Revenue Management for Beach Hotels

Following on from previous articles on Hotel Distribution and Revenue Management, and the corresponding reality check when we come up against the situation at coastal hotels, I thought it would be interesting to continue with the particular case of resort or coastal hotels. I have mentioned in a few blog posts that the oft-repeated line, “this is for city hotels; coastal hotels are different”, can become rather tiresome. If we are realistic, it is only fair to say that it is true: coastal hotels are different, as are all resort hotels. The question is: how are they different? The key issue is understanding who our high-value customers are, and the current value of our customers. This applies both to those we already have in our database (more on that later) and to those customers who, based on their value, are of greatest interest to our hotel. The reason I put “more on that later” in parentheses is to highlight the fact that the high-value customers in our database will almost certainly be the same customers our competitors have identified as being of interest. Therefore, we must also manage loyalty among those customers and, ultimately, the value of our product to them. In my view, we should identify our highest-value customers using three variables:

• Revenue
• Frequency
• and, in the 2.0 society: degree of influence over others.

In other words, directing our marketing towards customers who spend a great deal; customers who spend moderately but frequently throughout the year; and customers who, in turn, recommend us to other customers and act as ambassadors for our product. The particular characteristics of the case at hand—coastal hotels—make it somewhat more difficult to identify customer types for each variable, but doing so is essential in developing our own particular recipe. Given the complexity of this identification process, and how difficult it can be to reach these customers, the average hotel tends to make the mistake of identifying the distribution channel, or tour operator, that brings it guests year after year as a high-value, frequent customer—not customers—without any possibility of building loyalty or maximising their revenue through their stays. Ultimately, it falls into a business cycle that is unsustainable over time. In short, the ingredients of our recipe will be a balanced combination of customers in different proportions. Customers based on Revenue: Logically, we should give preference to those customers who generate the greatest financial revenue for us. To what extent?

• Prioritise longer stays
• Encourage bookings of higher-category rooms
• Perhaps families with children, large families, or families travelling with grandparents or with other families; perhaps LGBTQ+ tourism…
• Perhaps… whatever we choose. In reality, it will depend on each hotel’s business areas and particular needs, but we need to be creative.

Customers based on Frequency: Focusing our efforts on securing customers who stay at our property frequently, regardless of the revenue generated by their stays, and bearing in mind that, in coastal hotels, seasonality means that frequency is in many cases limited to an annual pattern, we should nevertheless not rule out certain customers who stay frequently throughout the year. Potential high-value customers based on frequency:

• Families who return year after year.
• Customers who take breaks periodically throughout the year.
• Why not corporate or business customers, meetings, etc.?
• …

The important thing is for each hotel to define its target customers and, based on its assets, location, facilities, destination, service and so on, create a unique value proposition that encourages those customers to return. Customers based on Degree of Social Influence: Taking into account potential customers, regardless of the revenue we may generate from their stays—which in some or many cases will be zero—but who, because of their social, professional, family or other status, may serve as influencers for potential customers in either of the other two groups. In Spain, we have excellent examples of this, with outstanding professionals who combine their sales activity with complementary initiatives that allow them to sow the seeds for the future:

• Stays for journalists.
• Invitations for figures from the worlds of culture, art and so on.
• Press conferences.
• Stays for executive assistants.
• Participation in loyalty schemes run by banks, credit cards, shopping centres, etc.
• Familiarisation trips for industry professionals, in collaboration with organisations.
• etc.

Once again, everything depends on the destination, facilities and level of service, but we must keep in mind that what may be a problem can also be a competitive advantage. I am referring, for example, to making use of rooms that will almost certainly remain empty as a promotional gift that enables us to attract other high-value customers. The next step after identifying customers, and therefore the ingredients of our recipe, is to go out and find those customers. We should not overuse ‘push’, although I understand that, initially, without a prior track record of actions that trigger ‘pull’, we will need to make a greater push effort in order to ultimately achieve:

• A fair balance between push and pull. In other words, customers who come naturally and customers we need to actively pursue year after year.
• A constant flow of high-value customers to our hotel, increasingly minimising our sales effort and maximising our revenue.

The push-pull balance of value segments for our customers must be achieved through optimal distribution channel management, based not on quantitative but rather qualitative considerations:

• Geographical segmentation: “where are these customers, which country are they in, and through which channels do they make their purchases?”
• Sociocultural segmentation: “customers of type X tend to… therefore…”
• Economic segmentation: “customers of type X, from country Z, would be willing to come if my price were…” “…or would be willing to pay N euros for my service”

This is where we need to deploy the Revenue Management strategy across each channel, segment, source market and so on, in order to attract our high-value customers to our hotel. It is therefore worth considering a number of points:

• Who are my current customers and who are simply guests?
• Do they meet my expectations?
• Is my business sustainable?
• Who controls pricing across my channels? Do I control it? Do the channels control it? Does my competition control it?

I hope this is useful and informative. Although, of course, better conclusions can be reached over a coffee.