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March 23rd, 2010 
Ifydcat I’m going to a job interview for a Product manager role in online travel. I have no prior experience in marketing. The company knows that but i want to be able to answer the typical behavioural questions “how do you go about” type:
how do you go about managing budget?
how do you go about defining the product strategy for products ?
how do you go about organising promotional activities to achieve performance outcomes and deliver revenue targets ?
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I’ll attempt to answer your first question. I work in the hotel industry as a revenue manager and know a little about yielding a hotel.
In order to yield a hotel/product you must have a good idea of what your demand is and know what your competition is charging. Price is based on demand. When demand is high, it is important to find the highest rate the guest is willing to pay without scaring them off. When demand is low, you try to lower your price in an effort to capture more business without compromising rate integrity. The perception is you get what you pay for. While I could sell a lot of rooms for $30 a night, the perception is my hotel might be a dump and I wouldn’t make much profit. That perception would scare off customers that are willing to pay a little more for quality.
At a former hotel, I was once fortunate to get to play around with the marquee showing the hotel’s rates. The owner wanted us to sell rooms at a $59 rate while everyone around us was priced around $89-$109. Tracking the number of walk-ins during that time and comparing it to past data, I determined I was only averaging 2-3 rooms more a night. But, my average daily rate (ADR) was down. I was actually losing money. The lower rate also attracted unwanted guests and scared off the more desirable guests. It was the perception that something was wrong with the hotel – this was a common question at booking.
I use this strategy in my market: I identify what my potential sell out dates are. I then look at what is on the books. I may keep the rate lower far enough out just to build a base of business. As the number of reservations booked increases, so does the rate. As demand gets high, I may decide to not accept any AAA discounts/senior discounts. I will also close off my hotel to alternative distribution system (ADS) channels such as Orbitz, Priceline & Expedia. If demand is high, the guest will pay a much higher rate. My goal is to maximize the revenue for the hotel. If one person won’t accept the rate as is, someone else will if the city is sold out.
Package deals can be a great way to increase revenue. You essentially combine other services that the guest may otherwise not buy. A good example is the romantic packages. Let’s say you the room rate is typically $140 plus tax. The operating cost per room per day for the hotel is $25. A steak dinner for two and a bottle of wine runs $70 on your menu. You have a food cost of 30%. So, that dinner only costs the hotel $21. Everything over that is profit. Assuming the guest eats in the restaurant and orders the high dollar items, it would usually cost the guest $210 at a hotel operating cost of $46. You could easily offer the package for $180 and still make a good profit during a slower period. You also drive revenue to the hotel restaurant that typically needs the business.
Another way to increase revenues is to price your products with added features higher. For example, ocean view rooms are typically in higher demand than exterior rooms. Because of this demand you can price the rates higher and earn as much as $200 more for almost the same product.
Revenue management requires you have past data to go off of, an understanding of the market, a demand forecast and some intuition. You must also record data as you go. A successful revenue manager loves working with numbers and knows to how to use them.
If you’re working with on an online agent, the strategy can be different. Your goal is to sell what is most profitable first. Essentially ADS channels sell rooms in bulk and get a break in price from the hotel. They then mark up the price and the rest is revenue.
Let’s say you have two 3-star hotels. Hotel A has agreed to give you a rate of $70. They sell their rooms on their site for $100. You can mark the price up to $95 and you’re still cheaper than the hotel and you make $25 in revenue. Hotel B has agreed to give you a rate of $65 and their rooms also sell for $100. You can also price this hotel at $95 but you’ll make $5 more. Which hotel would you want to place higher in position, Hotel A or Hotel B? That’s a smaller picture an doesn’t even go into contracts that ADS channels may have with a chain in certain markets. Some ADS channels may ask the hotel to give them last room guarantees and in return they give the hotel a position on the first page.
Anyway, there really is a lot more to cover. This be more than enough information and may not pertain to you. But, the examples given should give you some idea on how it works. Good luck to you and I hope I have been of some assistance.