The 2016 Smart Decision Guide To Hospitality Revenue Management

Hospitality Revenue Management: Three Key Considerations

The tools and services that enable hospitality revenue management are evolving rapidly in response to a number of factors. These include the proliferation of online travel agencies (OTAs) with differing pricing and commission structures, shrinking booking windows, the emergence of more advanced pricing strategies, and ever-more intense hotel competition.
Illustration of people checking in at a hotel
Hospitality Revenue Management: Three Key Considerations

Starfleet Research

This article is excerpted from The 2016 Smart Decision Guide to Revenue Management, which was published this month by Starfleet Research, a leading market research firm that benchmarks best practices in hospitality technology. It is now available for complimentary access. Click here to access. Also now available for complimentary access is The 2015 Smart Decision Guide to Hotel Property Management Systems. Click here to access.   

The tools and services that enable hospitality revenue management are evolving rapidly in response to a number of factors. These include the proliferation of online travel agencies (OTAs) with differing pricing and commission structures, shrinking booking windows, the emergence of more advanced pricing strategies, and ever-more intense hotel competition.  

Leading solution providers are investing heavily in R&D and running agile software development and release cycles to try to say ahead of the competition. The flurry of change can make selecting the right solution a daunting task. The buying considerations are sure to depend to a large extent on a hotel’s specific needs and situation. That includes category, size and typology (including the number and types of non-room revenue streams) as well as the team’s level of experience (including whether it has one or more dedicated revenue managers and the right corporate culture in place).  

Should the hotel hire an outside firm to conduct an assessment of current pricing practices? Should it use a BAR approach or should each channel and segment be priced independently? Should it price by arrival date or length of stay? For these and countless other questions, the answer is: it depends. Still, for most buyers, there are a number of key considerations to keep in mind, including the following.  

Technology integration capabilities

Hotels, resorts and other lodging properties have always had extensive technology integration requirements. A revenue management solution, especially, can’t be treated as a standalone application. Rather, it needs to integrate as seamlessly as possible with multiple data streams, starting with the Hotel Property Management System (PMS) to provide for unified bookings, analytics and reporting. It also needs tointegrate with systems used for marketing, sales and distribution as well as OTAs and any number of other third-party technologies and channels.  

For integrations to work optimally, technology partners need to independently test and certify data and functionality. They need to ensure that systems are compatible and that all historical data has been extracted and validated. Internally, within the organization, point of sale (POS) data needs to integrate with PMS data to provide a holistic view of a guest’s overall stay, including their ancillary spending on food and beverages, guest services, spa visits, etc.  

Data processing power 

Hotels are importing increasingly large volumes of data into their pricing models. For a large property, the data set may include dozens of customer segments, a dozen or more room types, several years of historical booking and reservations data, and upwards of a dozen length-of-stay types.  

Add to the mix competitive rate data, demand data, multi-market economic data, and even air traffic and weather predictions. Combining all these data sets for just one hotel could easily amount to 200 million-plus observations. Generating the pricing recommendations for that property could require more than 15 gigabytes. Multiply that number for a hotel chain with dozens of properties and it quickly becomes clear that, more than anything, revenue management is a big data challenge.  

Until recently, the technologies have underperformed by most measures, partly because they were unable to overcome the data processing constraints and optimize the needed calculations in highly compressed timeframes. Today, however, most revenue management solutions are able to address that challenge head-on. 

Channel management and optimization

With pricing recommendations in a continuous state of flux, its imperative that rates and inventory information gets updated as quickly, and with as few errors, as possible across all OTA and other distribution channels (including the hotel’s own website). Otherwise, unfortunate situations can arise. The prices being presented to prospective guests on some channels may be lower than desired, for example. Or rooms presented on some channels as available may, in reality, be overbooked. The potential fallout could be damaging, generating a flurry of negative online reviews.  

Inputting room rate and availability changes manually can, at the least, result in money being left on the table. Channel management capabilities help ensure that a hotel’s room rates as well as its inventory are up-to-date across all OTAs and other partner- and guest-facing channels.  

An important buying consideration, therefore, is the extent to which room change updates are handled automatically rather than manually, and what the average lag time is to implementing channel updates. Although not yet achievable in many markets, including the United States, advanced channel optimization capabilities should be used when possible to identify the most profitable channels, factoring in the associated costs, including commissions, transaction fees and search engine marketing (SEM) expenses, and dynamically adjust the pricing on a channel-by-channel basis.  

This article is excerpted from The 2016 Smart Decision Guide to Revenue Management, which was published this month by Starfleet Research, a leading market research firm that benchmarks best practices in hospitality technology. It is now available for complimentary access. Click here to access. Also now available for complimentary access is The 2015 Smart Decision Guide to Hotel Property Management Systems. Click here to access. 

 

About Smart Decision Guides Smart Decision Guides serve as definitive resources and required reading for decision makers researching selected niche markets with the intention of making a purchase decision. The content is independently produced, without editorial involvement from company underwriters, providing for unbiased, fact-based information and buying recommendations. To access Smart Decision Guides and other valuable resources from Starfleet Research, please visit www.starfleetresearch.com.

Media Contact:

Alisha Levin
Starfleet Media
alisha.levin@starfleetmedia.com



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