Interviewed by Lily Lin
INTRODUCTION
Carel-Coen is very passionate about the subject of revenue management. He is a serious and hardworking man with clear vision what he wants to achieve professionally. In term of revenue management education, he thinks that we live in a different era now; things are evolving so much faster than prior to the age of the internet. Therefore, revenue management education must focus on future development and not just concentrate on what the industry is doing currently. Otherwise, by the time students finish their education and before they even start their career, they are already outdated. He looks for individuals who understand the environment around them, who possess diagnostic and analytical skills, who are committed and success-driven.
ACCOR is a French multinational corporation, part of the CAC 40 Index, operating in nearly 100 countries. ACCOR has more than 4,000 hotels worldwide, ranging from economy to luxury. ACCOR Hospitality Netherland has a network of 38 hotels, with well-known names such as Sofitel, Pullman, Novotel, Mercure, ibis, etc., enabling it to cater for all tastes and budgets.
INTERVIEW
You graduated from Maastricht School of Management. What was your major?
I studied Hotel Management. I like hotel business. I also like dealing with numbers. It was good thing that I like numbers because with my current job, I deal with numbers every day.
Your job title is “Director of Revenue Management and Pricing at Accor Hospitality. Can you explain “at Accor Hospitality”?
I am responsible for the revenue management resources, systems and strategies for all Accor brands in The Netherland, with the exception of Sofitel. (Sofitel has a different organization structure.) Together with the central RM team at the Support Office in Amsterdam we have 17 dedicated revenue managers in The Netherlands covering all Accor hotels. We also maintain a close relationship with the Central Revenue Development Department and the RM Pass Team at our corporate headquarters in Paris.
In addition, at the Netherlands’ Support Office, we maintain a close working relationship with Sales and Marketing and Operations Management. While RM looks at the demand, S&M tries to understand the clients and OM looks at the costs and the number of personnel required, and the cost and the amount of raw materials needed. It is a triangle; a group decision. However, the influence of RM is bigger because we work on numbers. If there is a commercial conflict, there is a higher structure to resolve the conflict. Once we worked out our strategy, we present this to the local GMs. At the end, the responsibility is with the GMs. But of course, if I have taken a decision, the responsibility stays with me.
Were you always interested in revenue management?
Yes. I’ve always been interested in revenue management, even before revenue management was widely recognized in the hotel industry. I’ve worked many years in Reservations, and Conference and Banqueting Departments, where pricing was an important management tool. Also, when I joined the Steigenberger Kurhaus Hotel I chose to specialize in revenue management, which brought me to where I am today.
Due to the Greek crisis, the current and near future economic situation in Europe is worrisome. Some of the experts do not believe that the Greek crisis and its effect will be over soon. Has this affected the Dutch hotel market, and how have you dealt with it so far?
It’s difficult to predict what will happen in Greece. If it really goes wrong, it will impact Europe and other parts of the world. As a country, Greek is not a major feeder market for us, but the Greek crisis impacts the economic growth potential in Europe, therefore, it affects the international hotel markets. However, we learned a lot from the 2008 economic downturn. We are monitoring the economic development in Europe daily and anticipating possible changes. Second, we try to optimize during the constrained and unconstrained demand1 periods, which we normally do anyway. An important issue here is that we must make sure that our market position is where it should be. Third, we focus not only on revenue but on contribution margin as well. In addition, we also have contingency plans that will actually cover more than just the Greek problem.
By the way, I have confidence in the Euro. The European governments will do everything possible to keep the Euro intact. In fact, I booked my holidays yesterday, and I am going to Greece!
1 Constrained demand is the demand limited by the hotel’s capacity, whereas unconstrained demand is demand not limited by the hotel’s capacity.
In September 2011, the Dutch Daily News reported that the Netherlands is the most expensive country in the Euro zone, with an average price increase of 4 percent in the first half of 2011. According to the Hotel Price Index or HPI from Hotel.com, the average room rate for a hotel in the Netherlands is €110. Amsterdam remains the most expensive Dutch city. Is this good or bad news?
To be honest, it does not mean anything to me. I would need to know the source of this figure. HPI [which is supported by Expedia.com], reflects only the view of one channel. Also, the claim that the price increase in the Netherlands was 4 percent in the first half of 2011 is misleading. This figure should have been offset by the price decrease in 2010. We are expensive, but we are not as expensive as cities such as New York or Paris. In term of whether this is a good or bad news, well, news like this won’t help the inflow of international tourists to The Netherlands.
What is your market forecast for 2012 and 2013?
From a broad picture, if international traveling slows down due to negative economic situations, you will see demand decrease at the airport hotels. City center hotels and hotels that are located where there is a concentration of foreign government officials and diplomats are the last to suffer because people still have to come for meetings. If business traveling slows down in Holland, we would see demand decrease in Eindhoven due to the fact that Eindhoven has a concentration of technical companies.
As for year 2012, it will be comparable to the year 2011 --- uncertain and unpredictable. The business segment, impacted by the economic circumstances, will remain fragile. I think 2013 will look better due to major events --- but of course, whether these major events will boost hotel business still remains to be seen. We don’t know about the corporate and leisure markets yet.
ACCOR has a number of well-recognized brand names, ranging from economy to luxury hotels. In dealing with revenue management issues, what are the differences between brands?
The differences are in a number of areas, such as room types, flexible and dynamic pricing, different brand’s positioning and its effect on public, group and contracted rates, distribution strategy, contract management, etc.
When I interviewed Caro van Eekelen, the Managing Director of ACCOR Netherland, she said that ACCOR intends to double the number of franchisees in the Netherlands. There are certainly some advantages in franchise operations. For example, the risks that normally associated with a major investment are greatly reduced. However, from the perspective of revenue management, will it cause more problems because of the “control” issues? That is, you have no ownership. Instead, you have a franchise contract with the franchisees.
Yes. You are right that we do not “control” our franchisees the same way an owner would. We believe that franchisees that join Accor share the similar long-term objective with us; namely, revenue optimization. To reach this objective, they must take advantage of our brands, distributions, and expertise. Our strategies have been proven successful; it would make sense that our franchisees would want to adopt the same strategy. It is also the reason that we developed a unique product called “RM for Franchisees”. Under this program, our franchisees must invest in our RM system, tools, training and consultancy --- even small hotels with 60 rooms. We want our RM philosophy to permeate all Accor hotels.
I definitely like franchise business. It’s a different way of working together.
In your opinion, is RM about “managing demand”?
Yes. We manage demand; we do not create demand.
Shouldn’t the responsibility of creating demand and managing demand rest on one person rather than dividing it into Sales and Marketing and RM?
RM and Sales and Marketing work together to analyze contracts and the market data. As there might be conflicts of interests, it is better to keep the responsibilities separated and work on solutions together.
Let’s suppose that you drop the room rate, is it the Revenue Management’s decision or Sales and Marketing’s decision?
In principle we do not drop rates. We prefer to encourage our guests to book early and pay the lowest rate. If we really need to drop the rate, it is a decision taken by our commercial triangle that includes RM, Sales and Marketing, and Operations Management.
RM is about “maximizing revenue”. Demand increase does not necessarily lead to revenue maximization --- and revenue maximization does not necessarily guarantee profit maximization. In fact, it is entirely possible that at one point, the more revenue you generate, the less profit you make. Have you had the opportunities to observe demand, revenue and profit relationship?
Yes. A good example nowadays is the channel management. We experience an enormous increase in demand of the third party websites, which result in more revenue for the hotels and therefore more commission paid --- both in the percentage of the revenue and in the absolute amount. Good channel management is necessary to optimize the bottom-line results for our hotels and their brands.
Although many hotels would like to see profit comparisons in the competitive set, yet, participating hotels often hesitate to provide profit data to make it a reality. What is your opinion on this issue?
In theory it would be interesting to monitor the competitors’ profit data. In reality it would be very difficult to implement. Often, the hotels in the competitive set have different financial and organizational structures as well as requirements about asset management. [At the same time, comparisons are only possible if all of the competitive hotels would calculate their costs and therefore profit, in the same way.]
Regarding discounting, what is your view on the following statement:
Comparing selling 90 rooms without a discount as opposed to selling 90 rooms with 25% discount, if the discount is offered, you would have to sell 120 rooms to make up the revenue difference.
In general, I prefer to sell rooms without discount, although it will depend on total demand and forecast. Discounting has a wider impact than only 25% less revenue. If you discount in the public area it impacts many other segments as well, whereas an equal RevPAR (revenue per available room) can contribute to better TRevPar (total revenue per available room).
Sometimes we have no choice but to reduce the rate, in that case, we, that is, RM, Sales and Marketing and Operations Management, make a joint decision.
RM considers rooms as inventory rather than products that can be created, changed or improved to maximize revenue. Do you think RM should be involved in product development and product improvement?
RM can provide an additional value on product development and improvement. RM has a view on the market and competition, therefore, the specific product demand; e.g., occupancy rate per room, F&B expenditure, etc.
In your opinion, will social media websites become one of the major players in making room reservations and selling hotel rooms?
No. Although I expect these sites will continue to develop in the near future, they will not be able to take over the specialist role from the hotel websites and third-party websites. Making a reservation is more than just clicking and buying; it’s also about guest emotions.
What is your thought on forecasting accuracy, especially group forecasting?
Forecasting accuracy is essential for revenue management. The more accurate your forecast is, the better the outcome of your strategy and tactics implementation. We are working on improving the forecasting accuracy. Currently, we use Forecasting Performance Ratio [forecasted number of rooms sold divided by the actual number of rooms sold] to measure our forecasting accuracy.
Group forecast is more difficult than the transient [individual traveler] forecast. This is due to the fact that the volume per booking cancellation in groups is higher. However, group sales are often from repeated customers and the peripheral revenue [other than room revenue] is often higher compared to that of the transients’. In addition, groups have longer booking period [rooms are reserved long before the arrival date].
Knowing the conversion rate [the percentage rate of converting online traffic to buying customers], cancellations and no-shows is very important for managing the group sales.
What are the most challenging aspects of your job?
The most challenging tasks for me are:
o Recruitment of skilled and motivated team members;
o Calculation of ROI for RM
o The right balance between time and effort spend on RM tools and systems versus strategic topics.
If you were to hire a new revenue manager, what are the most important qualifications, such as knowledge and skills, work experience, etc., that this person must possess?
We look for people who:
o Have a degree from a hotel management school or a business school;
o Possess basic mathematical knowledge and skills;
o Have experience in market research and case studies;
o Have a clear understanding of the hotel industry;
o Possess Strong business aptitude:
a. Ability in performing diagnosis and analysis;
b. Have a strong drive and are highly committed;
c. Strive for results
o Proficient in using RM analytical and distribution tools:
a. RM system
b. PMS [Property Management System]
c. CRS [Central Reservation System]
d. Excel, including using of formulas, database and pivot tables [interactive tables that automatically extract, organize, and summarize data from the main tables];
o Proficient in using communication tools, such as:
a. PowerPoint
b. Word
c. Outlook
What advice would you give to our students who are interested in pursuing career path in revenue management?
o Know what the RM job is all about and the required daily tasks;
o Possess a realistic view --- realize that you are just starting and you have a lot to learn
o Always take initiative
o Enjoy your job
What were your proudest or the most satisfying moments in your career life?
When I joined Accor the “Battle for Revenue” had just begun. I stepped in at the right moment and was able to develop and implement the RM structure and philosophy in Accor The Netherlands.
Finally, what will be your next career move?
I am not finished with my current job yet; I expect that it will take a little longer. My next move could be a similar job in a bigger country or region. I am also interested in the development of hotel portfolio. And maybe the airline industry RM will attract me . . . . I will keep you posted.
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