Talking at the recent Opportunity 2018 revenue management conference, Fernando Vives, Chief Commercial Officer of NH Hotel Group, gave a candid presentation on where NH had been and how far it had come. On the brink of bankruptcy in 2012, the company embarked upon a change management plan that continues to get enviable results.
In 2013, Vives and his team built a masterplan to change the company 180 degrees, and a strategic business plan was introduced in 2014. The roadmap was set.
Very early on in that journey, Duetto was brought in to provide new insights on pricing and demand, as well as implement its Revenue Strategy solutions across the entire portfolio of NH properties.
From the very beginning, there were a number of synergies between the two companies, Vives said. Both wanted to bring about change in the hospitality industry and both wanted to innovate in hotel technology to achieve this.
After a period of exponential change, NH Hotel Group has emerged leaner, energised and ready to take on the world, Vives said.
A BANNER 2017 FOR NH HOTEL GROUP
NH Hotel Group recently released its financial figures for 2017, which largely validated the company’s efforts to change its pricing and distribution strategies.
The financial statement included an 8.5% increase in Revenue per Available Room, a 4.9% rise in Average Daily Rate and a 3.4% growth in occupancy. Top-line figures included a 6.5% growth in revenue to €1.57 billion, up from €1.47 billion in 2016.
See our recent case study for how Duetto helped NH achieve these results.
THE STRATEGIC CHANGE MANAGEMENT PLAN
The strategic plan focused on brand segmentation, repositioning and asset rotation, efficiency, and IT systems transformation.
Pricing and commercial strategy have played a central role, with Vives and his team rolling out improvements in three stages:
- From 2013 to 2016, NH focused on growing traditional RevPAR, with attention paid to segmentation and pricing.
- In 2016 and 2017, the company rolled out an advanced pricing strategy, with a focus on Total RevPAR.
- For NH, 2017 to 2019 is all about creating competitive advantage, with a focus on net TrevPAR
Related video: How NH Hotel Group remade its revenue management organization to embrace Open Pricing
CUSTOMER SEGMENTATION: ADDITION BY SUBTRACTION
In order to return to profitability, NH had to turn away business. It was a hard decision to make, Vives said, but it has certainly paid off.
In total, NH released 1 million room nights booked from less profitable customer segments.
“We didn’t want that business anymore,” Vives said. “They either had to pay more or they didn’t stay with NH. Some customers were willing to pay more to stay with us.
“We had a lot of crew business and tour operator business, FIT rates, cheap corporate rates, etc. We had to steer our distribution strategy and shift from one segment to another. B2C was driving our highest ADR, followed by the MICE segment, so that is where we put a lot of focus.”
The company implemented big changes in terms of segmentation and rates. “We had to change the mentality of the sales force,” Vives said.
Further adjustments were made across its CRM. In total, 2 million changes were applied to its database in just seven months as the company worked to understand its customers better.
In addition to rate changes, room types were also changed and standardized in keeping with what the guest wanted.
BUILDING A NEW HOTEL REVENUE STRATEGY
NH Hotel Group invested heavily in expanding its revenue management organization. It doubled its team of revenue strategists to 250 in less than one year. What’s more, the company has built a centralized Revenue Strategy structure.
Focus has also been placed on the career paths of those working in revenue, with a retention and remuneration programme and an online revenue management academy. This was also offered to all personnel, from housekeepers to general managers.
Driving the new Revenue Strategy has been GameChanger, the flagship Open Pricing application from Duetto.
“This provides us with real-time transactional data with full connectivity to our CMS and PMS,” Vives said. “It is safe, fast and reliable in 100% of our properties.”
WHAT'S NEXT FOR NH HOTEL GROUP?
The strategic plan is not finished yet. But already, Vives and his team are looking at the next generation of advanced pricing strategy, or what he calls “Pricing 3.0.”
He has mapped out the journey. And thanks to the strategic plan, NH is already partway there:
- Limited price points
- Full demand curve optimization
- Infinite price points
“How can we optimise the full demand curve? It’s not by having 15 price points but by having infinite price points,” he pointed out.
“We sell 7 million room nights a year. Open Pricing helps us optimise the full demand curve. Discounting off BAR is now forbidden at NH,” he added.
NH Hotel Group has embraced a holistic view of Revenue Strategy. Its system follows the market and optimizes for demand. This has been the secret to the company’s success.
As Vives pointed out: “I control my prices, not the market.”