The “new normal” obliges the hospitality sector to take decisions based on data as rapidly and efficiently as possible. Historical data, basing prices on previous year demand has become obsolete requiring revenue managers to gain a deeper understanding of market performance to attribute relevant pricing to secure the right occupancy.
Travel demand forecasts provide insight of the different market segments, and by understanding segment demand you can respond with the most relevant products and marketing actions. The importance of segmentation resides in the fact that a product can have a different value for each type of client, allowing you to flex your price by customer-type. This makes it all the more necessary to develop a micro segmentation oriented towards price personalisation.
Historical data still provides product insights
While historical data won’t help with pricing it is particularly useful to glean information and insights on your guest segments and booking behaviours. Although we will see some traveller behaviours change, this data enables us to make informed decisions to drive profitability
● Which are the most profitable segments for your hotel?
● Use objective metrics on the level of revenue generated per segment: ADR, Revpar, breakfast rate, Total Revpar, etc
● Review metrics associated with the costs of each segment: average length of stay, sales by channel, average commission etc
● As well as other indicators that help you decide marketing actions for each segment: lead time, conversion rate in each channel, cancellation ratio etc
Pay attention to the domestic market
First we will expect demand at the local and regional level as the travel restrictions are gradually lifted. We can anticipate that international travel will take some time to be allowed. That is why we must consider our domestic market first. Review your distribution strategies, choosing intermediaries with direct access to these travellers and focusing marketing messages for your domestic market.
● The Staycation will return stronger, while some families have seen their purchasing power decrease, they are likely to choose a proximity stay, before giving up on their vacations entirely.
Don’t forget the corporate segment
First of all, you should not lower the rate of current corporate accounts, this reduction will consolidate quickly, and it will be difficult to recover the pre-crisis price level. Put the emphasis on the value offered by your brand and your service, especially the new safety and health protocols you have implemented, as well as additional services on arrival, in-room amenities, upgrades, late check out, etc.
Keep abreast of client travel intentions and renegotiate accounts. Consider short-term flexible conditions to attract new accounts that can be revised after a few months, allowing you to adjust to changes in the macroeconomic situation. Keep in mind that work-related travel will be the first to be allowed domestically.
The unpredictable MICE segment
The MICE segment has become one of the greatest uncertainties for the future. The market will have to rethink the need for each event and focus on those that are truly profitable and can be carried out in safe sanitary conditions.
The MICE sector foresees that small and local events will recover first, and that the rest will be conditioned by best practices that are implemented. Many recommendations have already emerged from the Convention Bureaux and other organisations: from health safety and social responsibility, to the flexibility of booking conditions and an effective communication plan.
What about group business?
From now on we can start thinking about the group business strategy for the future. It is difficult to make an accurate forecast at the moment, but you can analyse your history and get in touch with your regular clients. It is important that you keep an eye on business opportunities and make sure someone available from your team is always available for requests for information, even if your property is closed.
Each group works as a different customer and the purchasing behaviours vary from one to the other and therefore they must be considered independently. If you already have this detailed information on your past groups, you can somewhat anticipate the behaviour of this segment in the future.
Use rate fencing efficiently
Micro segmentation allows for personalised pricing. In this sense the analysis of competitive positioning using an index provides the insight of what price each traveller is willing to pay for a particular level of integral quality. By offering each guest the price they expect increases the probability of sale.
Pay special attention to rate fences, to avoid cannibalisation of rates. Ensure you have clear reservation conditions and offer alternate packages. The difference between one rate and another must be a benefit for the hotel and an advantage for the customer;
● Physical fences: differentiating the price based on the physical characteristics of the product, e.g room types or attributes
● Non-physical fences:price differentiation based on the different needs and buying behaviours of the traveller, e.g booking window, LoS where you can use sales restrictions for profitability
As many countries begin to relax lockdown conditions this is the time to design a plan for the different segments, and establish proactive measures to respond to possible demand scenarios.
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