Right before the holiday season, I had a chance to interview Oliver Geldner to talk about hotel marketing, revenue and distribution. Oliver has a wealth of knowledge in the field, with more than 30 years’ experience in the industry. He is an expert in e-commerce, digital marketing, distribution and profit management. He has worked in roles as e-commerce manager, general manager, and advisor to the board. Oliver’s track record includes both launching new hotels and turning around existing operations, always with a long-term focus on bottom-line profitability.
Today, Oliver advises hotels on revenue, distribution and marketing strategies at Taktikon Consultancy. Within his role, he offers tailor-made solutions for hotels to increase their results by smart price setting, and improved revenue management, distribution and e-commerce strategy.
Looking at revenue and distribution for hotels on the one hand and marketing on the other, can you explain a bit more about the correlation of the impact from these two?
Traditionally, the work disciplines of revenue and distribution versus marketing were separate functions, not only in hotels or travel but in many other industries. Then in hospitality, sometimes in the ’90s, marketing opportunities in distribution channels emerged, such as Instant Preference listings or targeted Travel Agency messages at system login in the GDS. With the expansion of Internet marketing, these two formerly separate approaches began to move closer together.
But it was only since search engine marketing and social media marketing matured that hotels have been forced to review the purpose and effects of their revenue/distribution and online marketing efforts.
Traditionally, the role of marketing was to generate demand and the position of revenue and distribution was the administration and conversion of the created demand. Today, we see clearly that revenue and distribution have taken a more active role as “demand generator” functions.
As it is possible today to target your rate and product offering to highly refined traveler segments, the pairing of a compelling marketing message with a price point and an instant conversion point in the hotel’s booking engine is the recipe for effective communication.
Whereas online ads and banners previously directed the visitor to the generic URL of the online hotel presence, savvy hoteliers and marketers now to try to route qualified traffic directly to the point of sale (the booking engine).
This, in turn, has resulted in a hybrid function of the traditional revenue department. Rates, packages, fenced offers, etc. now are steered by the revenue team, while target groups, audiences and conversion points are equally tracked through in-depth source analysis in order to provide the marketing function with the best possible data to run cost-efficient campaigns.
Meanwhile, the revenue results of these campaigns are often attributed to either the marketing or revenue department, but seldom to both. So, who takes the lead, and who gets the credit, marketing for lead generation or revenue for lead conversion? And does it really matter? Well, it doesn’t really, as long as your operations budget line items are still analyzed and reviewed separately by performance.
If they are so closely related, shouldn’t hotels merge these two departments? What are some reasons to do so or specifically not to do so?
If one were to combine the marketing and revenue departments into one function, any analysis of marketing spending against revenues would be measured by conversions and incomes, instead of shares, likes, imprints, and copies produced. And wouldn’t that make any marketing effort much more powerful? Indeed, it would!
There is, however, a risk in combining these two functions, and that is the timeframe and lifecycle these two departments operate within. For the most part, revenue and distribution focuses on the day up to six months ahead for fine tuning of rates and distribution, whereas marketing often paints with broader brush strokes, such as brand building and brand equity, with longer timeframes. And these scopes just don’t mix that quickly. So, when companies plan to merge their revenue and marketing departments, they should bear in mind that allocating resources for short-, mid- and long-term planning both for revenue and marketing planning can clear the way for marketers and revenue professionals to set their priorities straight.
So, with marketing impacting revenue and distribution, what can marketing managers do to help their colleagues at the revenue and distribution department?
Marketing and revenue and distribution are now more than ever linked like teenage siblings where the two parts need to redefine their role and function to get along.
One idea could be that your revenue and distribution sibling is the one defining target timeframes and revenue expectations, and the marketing sibling designs content tailored to the right audience for the best conversions.
Revenue managers would be greatly helped in knowing which short- and long-term campaigns are being planned and budgeted for, in order to add the most profitable price point or product to the campaign effort. Today, we see most campaigns in the industry being battled out on the price point (“rates from XX EUR”), because of the historic logic of marketing to reach as many potential customers as possible. In consequence, price and product offers are tailored to the wallet size of all target groups. A smart marketer would involve the revenue department to determine the right products and rates geared at finely segmented target groups, thus generating the right type of demand at the right times.
And the other way around?
Marketing managers could greatly be helped by the conversion and KPI logic that revenue managers apply when looking at overall distribution cost and cost of sale. Involving revenue managers in this exercise can significantly improve marketers’ ability to prove how marketing dollars are spent on every type of campaign and what conversions are generated. Measurability of success is a vital asset in any part of any operation, but the switch from vanity metrics (“likes, clicks, followers”) to quantitative metrics (“investment, return, profit”) that include marketing, sales and revenue has yet to be achieved in the hotel industry.
How do you see the future of these disciplines evolving?
CEOs, CFOs and CMOs will not be the only individuals putting their heads together in board meetings to develop and assess strategies. Even department heads and operative functions in finance, marketing and revenue will need to pool their resources to plan, determine and measure results of all activities. People will always look for answers on how to better accomplish what they get measured by, so creating common KPIs for all departments (that are at the same time simple, measurable, attainable, realistic and time-related – the SMART model) is undoubtedly the best way to create results-driven, inter-departmental alliances.
To connect with Oliver click here to see his LinkedIn profile.
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