Adopted from The 2019 Smart Decision Guide to Hospitality Revenue Management. Now in its fifth edition, this title is widely considered to be the hotel industry’s most authoritative and comprehensive resource on this topic. The new edition is now available for complimentary access.
The world of hospitality revenue management is comprised of technology solutions predicated on two different approaches to pricing decisions, where some solutions address pricing and others address overall automated revenue management.
The first relies on adjusting changes retroactively. This approach requires that revenue managers input business rules. For example: “When occupancy for Room Type B reaches X percent, then lower the rate by Y percent.” Those who champion these rules-based decision-making solutions are generally those who are confident in their own expertise and prefer to take a hands-on approach to pricing.
The second approach centers on robust analytics and AI-powered decision-making, which relies on dynamic decision models and machine learning. With this approach, statistical algorithms are entrusted to make pricing and revenue management decisions. Revenue teams partner with the technology to “manage by exception.” Advanced statistical models have been proven to provide statistically more benefit to a hotel’s bottom-line. They can detect subtle signals in supply and demand better more effectively and allow revenue managers more time for strategic activities.
It’s easy to see why so many hotels are migrating to the AI-powered decision-making approach. It’s agile, dynamic and responsive. Rules, by contrast, rule are rigid and fixed and may not be in sync with the ever-changing realities of our world. It’s also easy to see why, according to the research, more than one-quarter (29%) of hoteliers who have not upgraded their revenue management capabilities within the past 3 years plan to do so in the next 12 months.
With different approaches to revenue management and different features, functionalities, and benefits even between AI-powered solutions, it’s important to gain clarity on what to expect. The best way to do that is to ask questions of solution providers. By asking the right questions, hoteliers can determine which solution will best fits their needs and be best equipped to deliver the benefits they seek, and with minimal risk.
The hotel’s revenue manager(s) should be included in the process. They need to feel comfortable that the new solution will allow them to do their jobs with maximum effectiveness. Also, they need to understand how their role might change with the deployment of a next-generation solution. In terms of actual interaction with the solution, they also need to look under the hood and understand how, for example, to spot trends and anomalies and how to respond accordingly.
The following are just a few questions buyers may wish to explore with solution providers to ensure that, once implemented, the new solution will do what they want it to do.
To what extent does the solution offer flexibility with data analysis and reporting?
Not all data queries and reporting needs can be anticipated in advance. Out-of-the-box functionality may satisfy the needs of novice users or small properties with relatively simple needs. But it is likely to be insufficient for more sophisticated revenue managers and larger properties with multiple room types, customer segments and ancillary revenue streams.
A solution should provide for flexibility, which is important when it comes to setting pricing, noting special events, adjusting segmentation schemes, etc. A solution should make it easy to accommodate virtually any need, including the need to monitor and measure individual property, portfolio, and departmental performance, the need to create customizable hierarchies for different geo-markets, channels, room types, time periods and loyalty programs. Important questions might include: Once problem areas are identified, can the solution guide users on how to take appropriate action? Can tactical decisions, including the overall impact, be tested live? Can the dashboards provide exception reporting, identifying areas needing the most attention?
Tip: Verify that the solution is flexible in terms of keys areas of functionality, including custom reporting, and validate all of the vendors’ claims.
What is the solution provider’s track record of success?
Company reputation and customer satisfaction are important factors in the decision-making process. Nobody wants to purchase and implement a solution that falls short of expectations due to known shortcomings in stability, reliability or promised benefits.
No input may be more important to the buying decision than that which can be gleaned from existing clients, preferably lodging properties that share some commonalities in terms of size, typography and existing technology infrastructure. A solution provider or consultant may be willing to provide one or more client references. And some clients, particularly those operating in noncompetitive markets, may be willing to share their experiences and perhaps even disclose results in terms of percentage increases in RevPAR. Client testimonials and success stories can also be valuable sources of information.
Tip: Find out what performance issues may arise by talking to existing clients, preferable ones that are similar in size and existing technology infrastructure. Ask about the product roadmap to understand the plan for future features and functionality and ask about the provider's track record of delivering against that roadmap and deadlines.
How long will it take for problems to be resolved?
Decision makers should have clear expectations around customer support and problem resolution as well as the training that may be needed to get front desk employees and other staff up to speed on the new system. Almost three-quarters (73%) of hotel operators agree that user training ranks as a key success factor in ensuring that a revenue management solution is utilized as effectively as possible.
Does the solution provider (or a certified subcontractor) offer adequate training? Do the team members in charge of support and training have revenue management experience of their own from previous jobs at hospitality companies? Does the provider offer online troubleshooting and diagnosis should technical issues arise? Is local in-person service and support a possibility?
Tip: Make sure that problems will get resolved in a timely manner. Some solution providers will go so far as to guarantee response and case resolution times.
The 2019 Smart Decision Guide to Hospitality Revenue Management is now available for complimentary download. It can be accessed here.
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