Students at the Cornell University School of Hotel Administration are busy getting ready for The 85th Annual Hotel Ezra Cornell (HEC) event. Beginning on April 8, the three-day educational seminar is expected to draw hospitality insiders from across the nation to Cornell’s Ithaca campus.
Each year HEC aligns with industry leaders to gain valuable insight and expertise into the current state of the industry. One such leader is Hari Nair, a 2002 graduate of Cornell University School of Hotel Administration, and now vice president of Lodging Market Management for North America at Expedia, the world’s largest online travel company. Nair was honored by the invitation to speak at HEC this year, which will focus on the theme Managing Through and Thinking Forward: Opportunities for Innovation in the Down Economy. Nair will speak on a panel titled “The Price is Right: How are Heads Getting into Beds?” alongside participants from Hyatt Hotels and Southwest Airlines, among others.
Ahead of the event, Nair answered some questions posed by current Cornell Hospitality students regarding revenue management and current trends in online hotel distribution.
Q. What’s the number one thing you are counseling your hotel partners on these days?
My team is spread across North America, working closely with our partners at the property level, so we’re seeing various conditions from market to market. Our partners who seem to have weathered the storm the best are the ones who have actively managed their rates and inventory, assessing their specific needs for demand over longer, middle and shorter term ranges as stay dates draw near. We call it a surgical approach to pricing and revenue management. For example, if they look at stay dates 8-10 weeks out and see they have a weekend where occupancy is lower than they’d like, they’re coming up with a great offer for those specific stay dates, which they can then yield up as they secure a base of occupancy.
Also, as we start to see occupancy levels coming back faster than expected in some markets, some hotels are tempted to shut off certain distribution channels based on the remuneration received, but by doing so, they miss the opportunity that a comprehensive channel mix can deliver in this environment. My recommendation to hotels that want to reduce demand from a particular channel is to raise rates. This gives them the ability to stay agile in an increasingly competitive market and to maintain the exposure and merchandising benefits of each of their distribution channels.
Q: What specific tactics do you think hotels should be taking a greater advantage of within their distribution mix?
A: That’s a particularly good question for Expedia, because when a hotel partners with us, it means their property can be made available on the full service travel agency site Expedia.com and its 18 sister sites around the world; over 60 hotel-only Hotels.com sites; opaque site Hotwire; and corporate travel company Egencia. Each of these brands brings slightly different types of travelers, with variations in booking window, price sensitivity, desire for specific amenities, and appetite for value adds. I like to encourage our partners to experiment to understand which channels work best for them for certain types of needs. For example, if they have lots of inventory closer in to travel dates, Hotwire is going to be their best friend. Our resort market partners get a lot of value from the packages channel on Expedia.com, which delivers advance bookings and longer stays. In addition, hotels should take full advantage of the ability to address international demand by setting strategies targeted specifically at international customers.
Q. Demand in general has been lower than in recent years, and on top of that there are hotels that deal with seasonal peaks and valleys. How do you think about seasonality in an already low demand environment?
The seasonal cycle continues, even within bigger, longer economic cycles, but there are a few ways to think about seasonality. One would be to try to maintain even occupancy levels by taking rates lower or offering compelling value adds during times of low demand. Other properties might decide to really max it out during peak season so they can tolerate lower occupancy during off-season. For the latter approach, participating in a big summer or winter sale, for example, can be a great way to “point the fire hose of demand” as we say, and help ensure a boost to occupancy during more competitive times, or to entice bookings in a slow demand season.
Q. What besides rate can properties adjust to incite demand?
Many travelers are highly responsive to value-adds, such as resort credits, or free wi-fi, meals or parking. But going beyond tactical offers, this is where the user generated content trend becomes very powerful. Our data shows that hotels with traveler review ratings of 4 or 5 out of 5 generate more than double conversion than a review of 1 to 3. There’s an argument to be made that future demand flows from today’s guest, not only in terms of repeat business, but in the influence each customer now has on other customers’ purchase decision. It underscores the importance of treating every guest well, recognizing that your guests who book online are predisposed to sharing their experience in an online review after their stay, and that what they say has a very real impact on future bookings.
Q: Which metrics do you think hotels are underutilizing in measuring their performance?
A: I think it’s important to look at a spectrum of metrics, as no single metric can address the effectiveness of certain elements of the business. RevPAR remains an industry standard for measuring the effectiveness of revenue management, pricing and distribution channel strategy, but I don’t think it tells the whole story. In today’s distribution landscape, there are cost benefits of certain channels that are simply not reflected in RevPAR. I’m referring specifically to the “Billboard Effect” of participating in online channels. It’s something the industry has been familiar with for several years now – that hotels benefit from direct bookings as a result of their exposure on OTA sites – but it was quantified in the recent Cornell Hospitality School study showing that hotels received anywhere from 7.5% to 26% more direct bookings when they are displayed on Expedia than when they were not. This brand exposure and marketing benefit for a specific property essentially reduces the costs typically associated with a booking that comes through the OTA channel.
Q. Any parting thoughts?
Thanks for the opportunity to speak at HEC this year, and here’s to a great event!
About Expedia, Inc.
Expedia, Inc. is the largest online travel company in the world. Since launching in 1996, the company's Expedia.com brand has grown to become the world's most highly visited online travel booking site, generating more leisure travel bookings than any other travel agency - online or offline. Worldwide, the Expedia, Inc. family of brands today includes 19 Expedia.com sites; more than 70 Hotels.com sites; leading agency hotel company Venere.com™; leading U.S. discount travel site Hotwire®; Egencia™, the world's fifth largest corporate travel management company; the world's largest travel community TripAdvisor® Media Network; destination activities provider ExpediaLocalExpert®; luxury travel specialist Classic Vacations®; and China's second largest booking site eLong™. The company delivers consumers value in leisure and business travel, drives incremental demand and direct bookings to travel suppliers, and provides advertisers vast opportunity to reach the most valuable audience of in-market travel consumers anywhere through Expedia Media Solutions. Expedia also powers bookings for some of the world’s leading airlines and hotels, top consumer brands, high traffic websites, and thousands of active affiliates through Expedia® Affiliate Network. (NASDAQ: EXPE)
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