How Can Hoteliers Adjust Their Revenue Strategy Due to COVID Restrictions?

“When it comes to reservations, full flexibility has become the new norm. Trying to maintain any restrictions (prepaid, non-refundable) would turn into a disadvantage, as the comp set will offer easier terms. With so much uncertainty around travel restrictions, the current scenario will extend over time. Customers and guests will get used to these flexible terms, making it challenging to resume stricter cancellation conditions in the mid-term.

This also creates a challenge when it comes to forecasting, especially when the client base is predominantly domestic or can reach the destination by car. However, for destinations further afield (e.g., Maldives, Seychelles) or those relying on foreign demand (e.g., Cancun), the impact of the current flexible terms is not as high. In these cases, customers tend to book well in advance and with a lower chance of last-minute cancellations.”

“One of the main adaptations has been to offer more flexibility in the cancellation policy, while also looking closely at competitor reactions to the situation. However, it’s important to be mindful when changing strategy like this, i.e., avoid moving a hotel into a position that’s difficult to return from in future ideal-pricing situations.

It’s also important to ensure a seamless guest booking journey and a simple check-in process. Discussing these matters closely with the operational team is essential for proper planning before implementation. During implementation, observation and evaluation will help you to spot areas for improvement and maintain the all-important positive guest feedback.

Clearly conveying any changes to guests is key, keeping them well-informed for their decision-making process.”

“As we are finally emerging from hibernation after a year, it’s important to recognize that the behaviors and priorities of our customers have changed concerning travel. Traditional revenue techniques and tactics no longer apply now. Many of us have had to adjust travel plans, holidays, and business trips, and it’s clear that flexibility has become a key factor when choosing a hotel. This has meant that cancellation policies, flexible check-in and check-out times, and flexible paying options have had to be adapted. We can see this trend when we analyze booking lead-time data and the most popular products purchased by guests.

One of the approaches we’ve taken is to remove advance, non-cancellable rates. Instead, we opt for semi-flexible, slightly discounted products that can be cancelled and refunded. The new trend of flexible check-in and check-out has seen more and more hotels offering those options and customers have responded positively. Apart from transient segments, we also need to (individually) look at offering more flexible terms to committed segments such as groups and MICE. These often depend on international travel restrictions and guidelines.” 

“Due to the new market conditions, our strategy has become increasingly centered around flexibility. At the moment, this is vital for a great guest experience. We have reduced the number of products being offered so that we can keep our flexible options as competitive as possible. Traditionally, these flexible options have always been kept at a premium rate within the industry. This has been to ensure guests shift towards non-refundable options, but also to make sure there is enough margin to use tactical discounts. We have shifted away from that and are focused on a compression strategy. Essentially, this involves cutting out the most restrictive rates (which are always the cheapest) and seeking to make our flexible options as competitive as possible.

Another tactic we’ve recently been exploring is the introduction of a Flexible Advance Purchase rate (fully prepaid). This gives the possibility to cancel/postpone/get a refund if the guests are unable to travel. One of the drivers behind this new practice was recognizing a strong price sensitivity in the market, a need of securing cash in advance for hotels (with an increase in confidence in future months) ultimately, an increasing demand for flexible conditions.”

“While I don’t currently revenue manage any properties, my suggestion for clients is to be as flexible as possible while you can and while demand levels allow. We know this can lead to challenges concerning forecasting, staffing, etc., but if viewed through a customer lens, flexibility is paramount for anyone travelling at this time.

Yes, it depends on the segments you have in-house, but for the most part, being seen as flexible and guest-focused will build guest loyalty. It will also potentially help with guests being more understanding if / when you decide to begin removing some of this flexibility when normal business patterns return.”

“We currently don’t offer any non-cancellable products but have applied varying, flexible cancellation policies according to location (i.e., city centre or resort). Although this brings higher risk & uncertainty, it is what’s needed for travellers to confidently book hotels. It is key to increase demand and create trust to show that we are easy to do business with.

The aim is to gain more commitment from guests by driving restaurant & spa bookings. In addition, we offer ‘check-in or out any time you like’ options to create additional value.”

“I believe companies should be more creative in targeting their segments by understanding the intention to travel and then tailor their product accordingly. Flexibility is a key requirement for most travelers and the hospitality and travel industry should be more creative in its product offerings.

The price differential could be based on the duration of stay rather than the cancellation policies. That is, for guests who check-out based on their check-in time, they will pay more than the guests who check-out at the standard check-out time.”

“Typically, we have reduced our cancellation period to within 7 days free, accommodating those who’ve failed their mandatory PCR tests, or have been impacted by last-minute travel restrictions. For re-booking, we have allowed guests to amend within 12 months at the same rates, or opt for a travel credit towards any future dates if desired. The goalposts keep changing, so we are adapting as per requirements, in some instances offering much more.

As a resort with a high percentage of repeat clientele, it’s a balance between maintaining the booking and ensuring that potential demand is not displaced. I think flexibility has become almost client-based as well, i.e., loyalty has a high impact on the strategy. The strategy also has to adapt, as people are now less willing to book further out, so the pace of the past cannot be considered for the future. Like many others, we have also begun to offer vouchers for future planning and have adapted our deposit policies.”

“The pandemic has transformed flexibility from a perk to an expectation for most travelers. Hotels need to adapt to the evolving customers’ needs and create valuable offers that are meaningful to guests for two main reasons:
1. Convert the prospect demand into a booking.
2. Drive attention to the value while not compromising on price.

My revenue management strategy is focusing on the guests’ expectations more than ever. It involves liaising with Marketing to gain a deeper understanding of new customers’ profiles to create the best value when targeting them. Free cancellations are on top, but also of importance are value-add inclusions such as complimentary upgrades, early check-in, late check-out, credits for ancillaries, and free parking, to name but a few.

Where once we had 2 price points (flexible and pre-paid), we are now making it simple and just keeping the flexible rate pricing. In other cases, we are keeping two price points but with different flexible cancellation policies. For example, assuming that the standard flexible cancellation is 2 days, transforming the former prepaid rate price point into a 7-day cancellation policy, or prepaid but changeable. It is a matter of adapting your strategy to what makes sense for your hotel and your demand.”

“Currently, the booking window has narrowed to just 2-3 days before arrival, especially in urban destinations. Therefore, it’s strongly recommended to have a highly flexible cancellation policy, even on the same day of arrival (e.g., free cancellation until 4pm on the check-in date). This helps you to be visible anytime in the OTAs “Free cancellation” special filter and benefit from major online exposure. To simplify the booking process for guests using their mobile device on the go, it’s also an option to allow bookings without a credit card during the last-minute window.

The same concept applies to check-in & check-out times. Flexibility is a must, and it’s made easier by the fact that hotels are running on lower-than-normal occupancy levels. This flexibility drives high satisfaction in guests, which translates into positive reviews and conversions. In turn, it results in increased visibility and conversions in the medium-long term once demand returns to normal levels.

Moreover, it is essential to understand who is travelling now and requires hotel accommodation. On one hand, the leisure segment is still at a standstill due to many restrictions, while on the other hand, other segments continue to travel and need hotels. This is mainly transient business customers or people who travel for health reasons. It’s critical to appear on all the filters that these customers potentially use when searching for hotels that meet their needs. For example, in addition to the most popular price range (e.g., 50-100 euro), hotels that can provide certain services such as breakfast, room service or restaurant options, parking, great Wi-fi, excellent cleanliness scores (especially now), and review scores have a competitive edge over other hotels.

Along with these practices, it is also vital to rationalize and optimize costs. Try to turn fixed costs into variable costs whenever possible (e.g., by outsourcing some activities) to keep an ideal balance between costs and revenues and maintain a positive GOP.”

“We could see a significant reduction in lead time, which in itself, renders early-bird type offers obsolete. Of course, the uncertainties around travel restrictions require fully flexible rates. Prices in many markets have reached rock bottom and if your competition is offering fully flexible rates at the lowest price points, there is just no room for more restrictive rates.

Depending on the market, however, hotels have some room for creativity. Rates could be non-refundable while still allowing modifications. This reduces stress around making a wrong purchasing decision on the buyer’s side while locking in funds for the hotel.

Concerning higher flexibility with check-in or check-out times, those are still primary upsell opportunities for hotels.”

“It’s a no-brainer (hopefully!) that without flexible booking conditions, hotels will not be able to capture any bookings out of the already-very-limited pond of demand. However, booking conditions are all-too-often not communicated clearly across the different distribution channels. Make sure that your T&C details are updated, in line, and clear on all channels, not only on your brand website. There’s nothing more confusing for a guest to read different cancellation policies on different channels. It does not build trust and will send your bookers to the competition.

So content parity is the new norm. And while you’re at it, make sure to inform your guests on what your hotels are doing to create a safe environment in current times!”

“Our approach to flexibility has been to find a median balance that works best for our guests and our operation. With non-refundable reservations made at least seven days or more before arrival, we typically allow guests to cancel their reservations within a 24hr window. Outside the 24hr window, we would usually allow the guest to make one date change request. Our policies vary based on the brands we manage and the booking channel.

With a significant number of reservations still being made in a short booking window of 0-48 hours before arrival, our strategy focuses heavily on maximizing ADR during the short pickup window and last-minute surges in demand. We also see an increased demand from our MICE clients asking us to incorporate more flexible terms due to the uncertainty of events materializing.”

“There are ample options available to make bookings more attractive by loosening policies. Like most competitors, in the first month of the pandemic, we closed all pre-paid rates and only sold those with flexible cancellation possibilities. Additionally, we have had a positive experience with offering vouchers instead of accepting free-of-charge cancellations of pre-paid bookings. The vouchers are valid for 3 years and can be redeemed across our entire portfolio.

This format has found great acceptance amongst our customers and we could preserve the deposits to support cash flow. OTAs have released optional risk-free booking models to offset losses from cancelled bookings with new incremental business. For new group inquiries, we have also released very short cancellation deadlines.”

“While working with highly reduced demand during the pandemic it is relatively easy to challenge the norm within operations and the way we transact with customers. The role of the revenue manager has seen a shift from managing demand to stimulating demand during the pandemic. The focus has shifted towards what is needed to entice the customer to travel and at the same time calm their fears.

Apart from flexibility, personalisation in conversion has also taken a front seat; two major trading methods that will need some form of sustainability in the way forward. We have also been blessed with a leap in software development for the hospitality industry, for example, online check-in platforms. The pandemic has propelled this development into the ‘now’.”

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