Navigating changing market conditions and new competitors
- Significant year-over-year growth in RGI
- Improved business mix
- Increase volume in high-rated BAR
Travelodge opened the UK’s first budget hotel in 1985. The company operates over 500 budget hotels throughout the UK, Ireland, and Spain and plans to boost its portfolio even further with the addition of 12,500 rooms by 2020.
In 2013, the Travelodge brand benefitted from a £223 million investment. This capital expenditure will help Travelodge to grow its business, strengthen its product offering, and make Travelodge the best value hotel chain in the UK. As part of this investment, the budget hotel chain has created a new room which offers more comfort, quality, and style. This enhanced product offering is being combined with a new cutting edge revenue management system that offers economy pricing, to ensure Travelodge is the smart choice for leisure and business travelers. Central to this revenue optimisation strategy has been Travelodge’s utilisation of revenue management and its long-term partnership with IDeaS Revenue Solutions.
The longevity of IDeaS’ partnership with Travelodge is testament to the effectiveness of the solutions delivered throughout the different stages of Travelodge’s growth. While this working relationship has existed for more than a decade, it has remained an innovative one throughout.
With IDeaS, Travelodge has achieved a substantial growth in RevPAR, and Revenue Generation Index (RGI) for the estate has increased significantly.
Applying the right model
Centralised revenue management can help large chains capture the benefits of scale, but only if people, processes and technology are aligned. With a revenue team of just 20 responsible for the entire portfolio, Travelodge is familiar with the challenges of maximising revenues whilst ensuring its customers receive the best value within the marketplace.
“We want our hotel managers to stay focused on our customers, which is why we have a central team of professional revenue managers in place, to deliver the right pricing decisions for all our hotels,” said Peter Manby, Revenue Director.
Travelodge has been working with IDeaS for 10 years, during which time the company has applied an increasingly sophisticated approach to revenue management. With leading revenue management technology and techniques in place, Travelodge is well positioned to capture revenue opportunities in all market segments and economic conditions.
Selecting the right partner
In 2004, when Travelodge understood it needed to increase automation to support the continued growth of its business, it chose IDeaS to help make it happen.
IDeaS implemented its automated Revenue Management System (IDeaS RMS) within 280 Travelodge hotels in just 90 days. IDeaS RMS creates the data-driven decision environment essential to systematic revenue optimisation. Using industry-leading analytics, IDeaS RMS automates day-to-day pricing decisions. With validation procedures required in most cases, revenue managers can spend more time pursuing revenue opportunities.
IDeaS RMS provides invaluable business intelligence during every stage of a hotel’s lifecycle. As Travelodge added more and more hotels to its portfolio, IDeaS RMS was installed at each new property as part of IDeaS’ New Hotels Success Service Package (NHSSP) which was used to support maximum revenue generation from day one.
With NHSSP, each new Travelodge hotel has a fully functioning RMS in place, producing forecasts and automated decisions before it opens. Using a cloned data profile based on historical information from a hotel with similar characteristics and business mix, IDeaS RMS can forecast demand, set corresponding prices and provide reliable business intelligence before rooms even go on sale. Without an RMS like this one, revenue managers are operating in the dark. They run the risk of mispricing rooms when hotels can least afford it. With IDeaS RMS they are in a much better position to maximise revenue generation.
Adapting to a new environment
By 2010 a weak European economy, the arrival of new competitors and advances in hospitality technology had created new challenges for Travelodge. The market was changing, in particular the approach taken by Travelodge’s competitors to pricing. Travelodge wanted to make sure it did not miss opportunities to drive new revenue. “We needed to make sure our processes and solutions were fully supporting us to capture all revenue opportunities while supporting centralised revenue management,” said Manby.
Travelodge and IDeaS conducted a business review to define the most appropriate approach to maximise revenue management performance for a portfolio that had nearly doubled in size since the relationship had begun. “We worked with IDeaS on this not just because of its world-leading solutions but because over the course of our relationship they had continually demonstrated a deep understanding of our needs, and as a result we created the Driving Better Revenue initiative.”
Through the “Driving Better Revenue” initiative, IDeaS provided a series of recommendations to enhance revenue performance, increase productivity and efficiency within the revenue management team and ensure sustainable long-term growth for Travelodge.
Enhanced revenue performance
Travelodge saw that instead of selling rooms using a simple flat-rate model, it could set prices based on demand, and pull in greater revenue opportunities. IDeaS helped Travelodge move to dynamic pricing by installing its Best Available Rate (BAR) module, which calculates the optimal room rate based on arrival date and can price either by arrival date and length of stay or by day.
With IDeaS’ BAR module, the impact of competitor activity can also be incorporated into the pricing decision. Revenue managers can refine pricing strategies in real time to maximise revenue in a competitive market. “The BAR module is hugely impressive. Pricing decisions for each hotel are updated several times a day, seven days a week, 365 days a year,” said Manby. “IDeaS BAR module has been a core part of driving a better mix of business, leading most notably to increases in BAR and corporate business in preference to our discounted products.”
Regardless of a hotel’s automated revenue management system, it needs to have an appropriate BAR spectrum from which to make tactical pricing decisions. This rate spectrum needs to take into account all the nuances surrounding different days of the week, and elements such as seasonality—a formidable task involving a huge amount of data analysis.
Travelodge understood the vital importance of getting these rate spectrums right, and their impact on the overall revenue opportunity. It leveraged IDeaS Consulting Services to build a structure that quickly identified the ideal rate spectrum. In addition, the IDeaS Change Accelerator service left Travelodge with freshly established standards and processes for rolling out the new pricing approach across the portfolio. IDeaS also looked beyond rate spectrums to provide Travelodge with recommendations for optimal discount levels, rate fences and special event rates for key hotels. “The review was so successful that we plan to repeat the process with IDeaS to finetune and update as we and the system learn,” said Manby.
Utilising IDeaS’ BAR module achieved another objective for Travelodge, a need specifically driven from having a small centralised revenue management team, which was to move revenue managers onto the more efficient path of managing by exception. With IDeaS RMS doing the heavy work, revenue managers were freed-up to develop revenue-enhancing strategies while managing exceptional situations—those cases that require a distinct interpretation of market conditions that cannot be gained from data alone.
Moving from reactive to proactive behaviour increases revenue manager morale as well as productivity. “It was a strategic action point for us at the beginning of this project to achieve management by exception. This is a vastly more scalable and satisfying way for our centralised revenue management team to work,” said Manby.
We develop solutions that can co-exist in your current environment and train your employees along the way to ensure a deep revenue performance culture.
Increased productivity and efficiency
New processes were needed to complement this state-of-the-art technology and IDeaS worked with Travelodge to revise the revenue management standard operating procedures, in line with the new technology environment.
Standardising procedures have led to increased efficiencies, clearer roles and responsibilities and application of the latest industry best practice within Travelodge. So much so that Paul van Meerendonk of IDeaS Consulting Services comments, “Travelodge is now operating one of the most advanced centralised revenue management models we’ve seen.”
A culture that supports sustainable growth
IDeaS then supported Travelodge to embed the right behaviours within the revenue management team. “We recognised early on that continuing professional development, training and education are all central to maintaining a successful revenue management culture at Travelodge,” said Manby.
IDeaS delivered a series of user training programmes conducted onsite and online through Discover, IDeaS e-learning system. The modular workshops are designed to provide consistent understanding and application of revenue management strategies to ensure best practices within revenue management teams and the departments they interact with. The programme delivers on two levels. As well as training new employees, it can be used to refresh the skills of current team members.
An accompanying IDeaS RMS Trainer Certification Programme provided Travelodge trainers with the knowledge and skills to train revenue managers independently. This has the added benefit of creating a group of highly motivated internal experts as familiar with the very latest developments in revenue management as any external consultant. “One of the best results of the training is the impact on our staff who are trainers themselves. Their excitement and motivation is excellent and we continue to see an increase in staff retention levels.”
Confidence in the future
With technology, processes and people all working in harmony, Travelodge is confident it has the revenue management model and culture to match its ambitions. “We have more clarity and control of our revenue management now and importantly, in under twelve months, we are already able to show clear evidence of return on investment from the Driving Better Revenue initiative” said Manby. “We have realised a remarkable uplift in performance against our competitors, reflected by significant year-over-year growth in RGI. This performance uplift has come largely as a result of a better business mix for us, and increased volume in high-rated BAR and corporate contracted segments. IDeaS has proved to be an invaluable partner, and will undoubtedly continue to play an integral role during our continued growth.”