IDeaS Inc.

10/29/2001  

Revenue Management: Mission Critical in Today’s Market

Prior to September 11, hotels worldwide were feeling the effects of an economic softening.  Although industry analysts were forecasting decreased RevPAR, in the post-911 era, hotels have experienced unprecedented challenges in managing their businesses. 

Automated revenue management (RM) solutions provide hotels with sustainable competitive advantages to navigate through this period of uncertainty. These solutions provide quantifiable financial and operational benefits in all market conditions, critical to the success and longevity of hotel properties worldwide.

Automated RM solutions successfully assist hotels in optimizing demand and increasing RevPAR. Booking controls such as rate availability, overbooking controls and length-of-stay restrictions are designed to accept the right mix of business, at the best rate, at the right time for the optimal length of stay. Revenue management results have been impressive; occupancies have increased as well average daily rates with measurable RevPAR increases.

The question today is do automated RM solutions provide benefits in a soft market?  The answer is a resounding yes.  Here are a few examples of how automated RM systems provide hotels with tangible benefits and sustainable competitive advantages.

Quantifiable Benefits

Hotels with automated RM solutions continue to outperform other hotels in their markets, even in periods of declining demand. According Universal Orlando, "Universal has seen growth in a market that is down, some of it is certainly attributable to revenue management."

The fact remains that the economy works in cycles – up and down and up and down again. Automated RM solutions do their best, most valuable work when demand is fluctuating between busy and not-so-busy nights, not just when hotels are sure to always fill up.  These solutions generally outperform manual environments, semi-automated tools and decision support systems by 4 to 12%. Detailed analytical processes, scientific forecasting, automated restrictions and constant monitoring, combine to ensure hotels receive unequalled benefits.  In all market conditions, hotels with automated RM solutions will maintain significant advantages over their competition.

Fluctuating Demand

On a daily basis automated RM systems look far into the future…60 days, 90 days and further. They are designed as a strategic tool that prioritizes business-critical information and alerts users when bookings materialize greater or less than anticipated. 

By harnessing the power of the microchip these solutions efficiently analyze massive amounts of data picking up even slight changes in demand. In times of less than anticipated demand, this information becomes strategically important, enabling properties with information to deploy sales and marketing strategies to build demand. Mövenpick hotels attributes an automated RM solution with impressive results, “The average room rate at our hotel rose 21% from DM 137 to DM166 from last year to this year."

Optimized Occupancy

When demand fluctuates and is uncertain, automated RM solutions continue to deploy decisions to optimize both occupancy and rates. Even in environments of low demand where occupancy could be as low as 30%, there are often special events, holidays and perhaps trade events that present significant opportunities to increase revenue. 

Take for example events such as ITB/Berlin, the London Trade Show, Paris Air Show, Comdex or the Bledisloe Cup Match and Communiqué Asia; each of these events presents an important opportunity to increase revenue.  According to Vail Resorts, one of the largest resort operators in North America, "The most critical factors that contribute to successful room yielding are: maximizing occupancies; booking guests with the longer length of stays; managing the amount of overbooking we are willing to accept; and selling rooms at the best price based on demand. That's why we chose…a system with an automatic, integrated decision-making ability to consider those factors at the moment when reservations are made."

Increased Efficiency

In difficult times, properties often cut back staff or staffing hours resulting in increased workloads for those who remain. Automated RM solutions represent a radical reduction in manual labor and an exponential improvement in reliability and results.  These solutions tackle the complex task of analyzing vast amounts of data, save valuable time and provide better information, providing significant operational benefits. In all circumstances an automated RM solution is, “…the most effortless system to support,” from the perspective of experienced hoteliers at the Orchard Hotel Singapore.

Revenue Management Culture

Hotels with automated RM benefit from a consistent deployment of RM practices from person-to-person, hotel-to-hotel and across large chains. Organizations that invest in building a RM culture around a highly sophisticated and integrated tool jeopardize both benefits and culture if they discontinue using that tool for any period of time.  Some of the most respected hotel companies in the world, such as Hilton International, work hand-in-hand with solution providers to “…develop and enhance …integrated revenue systems, ensuring that Yield underpins our strategy.”

The benefits of maintaining a consistent revenue management culture are tangible in the superior RevPAR and competitive set performance of hotels with automated RM solutions.

Group Demand

In today’s market, more pressure is put on properties to reduce rates and renegotiate group contracts. Automated solutions enable hotels to evaluate potential business that might be displaced by accepting a particular group, evaluating days prior to arrival and after departure.  They provide comprehensive scenario evaluation and rapid response to group inquiries. 

Through automated solutions, properties now have access to tools that quantify the impact of making these types of strategic changes on group business, enabling them to evaluate and accept the right mix of groups versus transient business.

Maximizing Contract Revenue

Contract business builds a solid base business for hotels and may account for a significant amount of a hotel’s business.  A revolutionary new RM tool for contract evaluation provides properties with the ability to negotiate more profitable contracts.  Automated solutions provide tools to objectively measure the financial impact of potential contracts and provides management with the ability to make more informed decisions about rates and access (yieldable, semi-yieldable, non-yieldable). 

Despite current market conditions, hotels are entering the important contract season and this capability is invaluable in maintaining inventory flexibility and maximizing revenue from contract business.

Managing Market Resurgence

Having an automated RM system installed and operating as the market revives is essential.   Hotels worldwide will experience subtle increases in group inquiries, conversion rates and occupancy that automated systems are designed to detect.  Each of these events represents critical revenue maximizing opportunities.  Hotel properties with automated RM systems installed and operating will have competitive advantages in both short and long-term performance.

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