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Strong Revenue Strategy Starts at the Top

Strong Revenue Strategy Starts at the Top

At the recent NYU Hospitality Industry Investment Conference, Jim Abrahamson drew plenty of laughs and several headlines for his comment that Expedia and Orbitz joining forces was like “the Klingons and Romulans teaming up together.”

It was funny, but what preceded the Star Trek reference was the part that stood out to me: “We’re under attack right now. We’re under direct attack. We’ve got Expedia and Orbitz planning a merger. They have 75 percent of the online marketplace.”

The numbers may be off, but his point remains and he’s not even mentioning the other half of the duopoly and Priceline’s recent expansion. As I’ve detailed before, as these behemoths grow even larger, so do the challenges for hoteliers.

What struck me the most was the fact that the CEO of Interstate Hotels & Resorts and current AH&LA chair was discussing this—distribution—on the main stage at one of the industry’s biggest investment conferences with the leaders of Loews, The Plasencia Group, Four Seasons, and Starwood. This was the hot topic of the moment—not real estate valuations, cap rates, or how the M&A market is heating up.

I remember when distribution topics were discussed in tiny rooms at small-scale conferences attended by revenue managers and digital marketers. Star Trek references were far more common there. But now revenue strategy is a board-level initiative for hotel ownership groups, management, asset management, and brand companies.

It’s reassuring that distribution, revenue management, marketing, and the technology and strategies behind them are becoming a priority on the broader stage. A more holistic revenue strategy that brings together so many separate disciplines is the industry’s best response to the challenges brought on by OTAs, emerging channels, and the sharing economy.

These outsiders aren’t the enemy. They’re all out to make money and provide services valued by consumers. It’s incumbent on suppliers and their partners to create that same kind of value and to remain competitive in this digital arena.

New channels have made the distribution and data science side of the business far more demanding, and advances in mobile technology and social media make it even more complex. Optimizing demand and increasing not just revenue but profitability are issues that must start at the top. These can’t just be property-level concerns anymore.

As customer acquisition costs continue to rise, driving direct bookings becomes a bigger priority. A moderate increase in revenue can translate into a massive increase in profit. That’s why savvy real estate investors and management companies are paying attention, and one of the many reasons the leaders of these companies are interested in what used to be just revenue management.

The future of this industry lies in the convergence of marketing and technology, in a more integrated revenue strategy that focuses on optimizing demand and measuring overall profitability. To be successful, this approach needs to encompass sales, marketing, distribution, revenue management, loyalty, and all facets of generating revenue. There must be a common goal among those departments and it has to start at the top.

Hearing the chair of AH&LA and a panel of the biggest names in the industry discuss distribution at a real estate conference gives me hope.

About the Author
Patrick Bosworth is CEO and a co-founder of Duetto, a hotel revenue strategy technology company based in San Francisco.

Photo credit: Business Meeting via Bigstock.

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