Why marketing and revenue departments should bury the hatchet, right now

Sponsored by RateGain.

Did you know that for every hotel revenue manager (RM) there are two hotel marketers? It’s true, look it up! According to LinkedIn, in fact, there are almost one million (998,888, at the time of writing) “marketers” vs half a million (507,203) “RMs”.

France seems to lead the way, with four marketers for every RM, followed closely by Italy and Germany, even though the trend is pretty much identical all over the world.

But this is more important that just being a fun fact. Historically, these two departments are known for their rivalry. If you’ve worked in hotels long enough, chances are you have witnessed the sometimes palpable tension between RMs and marketers. What you may not know, though, is why this tension exists in the first place.

Different KPIs

One of the main areas of friction between the two professions is to be expected. When it comes to department goals, for example, they tend to use irreconcilable metrics. Revenue managers measure success in terms of RevPAR or GOPPAR, marketers opt for brand positioning, awareness and product differentiation.

At a superficial level, marketing goals seem pretty insubstantial when compared to the aims of revenue managers, but marketers often possess a long-sightedness that RMs lack. They understand the value of advertising, even when it does not create an immediate return on investment. The purpose of revenue managers is to keep the boat afloat and profitable. As a result they are often more pragmatic and scientifically rigorous than marketers, so it comes as no surprise that they are openly skeptical towards those extravagant money-burners next door. 

Diego Fernandez Perez De Ponga, Corporate Director Revenue Management @Palladium Hotel Group:

Price is a highly positioning factor and it sends a powerful message to all our customers. Revenue departments need to not just understand it but control it. By sharing common goals between revenue management and marketing departments we have seen a RevPAR growth by 15% in 2016 and an additional 14% in 2017

Are marketers hotels’ Robin Hoods?

You may be tempted to think that RMs focus solely on the needs of the company instead of the needs of the customers – a perfect recipe for disaster. While there may be some truth in this, the line between RMs and marketers is becoming less clear every day, converging into a new, hybrid profession. In today’s distribution landscape, the two departments should bury the hatchet once for all and work together on common, shared and transparent goals. Because, as Bob Wells once wisely said: “There are no enemies here. There’s just good, old-fashioned rivalry”. And rivalry without enmity is often good for business.

Niki Fotiou, Marketing & PR Director @Divani Collection Hotels

Thanks to a clear, common and shared strategy between our revenue department and our marketing office, the group was able to increase its direct revenue by 69% and its average booking value by 7.8%. Highly targeted marketing campaigns, together with a 1:1 rate strategy and a more holistic approach, resulted in a -44% cost per acquisition and an ROI increase of  88%. Different techniques, such as inventory nesting, opaque rates, remarketing, brand protection, Expedia Travel Ads, and social ads were applied harmoniously to reach our (ambitious) KPIs. And these amazing results could not have been achieved without teamwork and candid collaboration between all of us.

 

RMs love GOPPAR, marketers love ADR

As a general rule, revenue managers are present at the end of the booking funnel, while marketers’ added value at the top. Brand positioning is useless without a solid distribution strategy, exactly as price alone cannot generate awareness. GOPPAR is probably the most important metric for RMs, as it indicates which distribution channel needs to be to optimized in order to increase margin.

On the other hand, they often see ADR as  incomplete, misleading and somehow arrogant metric. But marketers love it, because ADR can be used as a precise company statement. The price is part of the hotel marketing mix as it communicates your brand’s perception of itself. If you want to send the “this is my position in the market” message, then GOPPAR is not the right arrow in your quiver.

In this industry, you play to win, not just to avoid losing. This means taking risks, developing new ideas and, sometimes, using your price as a declaration of intent.

Of course, this does not mean that hotels can completely ignore market rates.

That’s why creating a culture of team working between RMs and marketers is critical to stay profitable without devaluing your brand.

Static and dynamic

When industry blogs are filled with terms such as blockchain, AI or bots, speaking about offline distribution seems archaic. Marketers struggle to understand why a hotel should have wholesalers, bed banks and tour operators in its distribution mix. This is understandable: these channels can be hard to track and the potential added value is hard to quantify.

But hotel distribution is not about old or new, it’s about profit and brand positioning. It has been said that “good music doesn’t have an expiration date” and this is true for distribution as well. The key is balance and keeping a healthy mix. Risk diversification is another key aspect of the matter: you don’t want to put all your eggs in the same basket because, if one day the basket breaks, the resulting omelette could be unpalatable.

Every player in the distribution mix has something to add to the value of your product. Tour operators, for instance, typically guarantee longer lengths of stay and booking windows, making it easier for RMs to not only forecast with confidence but also reduce variable costs. So, the only problem here, ironically enough, may be entirely semantic: marketers are biased, because the word offline evokes impressions of obsolete, old-fashioned and ancient in their minds, even when that is far from true.

In this video interview below, Sergio Zertuche and Diego Fernández Pérez De Ponga (respectively chief of sales and marketing and corporate director of revenue management at Palladium Hotel Group), suggest that by “replacing the terms offline and online with static and dynamic this bias can be removed, and the two departments can work better together”.

 

Yogeesh Chandra, Executive Vice President @RateGain:

This disconnection can be attributed to traditional departmentalization of these functions with separate objectives and key results. The digital era makes a compelling case to drive a confluence in ways of working. Moving away from traditional marketing to performance-based, programmatic marketing indicates a clear shift that a traditional organizational structure cannot support.

 

Reunited at last (and it feels so good)

Revenue managers’ and marketers’ expertise is  complementary, especially in some specific areas, where teamwork can really make the difference. We came up with four that can really boost your results:

Loyalty programs:

 Almost 9 out of 10 Gen Y (50% of buying power by 2020) have never joined a loyalty program. According to several studies, the reason is that they expect something more than a free stay every 50 room nights, and here is where RMs and marketers can work hand-in-hand – to diversify the way guests can redeem their points.

Hilton, for example, was the first chain to participate in the Amazon reward system, Shop with Points, so that guests can use their credits to buy on Amazon. This is a perfect example of a revenue problem solved with the help of marketing.

Distribution

Guess what – travel agents are cool again! With the rise of a new experience-centric travel sensibility comes the need of tailor-made customization. Travel agents quietly (re)gained popularity, because they target specific niches for whom the OTA one-size-fits-all approach is inapplicable.

According to MMGY, more than one US millennial out of four consulted a traditional travel agent over the past year, which equates to more than 17 million potential customers out there. This is a marketing problem (awareness) which can solved by revenue managers who embrace distribution by millennial-friendly travel agents.

Reputation

By now hotels should be pretty familiar with the Chris Anderson’s 2012 study on reputation: a simple 1% improvement leads up to a 1.42% increase RevPAR. Post-stay surveys, remarketing and targeted ads can increase RevPAR (a revenue problem) through marketing.

Problem solving and collective wisdom

RMs and marketers, because of the different background and approach, can come to different conclusions when analyzing data to find unexpected solutions.

In his influential book, “The Wisdom of Crowds“, James Surowiecki states that “groups that are too much alike find it harder to keep learning, because each member is bringing less and less new information to the table….They become progressively less able to investigate alternatives.”

Bringing RMs to analyze marketing strategies and marketers to review distribution mix can seem far-fetched but, statistically, it happens to work. The only true advantage that a team has, according to Surowiecki, is “collective wisdom”, and you don’t want to waste it.

Conclusion:

Creating a corporate culture of team working

In today’s industry, it is imperative to adopt a more holistic approach to adapt to the new challenges. RMs and marketers will eventually have to join forces. There  are some technical issues to overcome, though, such as the vendor fragmentation problem. With an ever-growing number of PMS, CRS, channel manager and booking engines providers in the market, the risk of working on unaggregated (if not contradictory) data is pretty high, especially when you switch from revenue management systems to marketing tools. That is why RMs and marketers should not only share data with each other but also make sure that those data are accurate and reliable.

If the hush-hush approach harms both departments, the lack of a shared set of data can have similar negative effects. Both RMs and marketers should be able to access any information at any time, anywhere and with no limitations, not only during the weekly Monday morning meeting.

And data is not the only thing that departments should share: goals and KPIs should be shared as well. In a hotel, it’s never “awareness vs profit”, but “awareness PLUS profit”. Without a shared vision it is impossible to sell to the right guest at the right time at the right price, and this is a conditio sine qua non, especially on a 1:1 marketing industry like ours.

In a nutshell: in order to be profitable, hotels should understand that RMs and marketers do not compete, rather complete each other. And Creating a flat organization structure and a culture of sharing should be a mantra.

Because, as Ed Catmull wisely said “if there is more truth in the hallways than in meetings, you have a problem”.

 

 

Want to know more about how to optimize the co-operation between your revenue and marketing department? Make sure not to miss the Last Available Room webinar series. Sign up for free right now here and get all the best tips from experts such as Remko West, Martin Soler, Pranab Agarwal, Enzo Aita and Simone Puorto.

 

This is a sponsored article by RateGain, with input from Palladium Hotels and Divani Collection Hotel . It appears as part of the tnooz sponsored content initiative.

Photo by Dan Edwards on Unsplash

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About the Writer :: Sponsored Content

This is the byline under which we publish articles that are part of our sponsored content initiative. Our sponsored content is produced in collaboration with industry partners. The views expressed do not necessarily reflect or represent the views of tnooz, its writers, or partners.

 

Comments

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  1. yannis moati

    Great article. I am happy to witness that just in the last 3 years since we launched our company, the general thinking and mood in our industry is now more towards a balanced distribution approach instead of a direct acquisition model at all costs.

     
    • Enzo Aita

      Hi Yannis thanks for your comments. What do you think about these 2 Key role: Revenue and Marketer within the hospitality industry? Which is from them the most relevant player from your point of view and why?

       
 
 

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