By Paula Winkler, Executive Vice
President, Operations Support Services & Chief Information Officer,
Carlson Hotels Worldwide
June
2009 - Carlson Hotels Worldwide announced the latest phase of its revenue
optimization program in March 2009. Designed to drive higher revenue for
its hoteliers, SNAP, or �Stay Night Automated Pricing,� builds on the company�s
implementation of an enterprise forecasting solution that was completed
at the end of 2007. Both phases of the project represent a shift in the
philosophy of technology delivery, enabling Carlson to move away from the
emphasis on property systems and focus on a true decision support infrastructure.
The company�s decision to implement the SNAP program
is the result of extensive research into existing revenue management systems
and processes, which revealed that traditional solutions do not solve the
right problem for today�s hospitality industry. The traditional approach
to revenue management identifies opportunities to restrict product availability
on busy nights, also known as yield management. In today�s market conditions
hotels are experiencing fewer sold-out nights, making yield management
a sporadically effective lever at best. Carlson determined that its hoteliers
needed to understand the price at which their hotels would make the most
money on all future booking nights. In order to do so, Carlson would need
to take a radically different approach.
SNAP into Place
The company�s SNAP program represents a totally
new approach to revenue optimization that brings together the historically
separate activities of pricing and revenue management. SNAP assesses current
supply, demand and competitor rate data to determine optimal stay-night
prices for participating hotels. Carlson also became aware of some significant
opportunities in the way that revenue management solutions are usually
delivered.
Over the years many hotel companies and several
vendors have linked revenue management to property management systems.
From the technology perspective, that makes a lot of sense � robust property
management system interfaces help operators extract data and implement
inventory controls, as well as reduce the risk of revenue management solution
implementations. But ease of implementation is not the paramount consideration
when enabling a revenue-generating function like revenue optimization.
The property management system is central to everything
that goes on in a hotel operation with multiple mission-critical operational
processes, and much of the training that Carlson hoteliers receive is dependent
on the technology. Reliability, stability and ease of use are the most
fundamental requirements in property management technology. Revenue optimization,
on the other hand, is concerned with understanding the market, identifying
opportunities and enabling hoteliers to capitalize on that information
to maximize revenue. It seeks to predict changes in customer behavior and
market conditions, as well as be nimble enough to adapt to them.
Sizing Up Skill Sets
When Carlson considered the user communities of
both systems, it became clear that hotel operations management and revenue
optimization require different skill sets. Most revenue management systems
have their origins in the passenger-air industry, where large communities
of experienced analysts focus solely on revenue management decisions. The
skill set and process of an airline revenue management analyst�s job is
totally different from that of a hotel operator who has to run a 24-hour,
guest-centric operation with multiple operational functions. Yet the hotel
revenue management process and systems still work in a similar manner.
Carlson found that even the simplest property-based revenue management
system still demands extensive interaction with analytical content, and
this is time consuming for time-pressed hotel operators.
The company felt that it could redistribute this
workload more effectively and relieve its hoteliers by deploying more flexible
technology. It was partly for this reason that Carlson decided to implement
enterprise forecasting first and then progress to SNAP to automate an optimized
pricing process for its hoteliers. This made it easy for the company to
focus deployment of the tools on the appropriate user communities with
a central forecasting process managed by expert resources.
Finally, and most importantly, Carlson considered
the possible risks of the revenue management solution to its technology
investment. The company could have chosen an established solution that
is relatively easy to implement; however, current market conditions show
how a shift in guest behavior can render traditional revenue management
approaches ineffective. A significant drop in year-over-year demand restricts
the yield-management opportunities to even fewer stay nights, yet if Carlson
had invested in a standard revenue management approach it would still be
in a situation where the company would have to maintain and support a solution
that adds little value to its hoteliers.
Conversely, imagine what would happen if Carlson
had an excellent revenue management process but decided that the property
management system needed to be changed. If the systems were highly interdependent,
this demanding transition would be made more difficult because a major
process change to another mission-critical function would be required.
The company wanted to keep these processes as independent as possible and
worked to deliver a modular enterprise solution rather than provide a one-size-fits-all
revenue management technology to its properties.
Taking a Centralized Approach
Good revenue optimization is about producing useful
insights � not following processes � and when chains relegate revenue management
to property system processes they miss important opportunities. When Carlson
embarked on its revenue optimization technology program, the goal was to
provide technology-enabled services that would allow its hotels to be as
successful as possible. The company found that by using powerful, flexible
and centralized applications, it can wrap a more effective support and
service layer around revenue management.
For example, the current generation of hotel revenue
management solutions places the task of managing the demand forecast in
the hands of the individual hotelier. But why burden 1,000 separate hoteliers
with the need to manage a demand forecasting tool when a hotel company
can employ a team of experts to centrally manage forecasts for all hotels
using enterprise forecasting technology? Not only is the centralized
approach far more cost effective, it also creates opportunities when critical
demand data is made available to the other centralized functions � like
sales and marketing, for example.
Carlson looked beyond hospitality technology to
find examples of how enterprises leverage decision support. For example,
companies that produce and/or distribute physical products must make multiple,
frequent decisions that can have a profound effect on profitability. The
mature discipline of supply chain management leverages centralized demand-forecasting
capabilities to provide information to enable companies to make better
decisions across the enterprise. The same forecast that enables better
production planning decisions, for example, can also drive better logistics
decisions and pricing decisions for the same company. And by driving multiple
decisions from a single view of demand, enterprises can leverage technology
to eliminate inefficiencies. It seemed to Carlson like a direction that
would also work for the hospitality industry.
SNAP is the latest step in an overall revenue
optimization strategy that focuses on delivering money-making insights
to Carlson hoteliers. First, the company established a central support
team of revenue optimization experts. The company then equipped itself
with best-in-class decision-support technologies, assured that it is placing
the right tools in the hands of its hoteliers. This approach enables Carlson
to develop deeper expertise, find innovative solutions to enterprise problems
and engage with suppliers to identify and implement best-in-class solutions
that benefits the entire enterprise.
Paula Winkler is the chief information officer
and executive vice president, operations support services for Carlson Hotels
Worldwide, which includes the company�s Regent International Hotels; Radisson
Hotels & Resorts; Park Plaza Hotels & Resorts; Country Inns &
Suites by Carlson; and Park Inn brands. Winkler leads the strategy for
IT within Carlson Hotels as the company focuses its business model on customer
centricity and innovation. |