In Conversation with Deniel Frey, H-Hotels Europe

With more than 60 hotels across Europe, the renowned H-Hotels Group offers a wide range of accommodation options. From budget hotels to luxury accommodations, the H-Hotels Group offers its guests a wide range of first-class accommodation options to meet a variety of needs. In his role as Vice President Revenue Management, Deniel Frey plays a key role in helping H-Hotels Group further strengthen its position as one of the leading hotel groups in Europe.

I have been in revenue management for 15 years and have worked for several hotel groups. I have been VP-Revenue Management at H-Hotels for almost five years now, where in addition to Revenue Management I am also responsible for Distribution, E-Commerce, Group Sales, Reservations and Business Intelligence. At H-Hotels, all these departments are united under the Revenue umbrella because they help us generate revenue. I studied tourism management in Innsbruck and have been a lecturer there for twelve years, teaching students about revenue management. After my internship at Hyatt in marketing and revenue management, I grew into this role because of my affinity for numbers and my analytical nature. This is how I discovered my passion for revenue management in the hospitality industry.

Revenue management has changed a lot over the last 15 years. When I started, it was not as sophisticated and automated as it is today. Back then, it was very classic Excel spreadsheet work. At that time, everything was still very manual and very rudimentary compared to what it is today. Now, there are specialized tools and management systems that support our work and automate operational tasks. A revenue manager has a 360-degree view of what's happening in the marketplace and can identify periods of weak demand and missing guest segments in a given period. This allows us to decide when to release offers or raise rates - that's revenue management today.

Ideally, a revenue manager should analyze the next two to three months on a daily basis and six to twelve months out on a weekly basis. This includes not only room occupancy, but also banquet occupancy. At H-Hotels, we have a total revenue management philosophy that includes banquet. During events such as trade shows, room rates can be very high, leaving certain meeting rooms empty. As a revenue manager, it is important to recognize this and communicate it to the group sales team so that these rooms can be filled.
Events are particularly important to the city hotel industry, especially trade shows and conventions, as they are considered "cash cows" for us. So it's critical to keep an eye on occupancy, pricing and competition to set the right price. Sometimes it is a bit of a gimmick where you have to keep your nerve to benefit from higher demand later on. Weather data is also important, especially in the resort hotel industry, but more on a short-term basis. It is important to consider what is going to happen in the next 14 days or three weeks and how accurate the data is.

Even the best pricing policy is useless if the necessary distribution is missing and no guests book. Distribution, of course, includes online travel agencies (OTAs) such as Booking.com or Expedia. They are incredibly important for us in both the city hotel and resort hotel industries. 

In addition to the OTAs, we are of course also very concerned about our own distribution through our own website. Another important distribution channel for us is the group sector, whether it is MICE groups (Meetings, Incentives, Congresses and Events) or groups that come to us for a specific trade show or for business meetings. All of these sales and distribution channels are very important to us.

For one thing, we have a rewards program for our guests called HotMiles, similar to HiltonHonor or others. This encourages guests to sign up with us and automatically gets them a better rate by being a member. The same goes for non-members. We use our revenue management system to compare the price on our website with the price on Booking.com and make sure that the price on Booking.com is higher.

Let's take an international trade show, such as the K show in Düsseldorf. International guests may not be familiar with our website and will look for accommodation on a platform they know, such as Booking.com. Booking.com is often easier for them to use, and they can see and compare all the hotels in the area at a glance. Our revenue management system detects when a period is dominated by OTA bookings. It then automatically increases the price on the OTAs while keeping the price on our site stable. When someone compares the price on Booking.com and our site, they will always find a lower price on our site and book directly with us - saving us the commission costs. If someone pays the higher price on the OTA platform, our commission is somewhat reduced. Ultimately, it comes down to understanding the guest and their habits. You have to take into account whether it's an international tourist, for example, traveling through Europe once, or a guest with the potential to return.

Revenue management provides the e-commerce team with impulses and suggestions, such as a direct campaign for a particular hotel that still has capacity in a certain period. It may also suggest investing more budget in Google campaigns for that particular hotel. If there are issues at a particular hotel, the revenue management team may recommend that the e-commerce team promote that hotel more to improve occupancy. The revenue management team works closely with the e-commerce team to increase revenue.

One specific example is Black Friday. In recent years, we have classically only offered discounts on our website (30%, 40%, 50%). These discounts were always higher than on the OTAs, where it was around 20%. This year we decided to run only a direct campaign on our website. This involved deducting €25 from our guests' shopping cart when they reached a minimum order value of €250. In order to better track the booking behavior of the guests, we have accordingly deposited special codes for tracking.

One thing we do very often is email marketing to our HotMiles members, i.e. our customers who have given us their consent to contact them. In doing so, we offer special deals that are only bookable on our website, such as free upgrades from breakfast to dinner. We are very creative in using these channels to generate direct bookings.

If you had to evaluate the level of automation, I would say that we are at about 90% in classic revenue management. This means that our system changes prices fully automatically and sends updates directly to all relevant channels. OTA bookings are fully automated, without any manual processes. We automatically change our rates three times a day. We also have properties in our system that constantly update and raise prices as soon as a booking comes in. There is no way one person could do all that manually.

On the marketing side, we still have potential to increase our level of automation. We are currently reviewing our IT structure and are constantly working to improve it. A large part of our IT structure will be CRM in combination with Sales Force. Of course, we need additional applications for smooth processes. Some of these applications have already been built, some still need to be built, and we are in the process of doing so.

For one thing, regular customers have to show up, and it's unlikely that airlines or other service providers know who their regular guests are. Higher prices for flights or fuels such as diesel and gasoline are usually easily accepted by customers. Why should the hotel industry be any different? An important revenue management tool is segmentation. Regular guests can be offered a price with some inflation compensation. At the same time, it is possible to continue online distribution with dynamic pricing. Guests who do not know the hotel pay the current price, while regular guests get their "goodie". The myth that guests agree on room rates is also questionable. But it is often easier to rely on myths than to implement and test dynamic pricing.

There is one person that I have worked for in a way, but unfortunately I have never had direct contact with. We are talking about Mr. Sternlicht, the CEO of Starwood Capital Group, a real estate hedge fund. The company buys hotel assets, "low hanging fruit" as they say. They renovate them and make them profitable, then sell them 5-10 years later. I worked for this company in England for four years, helping to set up revenue management. Mr. Sternlicht realized how much potential there was in the hotel industry by going digital, implementing revenue management systems, and getting rid of all the old school thinking. My key question to him: What drove him to build this company and run it so successfully?