Demand Management vs Demand Creation

The distinction between Demand Management and Demand Creation might be obvious, but its worth teasing out a little further.

Demand Management is essentially the process of matching your rates to the market demand. If your rooms are 5$ too expensive you are likely to lose a sale, if you are 5$ too cheap you probably lost 4$ of revenue, as you only needed to be the same price as your competitors or a little cheaper. It is of course the internet that is driving this process, 10 years ago hotel customers could not find hotel room prices without going through the tedious process of contacting hotels individually, now with the internet they can compare room rates from hundreds of hotels in a matter of seconds.

The net result is that in some regions ie City Centres, Hotel Revenue Managers are forced to sit glued to their screen flexing rates several times a day to get the most from the market.

The problem with this process is that it only squeezes the most from the existing demand, it doesn't actually increase demand. Hotels that are good at Demand Management have stolen a march on their competitors, but it is likely that more hotels will improve their rate management skills, new software may even automate this process, getting more hotels to chase the same existing business.

Demand Creation by contrast is the process of creating more demand for your product, ie increasing the pool of people who are actually looking for a room. This is back to the process of Online Marketing, reaching out/communicat5ing with the customers and giving them a reason to come to the hotel (Interesting Offers/Events etc). Thus is the area that Marketing people have been preaching to us for years, 'dont reduce your prices, improve your product', which we know is easier said than done, and was almost impossible during the recession when everything was simply price driven, irrespective of the product.

But it does leave an interesting question for Hotel Managers. What are you doing to create demand?

Demand Management - Areas to Focus

- Contracting with relevant OTAs
- Setting up correct room types
- Improving content: photos and text
- Engaging a channel manager
- Flexing Rates

Demand Creation - Areas to Focus

- Promoting Offers and packages
- Maintaining Adwords
- Social Media/Facebook Adverts
- E Mail Marketing
- TripConnect