition of traditional – and desirable – hotel services. This is not an entirely new trend, but the impact of the COVID-19 pandemic has caused a significant acceleration in what both consumers are looking for, and where hotels can pivot their business. It’s all about finding routes to make the spaces and services within hotels work hard in this new world.”

Again, McGregor is keen to point out that this is a required shift for hospitality professionals and how they move to think about their businesses away from room inventory and towards e-commerce. “Cost of acquisition and how to drive repeat business should be really important factors to hoteliers when evolving their portfolio of services, rather than assessing returns on room bookings alone” he underlines. 

Technology adoption in the hospitality sector – the integration of tools

Driving for efficiency is always a business mantra for independent hoteliers, but legacy systems can get in the way of achieving this. As guests demand more control over both their booking and their stay, and hoteliers look to increase their e-commerce potential, the role of integrated technology is becoming more high profile. 

“In the hotel business, it is common that you cannot check out over breakfast, as the team in the restaurant don’t have access to the technology system that sits at the front desk.” Outlines McGregor, who strongly advocates that having technology fixed to certain locations is business limiting. “Freeing up static points within a hotel reduces elements of frustration and congestion for guests, 

Integrated technology throughout a hotel may require investment, but longer-term it allows greater flexibility for business owners. People only have to be trained on one system, and can operate in any area of the hotel. Converging devices means that hotel workers can work from one device, that accesses any function or service in the hotel. Importantly, guests can also access offers or upselling options wherever they are in the hotel, or via their mobile device.

“Such technology systems are user friendly and simple and so it isn’t about technically upskilling people to use them, it’s about training them to think differently and see new opportunities to sell” explains McGregor. “The unprecedented situation the hospitality industry finds itself in is also creating new opportunities for hotels to think more broadly than rates and rooms. In fact, it is driving a whole new sophisticated approach to upselling. There is a real need for consistency in the guest-facing technology and the physical experience – omnichannel hospitality is critical.”

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