Greg Cross:The Future Of Distribution, RevPAR

Greg Cross, senior vice president, revenue management, Hyatt Hotels Corp., Chicago

　　At the HSMAI Revenue Optimization Conference, held in June in Baltimore, conference speakers predicted that the distribution landscape will shift dramatically and that revenue managers’ focus on RevPAR will be superseded by total revenue and profitability.

　　One of the panel discussions at the conference featured Greg Cross, senior vice president, revenue management, Hyatt Hotels Corp., Chicago. Before taking the position at Hyatt, Cross worked as a revenue management executive at Hilton Worldwide, McLean, Virginia, for 14 years. After the conference, HOTELS spoke with Cross about trends in revenue management and what he thought of the future of distribution, rate parity and the relevance of RevPAR.

　　More coverage of the conference will be featured in the September issue of HOTELS Magazine.

　　Reporter: What direction do you see distribution going in over the next few years? Do you foresee more or less direct booking?

　　Greg Cross: Less if you mean hotel direct. There will continue to be a large audience of customers who want to talk with a live agent during the sales process, but brand website bookings are continuing to grow as websites get more and more user-friendly and provide complete information and pictures. So the trend will continue to be customers moving online to book their reservation. Largely from the branded hotel’s website where content is the richest.

　　Reporter: What is the future of rate parity?

　　Cross: Rate parity is alive and well. Anyone who does not think so is too young to remember the online travel boom of 1998 through 2002. If you did not live through it, you simply cannot understand the chaos that was caused by a lack of rate parity as individual hotels continued to shoot themselves in the foot and sign contracts that permitted wholesalers to operate in a retail space with rates lower than the hotels could sell themselves. It took most of the major brands several years to get those contracts under control and to educate the hotel managers that they were only hurting themselves. Oddly enough hotels had been out of parity with global distribution systems for the decade prior to that but no one ever talked about it unless you were first generation revenue management. That was because the transparency of the Internet finally brought the problem into focus for a generation of hotel executives who were “out of sight, out of mind” on the challenge.

　　Reporter: How can revenue managers best identify their most profitable market segment, and why do you think some revenue managers have not identified this yet?

　　Cross: It’s actually very easy. Again, I hear this type of feedback at revenue management conferences, usually coming from independent hotels or small hotel chains where I guess the quality of data has not improved as rapidly as it has in the major brands. Most of the majors are now working with excellent market segmentation data and business intelligence tools that mine these answers and deliver them on a platter. The real enemy is not the competitive set. The real enemy is employee turnover and the frequent inability to find trained, qualified people to interpret the data and make decisions. It’s a geeky profession but that “lights are on but nobody’s home look” is still out there to be found.

　　Reporter: Is revenue management shifting from top line revenue to profit contribution? If so, how is that changing the revenue manager"s roles, the tools they use and how they are evaluated?

　　Cross: Not quickly enough. My personal opinion is that the challenge is cost-related. The hotel industry is a difficult, brick and mortar industry for profit margins. We spend a considerable amount of capital on information technology upgrades but most of the money goes into the sexy projects that incorporate something new, like Facebook or some other holy grail that is going to change the industry. And most of that money is being spent for use at the corporate level. But walk into many hotels and you will find that that managers are not on updated operating systems and are using revenue management technology from the 1990s.

　　Reporter: During the conference panel discussion, when you said that revenue managers are using data incorrectly, what did you mean?

　　Cross: RevPAR index data was never intended to be aggregated and used as a financial compensation tool. It was never intended to be used in performance tests by owners to determine if hotels were being well managed by management companies. How the data is being used today compared to the way it was intended to be used, 20-some years ago, is pretty far apart. Here again, like the rate parity issue, we have no one to blame but ourselves.

　　Reporter: Also during your panel discussion at the conference you said "in some ways we are chasing false gods" when occupancy is at 70% to 75% but profits are not increasing. What did you mean?

　　Cross: It was a direct reference to achieving a RevPAR index growth goal to achieve a financial bonus, by opening up opaque channels at near breakeven rates. We do not do that at Hyatt but there is a generation of revenue directors out there now who have never run a hotel without Priceline.com. When your incentive compensation is tied to an index number that you cannot take to the bank, it can invite some bad behavior.