HSMAI recently spoke with Klaus Kohlmayr, Senior Director, Consulting, IDeaS - A SAS Company and HSMAI Americas Board member, about hotel pricing today and the session he will be moderating at the upcoming HSMAI Revenue Optimization Conference (ROC): "Innovative Pricing in Today's World"
HSMAI: With the economic woes largely behind us and demand exceeding pre-recession levels, pricing right has never been more important in the industry. Is it surprising, however that so many hotel companies still seem to struggle with finding the optimal pricing approach for their business?
KOHLMAYR: While pricing is recognized as one of the key success factors, it is one of the most difficult things to get correct. Pricing is a very emotional process, it’s like marketing – everyone is an expert. In a Hotel, this means that from the Owners to the General Manager, the Finance Director, the Sales Department to the Reservation agent all have an opinion on how a Hotel should be priced. Reality is, you can never really get it right – and you can never get everyone to agree on what the right price should be. The best approach is to take the emotions out of the equation and to have a structured, measured and scientific – left brain - approach to pricing – which is often counter-intuitive with the service – right brain - culture in a typical Hotel.
HSMAI: When you talk about a right brain vs. left brain approach – what are some of the examples you see?
KOHLMAYR: The most forward looking hotel companies realize that a) Pricing is very hard b) It has to be done on an ongoing basis c) it has to be part of the culture. Gone are the days when you established your pricing structure once during budget season and then let it run its course. Competitive pressures are higher and technology is giving guests more pricing power than ever. So these companies have really worked over the last few years on putting their pricing in order. They have either invested in technology to be able to dynamically price, or they have increasingly reached out to specialist pricing companies to provide the analytical support they need to price optimally. This could be in the form of augmenting their own pricing technology or through analytical services which provide scientifically derived pricing recommendations. With a structured and proven approach and letting the data speak removes some of the emotional fuzziness and provides everyone with a better framework to work from.
HSMAI: Airlines have successfully unbundled their pricing – what would be the pros and cons if the hospitality industry would follow suit?
KOHLMAYR: This is an interesting question. The unbundling of the pricing has contributed hugely to return most of the Airlines to profitability – but at what cost to the customer experience? From a “left brain” - pricing and revenue management - perspective, it is definitely something which could be considered, however the conditions in the Hotel industry are very different. Hotels have a very different business model than Airlines. Margins are in general much higher and we actually see more bundling then less, especially in the segments of the industry where it make most sense to unbundle. It is still a mystery to many why guests are required to pay USD 30 for internet when paying USD 200 for a room, while paying nothing for a USD 50 room. Effectively, unbundling has always been a reality in the upper/luxury segment of the industry, while it is quite the opposite for the lower/limited service segment.
HSMAI: What do you see on the “pricing horizon”?
KOHLMAYR: I think we are at the cusp of a huge leap in pricing sophistication. New analytics and technology makes it increasingly cheaper to crunch large amounts of data in a very small amount of time – which is critical for pricing automation. We see a push to extend price optimization from transient segments into other areas, including groups, function space and restaurants. We could also envision in the next years the emergence of attribute based pricing, where every product a hotel might sell is priced individually – but dynamically - and then re-aggregated for the guest into one price at point of booking. These are very exciting times for the industry, the question is how the hospitality eco-system, including PMS, CRS, OTA and other technology providers will keep up or catch up with the rapid advances that are now becoming more and more accessible to the industry.
Klaus will lead a further discussion of this topic at the HSMAI Revenue Optimization Conference June 24 in Minneapolis with an industry expert panel consisting of:
- Craig Eister, Vice President, Revenue Management, IHG
- Kathleen Mallery, Director Revenue Optimization Planning and Development, Americas, Carlson Hotels
- Lesli Reynolds, VP Global Distribution & Revenue Strategy, Omni Hotels
- Ruben Sigala, Senior Vice President, Enterprise Analytics, Caesars Entertainment
About Klaus Kohlmayr
Klaus joined IDeaS in 2007 to develop and launch the IDeaS Consulting practice based in Singapore. He relocated to the IDeaS head office in Minneapolis in 2010 and is currently leading a rapidly growing team assisting clients worldwide to develop innovative new approaches to total revenue performance.
Before joining IDeaS, Klaus worked for InterContinental Hotels Group in a variety of operational and revenue management, pricing & distribution roles around the world with particular emphasis on growth in China and Japan. He holds a B.S. in Hotel Management from the Hotel Management and Catering School in Villach, Austria and a Certificate in Hotel Real Estate Investments and Asset Management with Cornell University’s School of Hotel Administration. He has been involved with HSMAI in Asia Pacific and the US for many years. He is a member of HSMAI’s Americas Region Board of Directors.
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