[VIDEO] Mathlete Mondays- Dimension by Channel

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Welcome to this episode of Mathlete Mondays.  I’m Mike Medsker, President of Focal Revenue Solutions, and I’m here today to help you unlock the insights you need to outrun your competition and take your hotel’s revenue optimization efforts to the next level.

Most of the hotels we speak with are heavily focused on channel optimization. Channel acquisition costs and net profitability are now a focal point of most strategic planning discussions, and a number of services have come into prominence over the past several years to help monitor and benchmark channel performance.

While I’m a huge advocate for the shift towards profitability management rather than simply maximizing RevPAR, I’m not sure we’ve figured out the right approach to working with this data. In speaking with our hotel partners it seems that while net profitability metrics make for great soundbites, that is often where their utility ends. Yes we understand that opaque channels have razor thin margins, and direct business seems to be somewhat more profitable than business through the OTA’s, but what are we doing about it?

To date much of the emphasis has been placed on shifting share through book direct campaigns, and millions have been spent on website improvements in an attempt to drive more business to a hotel or management company’s proprietary website. However, outside of some of the major branded efforts the success in shifting mix has been relatively muted.  Additionally, when you include all of the costs associated with “direct” business, the profitability difference by channel is not as sizable as it initially may appear

I’d like to suggest that perhaps we aren’t focused on the right metrics yet. Rather than evaluating channel mix on it’s own in order to determine how to increase profitability, we should be focused on a cross dimensional analysis of market segmentation by channel. In this episode of Mathlete Mondays, I’m going to show you how combining channel and segmentation data can allow you to come up with actionable strategies to increase profitability.

The first step is to combine your segmentation and channel data into one report. This can be difficult to achieve without the proper technology as the standard PMS reports often only allow you to select market segments OR channels. In order to get both, you’ll need to go down to the reservations level.

Once you manage to retrieve the data, lay it out in a matrix formula in order to analyze the interplay between segments and channels. I like to list my channels across the top with the segments running down the side, but that’s more a matter of personal preference. In this view, I start with the macro level segmentation and channels while retaining the ability to drill down into each individual channel or segment to get the underlying details.  In order to keep the report as concise as possible, we’ve limited the data fields to the highlight room nights, ADR, and percentage mix.

Using this view, we can quickly see how our booking patterns differ from channel to channel. I’m looking for any instances where we are far more or far less effective at selling our highest rated segments through a given channel. It can be particularly helpful to analyze your brand website against your reservations office, for example, to determine if your reservations team is truly selling or just booking the lowest available rate. You may also want to analyze the variance in production patterns between your direct channels and the OTAs.

Once I’ve analyzed the data for the current period, I also like to take a look at any variances to prior year or another point in time. Perhaps we shifted our strategy significantly in June in an attempt to generate more retail business through the brand website. By modifying my analysis and comparison periods, I can determine whether we’ve been successful.

It can also be really helpful to look at this data in a more visual format in order to more easily identify trends. For example, by compiling our data into a pie chart, we can quickly understand the breakdown in market segmentation across our various channels. In this case, I could see that our hotel’s website appears to be doing a better job of driving retail production than our reservations office.

After you’ve spent some time analyzing the information included in your report, you can determine new strategies to ensure you’re optimizing your sales strategy across each channel. Rather than impractical long tail changes such as “optimize my website for the 10th time” or “stop participating with OTAs,” this analysis will lead to concrete strategies that you can take today in order to generate results.

I hope this Mathlete Monday lesson was useful for you. If you’re interested in a list of strategies you can use to optimize your sales by channel, please click the link below.

At Focal, we’re keyed into helping our hotel partners improve their revenue optimization efforts by obtaining actionable insights more quickly. If you have any questions, or are interested in discussing this subject further, please feel free to reach out to me directly at mike@focalrevenue.com or via telephone at 970.471.6722.

Thank you for joining me, and until next time—good luck outrunning the competition!

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