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Integrated Marketing and Revenue Management Analytics in Hospitality

by Kelly McGuire, http://www.sas.comWednesday, October 07, 2009

If you’ve played the game of Tetris®, you understand the challenges that hotels, resorts and casinos face every day.  Demand comes at you quickly, in all different shapes and sizes, and you have to fit it in leaving no gaps, or empty rooms.  Sometimes, no matter how much you shift demand around, the right pieces just do not arrive when you need them, and you end up with holes.  Sometimes everything is lined up perfectly, waiting for that one piece that will clear four rows and give you a high score.  What if instead of waiting and hoping that the perfect piece arrives, you could instead reach out and get it?  Proactive demand sourcing is possible when revenue management and marketing work together.  You’ll never have to wait and hope for that perfect piece of business again!

Marketing and revenue management are two sides of the same coin.  Marketing is responsible for demand generation including campaign strategies, customer relationship management and loyalty programs.  They own the customer, and hold information about preferences, purchase behavior and customer value.  They know who the customer is and what offers they are most likely to respond to.  Revenue management, on the other hand, is responsible for demand control, including setting rate and availability controls.  They own the rooms inventory and hold information about price sensitivity and demand by property, market segment, date and rates.  They know when and where demand is expected and needed.   

Each department holds key pieces of information about demand that, when integrated, result in critical insight about demand patterns, product preferences and purchase behavior.  Unfortunately, these two closely related functions do not always work well together.  Misaligned goals and poor communication result in situations where marketing, with a goal of generating demand, sends out discount promotions that dilute rates during peak periods.  While revenue management, trying to maximize revenue, closes off promotional rates meant to encourage stays from the most loyal customers.  These activities damage revenue performance and customer relationships.   

Current economic conditions have encouraged better communication between revenue management and marketing.  Weekly demand planning meetings have become the norm for many firms.  Departments that used to be siloed have been reorganized to report through the same Director or VP, resulting in better alignment of responsibilities and goals.  This cultural and organizational change facilitates goal alignment and communication processes which form a foundation upon which a solid, integrated analytical strategy can be built. 

Getting Started

Technology can help to support organizational and cultural changes.  Weekly meetings foster communication and prevent damaging actions, but the real world moves fast.  In the current manual environment, a good deal of time is spent in gathering data from multiple systems and formatting reports to be shared at these weekly meetings.  If revenue managers and marketers are able to access key pieces of information generated by the other function in the systems they use every day, not only could routine decisions take place in real time, but data integration would mean that routine reports could be automated.  Weekly meetings shift to strategic planning or to discuss “tricky” periods that fall outside of normal business rules.  Analysts’ time could be spent in strategic analysis rather than pulling data and creating reports.  Simple information sharing improves promotion placement, customer targeting and pricing decisions, and weekly meetings become more productive and efficient.

 

As the organization works through the cultural change required for truly integrated marketing and revenue management analytics, technology-enabled information sharing breaks down barriers and opens lines of communication.  The data integration for reporting and decision support is only the first step in a longer journey.  There are advanced analytic opportunities on both sides as the journey continues to the end goal of innovation enabled by data and analytic integration.    

Advanced Analytics for Marketing

Many hotels and casinos have loyalty or reward programs which enable them to gather detailed information about customer interactions with their firm.  Others automate their campaign planning functions so that they are able to intelligently segment and target customers based on their likelihood to respond.  In some cases these programs are manual or in their infancy.  The more and more detailed information hotels and casinos gather about every interaction with the customer the better they can segment and target these customers.  If the company has significant ancillary revenue sources such as casino gaming, spa, golf or restaurants, then customer spend across these outlets should be captured and integrated into the guest profile as well.  

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