Revenue Management for Destinations

Destinations rely on service providers delivering high-quality services to ensure guest satisfaction and enhance their reputation. Conversely, service providers benefit from travelers’ interest in a destination’s overall offerings. However, it would be a misconception to assume that destinations and service providers closely coordinate their marketing and sales efforts. Unfortunately, the reality is different.

“Service providers often don’t even have the destination on their radar,” Bianca Spalteholz reveals at the start of her conversation with GRANT. For years, she has been working to enhance destinations’ image amongst service providers, especially in terms of revenue perspective. “Many destinations even have to fight to get service providers on board.”

Hotels, guesthouses, and vacation homes often fail to recognize the potential their destination offers. If destinations and service providers were to collaborate on revenue management, for example, they could jointly work on attracting guests willing to spend more, boosting both the economic strength of the location and significantly increasing the providers’ revenue. Why is this still a rarity today?

One reason destinations are underestimated compared to OTAs is their meager market share of 2-5%. Therefore the hotels do not take them seriously. However, this view overlooks travelers’ motivation for choosing a particular area. Providers would do well to understand they are on the same team.

So, what is going wrong?

Why do hotels, guesthouses, and vacation homes eagerly engage with OTAs like Booking.com but remain reserved with destinations?

Bianca Spalteholz points out three pivotal factors in the dynamics between destinations and service providers.

Bianca Spalteholz

In 1998, Bianca Spalteholz founded the first sales and revenue management consultancy for hotels in Germany. For 25 years, Spalteholz Hotelkompetenz has served their hotel clients. The specialized consultants educate their clients about Total Revenue Management, market demand, and innovative sales strategies. Spalteholz is a strong supporter of DestinationCamp and has been advocating to strengthen the collaboration between destinations and service providers for mutual benefit for years.

#1: Know Your (Real) Demand

In the hotel industry, there is a prevalent belief that occu- pancy rates represent demand. A significant misconception that does not apply to the 21st century. It is a fallacy to think that examining your records predicts the future.

A compre- hensive analysis of external factors and market data is essen- tial for a realistic demand assessment. With thorough data evaluation and a proactive approach, hotels can optimize oc- cupancy and significantly boost revenues.

Here, hotels and their destination could work hand in hand, as Point 2 further elaborates.

#2: Dynamic Pricing is Contemporary and Benefits Everyone

“My vision is: if the destination knew when demand would surge, they could advise hotels to raise their prices,” Bianca Spalteholz tells GRANT. “Because market transparency benefits everyone, it’s not about insider secrets.” From a holistic standpoint, it is clear that fixed seasonal pricing is outdated. Customers have long accepted and understood.

#3: Together, You are Strong!

When there is high or fluctuating demand and limited capacity, it is inevitable that prices increase. The destination can bundle all services and offer them in packages, including excursions, ferries, events, and concerts.

However, this requires effective marketing by the Destination Management Organization (DMO) as well as training and support for service providers. These are achievable goals! Providers should start by presenting their hotel or guesthouse on both, their own website (Direct bookings! See the interview with Claas Mäder from Onno Hotel) and the destination’s website with high-quality information and photos.

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GRANT#4 – From Zero to Hero

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Typically, commissions for destinations are a maximum of 5-7%; however, often, they are lower or not charged at all. The exact commission varies from destination to destination.

St. Peter Ording near the North Sea is an exemplary model of successful teamwork. Here, the destination, guesthouses, and vacation apartments work closely together for a striking joint presentation and mutual success. Such collaboration strengthens both the region and its service providers. This is how exemplary team play can succeed. The close partnership among all players unlocks the full potential of a destination.

St. Peter Ording in the far north is an outstanding example of successful teamwork. Here, the destination, guesthouses and vacation apartments work closely together to create an impressive presence and help each other succeed. The cooperation strengthens both the region and its top performers. This is how exemplary team play can succeed. The close partnership between all players makes it possible to exploit the full potential of a destination.