May 27, 2015
New York City is a tough place for revenue managers, according to a panel of “Money mavericks” during a HSMAI panel. Billed as “Money mavericks,” four revenue managers on a panel at a HSMAI of Greater New York event debated distribution, Airbnb and the future of their profession.

Among the highlights from the discussion, subtitled “A dialogue with four of New York’s most influential revenue management leaders”:

  • Airbnb is having a limited impact, but stands to gain in significance in the near future;
  • disruption will come from new intermediaries, such as Google;
  • automated revenue management tools will continue to get better, but a knowledgeable person always will be needed—especially in larger markets;
  • online travel agencies, last-minute booking sites and other channels were perceived as both threats and platforms to be leveraged; and
  • the third quarter in New York City will see the same stagnancy in rates as more supply enters the market.

Airbnb takes on business travel

While the panelists acknowledged the impact of Airbnb, they agreed so far it is not a major disruptor.

“Airbnb is only in its infancy and is only going after leisure guests. They will be evolving into something different,” said Adrian de Gortari, assistant corporate director of the revenue performance center at Magna Hospitality Group.

Steve Horowitz, market revenue leader for the Greater New York City area for Marriott International, said Airbnb is now connected with travel management tools like Concur and that its growth in the business transient business “will be a challenge.”

“We’re seeing a lot of disruption in the industry, and much of that is in distribution and Airbnb will be just another distribution channel,” said Calvin Anderson, director of revenue for the New York Hilton Midtown.

“New players will be meta intermediaries like Google Play, which will know what kind of hotels you like, what you are ordering in the bar, what recommendations your friends are sending you,” he added. “Google’s customer will book a hotel on its recommendation, and then they will find the best flight for her.”

Distribution channels: Friend or foe?

There were mixed attitudes toward OTAs, last-minute booking apps and other distribution channels.

“Last-minute channels are interesting but can be useful only if used in moderation,” said Roy Madhok, director of revenue at The Lexington Hotel New York City.

Revenue managers are too quick to use shiny, new tools before understanding how they impact the long-term strategy, he said.

“It’s important to realize what all these things do to demand and then strategize differently. You might decide to use HotelTonight one or two days a week; or Expedia on occasion; and maybe suck it up on Sunday nights so you don’t sell rooms for $79,” Madhok said.

De Gortari called the new channels “our worst enemy.”

“If you strategize correctly, you don’t have to use them,” she added.

Anderson came to the defense of OTAs. “They offer a lot of value, like knowing the customers better than we do and having huge marketing resources. Nobody likes to pay distribution costs, but the reality is that if you play them well they can be beneficial. You won’t know how to reach a group in Brazil that is booking a meeting 200 days from now, but they will.

“They do have a lot of value, but they will also have to continually prove it.”

Better tools but always human oversight

Panelists agreed automated revenue management tools would never replace human intelligence.

“I have worked with a lot of intuitive systems, but they always require somebody who knows the market,” de Gortari said.

With more transparency will come more trust, Anderson said.

“Revenue managers don’t trust (automated systems) because they can’t look inside them to see how they work,” he said. “The technology people will have to open up those boxes to the people ultimately responsible for the decision making. “

Kerry Mack, senior VP of revenue and distribution at Highgate Hotels, said automated systems might be sufficient in smaller markets.

“In smaller markets, the incremental value of these tools is huge,” he said. “But in a larger market, there are too many unknown, last-minute circumstances for a computer to accurately predict what will happen.”

Questions on Q3

The rate stagnancy that has plagued New York City throughout much of the year is likely to continue in the third quarter, panelists said.

Average daily rate in the market was down 4.1% to $204.18 through the first three months of the year, according to STR, parent company of Hotel News Now.

“It will be nothing great,” Mack said. “What we have seen in the last few months will be the same for a while. We may have some surprising good months as well as some shockingly bad months. And it’s hard to predict which will be which.”

Anderson notes some seasonal shifts that might wreak havoc.  “This year September is a week shorter because of a later Labor Day and the major Jewish holidays are in September rather than being partly in October.”

“The opportunity,” said Horowitz “is in growing groups. They have been strong and will determine the success of New York City. If we build a strong group base, we won’t have to drop retail rates. We need to give our sales folks great pricing and get them on the road.”