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IHG Sees Room for Improvement in Hotel Revenue Management

Sean O'Neill
IHG Sees Room for Improvement in Hotel Revenue Management

Not every guest is equally profitable.

InterContinental Hotels Group (IHG) wants to exploit that with the help of a central reservation system it debuted this year. However, the company’s proposed new way of selling its rooms online will require its revenue managers to rethink how they do their jobs.

Like most hotel groups, InterContinental sets its pricing around room inventory based on supply and demand. Like its peers Marriott and Hilton, the group is experimenting with a new pricing and booking process, called attribute-based booking. But the new process changes the game of revenue management.

Skift has covered attribute-based booking before, but here’s a quick recap: A traveler picks the things they want in a room — such as a king-size bed, extra-soft pillows, or a location on a high floor and in a quiet zone of the hotel — à la carte. Once they’ve selected a bundle of options, the hotel group provides a custom price.

“We’re heading toward the end of rates by room type,” said Clodagh Brennan, senior trend analyst at research firm Foresight Factory.

The exception is for online travel agencies, which will continue to get generic rates.

“When a consumer can pick their room and bed type by booking direct, massive numbers of them will move to direct channels,” predicted Christopher Anderson, director of the Center for Hospitality Research at Cornell University.

A few months ago, InterContinental switched over the last of its properties to its new reservation platform, run by tech giant Amadeus. This year it is piloting the first version of attribute-based booking, starting with bed choice, as Skift previously reported.

InterContinental will bring its first hotels live with basic attribute-based selling by the end of the year, said Jeff Edwards, senior vice president, global hotel and owner solutions, during an interview on Thursday.

Marriott will have attribute-based booking available for around 2,000 properties by the end of the year.

“We’ve got this whole layer of room types that we really call hidden gems,” said Brian King, global officer of digital, distribution, revenue management, and global sales at Marriott International, in a recent interview. “Which could be a corner room, with a balcony and a small mini bar in there. And that would just normally end up displayed on a website as a king room, right? So [attribute-based booking] will lift the veil on some of our inventory and let us move from special requests made in person to a guaranteed set of attributes when booking online.”

Revenue Management Game-changer

Attribute-based booking may sound merely cosmetic. However, the implications can be wide-reaching, requiring a new revenue management system, a new property management system, and a new customer relationship management system.

“The logic of how you do hotel revenue management will need a transformation,” said Francisco Pérez-Lozao Rüter, senior vice president of hospitality at Amadeus. “You need to move away from a rules-based approach with one based on artificial intelligence. It’s a very complex beast.”

“At IHG we’ve tended to look at revenue management with all of the channels being external,” said Edwards. “But attribute-based booking will require us to think of our in-house channel more carefully.”

“Rather than consider it ‘job done’ once someone books via any channel, we need to look at the monetization that happens by that guest while at a property,” said Edwards. “If you got in via a cheap rate but used the restaurant extensively and used the laundry service, you deliver more total value than the guest who paid rack rate but bought nothing else.”

To woo lucrative customers, InterContinental will need to enhance its customer relationship management software with better tools for reaching guests via a mix of email, app messages, and texts. It must use a carefully targeted approach that doesn’t prompt a traveler to opt out entirely. The company has yet to reveal its plans for that step.

Next Phase for IHG Platform

For now, InterContinental is focusing on the basics of attribute-based booking. It wants to ensure that the same booking process is available across all touch points, such as the mobile app, a lobby kiosk, and the in-room TV, Edwards said.

To work well, attribute-based booking needs access to useful data, too. Until now, companies like InterContinental have had siloed systems. Data on a customer who stayed at a Holiday Inn might not be shared with a different InterContinental brand when the customer shows up there for a different trip.

“We had a swivel-chair approach of operating the different systems,” said Edwards. “You had to mask behind a curtain the complexity of trying to interact with a guest.”

InterContinental intends to unify more of its data. The next step is to bring customer records, or guest folios, onto the platform.

“It’s a progression of our work,” said Edwards, without specifying a timetable. “But I don’t think it’s lengthy.”

“The other paradigm shift will be in loyalty program management,” said Edwards. “We’ve always had two camps of you’re either loyalty or not, and we pay the most attention to the highest-status loyalty members. New systems will let us think about every customer and become more creative about how we run our loyalty programs and recruit new members.

“We can technologically be capable of innovation we couldn’t handle before, but how do we get 5,600 hotels to appreciate and use it,” said Edwards. “You need a cadence to the rollout. So we’ve started with a move of like-for-like capabilities of our decades-old Holidex system to the new Concerto, cloud-based system. For us, that was a great first step to get staff acclimated.”

Consumers may also need time to adjust. “The critical part for IHG and Amadeus is to figure out which attributes do customers really care about and not inundate them with choices, which will put them off,” said Anderson.

“Rather than flood everyone with 300 choices, we’ll be selective and push offers that are brand appropriate, with different ones at brands like Regent than ones like Holiday Inn Express,” said Edwards.

During a transition period, attribute-based booking might spark an accidental arms race between hotels and their thriftiest customers to outsmart each other in what the most stripped-down offering could be. However, over time, more money will be extracted from the most lucrative of customers, and that will balance things out, executives said.

“Many hotel groups need to move from property-level, inventory-based views to group-wide, guest-centric views,” said Francisco Pérez-Lozao Rüter, senior vice president of hospitality at Amadeus. “But that will require rethinking absolutely everything. It’s both a phenomenal challenge and a phenomenal opportunity.”

For more context, paying subscribers to Skift Research can read this month’s latest report analyzing the hotel revenue management industry.

—Additional reporting by Senior Hospitality Editor Deanna Ting

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