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 Six Reasons Your Revenue Management System Isn’t Working

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By Jean Francois Mourier, July 2009

Revenue management is the new “IT” for hotels across the globe.  As the worldwide economy continues its doldrums, maximizing revPAR and occupancy without resorting to drastic rate-slashing tactics remains the ultimate goal for owners, operators, GMs and revenue managers everywhere.  And so it is this goal that should be prompting a thorough analysis of existing revenue management strategies, techniques and, most importantly, revenue management systems.

My System Is Better Than Yours!

A good revenue management system will help your property survive the downturn (and thrive in the recovery) by wringing every dollar of revenue from an increasingly fast and volatile booking process. An effective revenue management system is well integrated both with systems throughout your property and with online sale channels. It is responsive, dynamic, and fast (I’m talking real time fast). 

What, your revenue management system doesn’t do all that?

Then here are six reasons why your existing revenue management system isn’t working for you:

1. It’s Based On Historical Data and a Divining Rod
For many hotels, revenue management is still a distinctly ‘low-tech’ endeavor.  Some revenue managers, drawing on their experience, historical rates, seasonality, and current occupancy levels, divine the right rates for a period of time and set them out, hoping to attract guests.  While this combination of factors will achieve reasonable rates and generate revenue, an effective revenue management system will apply a much more detailed, logarithmic approach to pricing designed to squeeze every last bit of revenue out of the pricing scheme and booking period.  Yes, it should consider historical data but your revenue management system also must forecast ahead.

2. It Doesn’t Update In Real Time
The key to this revenue squeezing ability is real time updates.  With more and more bookings taking place online, whether through your property’s website or through an OTA, projected occupancy rates can fluctuate dramatically in minutes.  What’s more, OTA allotments can be reached and breached at any time, without warning and often during hours when revenue personnel aren’t available to reopen bookings.  An automated RMS will prevent your property from leaving those lucrative booking dollars on the table for your competitors.

3. It Relies on Mere Mortals
Most hotels (and revenue management systems) rely on the revenue manager to analyze and implement complex and rapidly changing pricing structures.   But relying on humans is, unfortunately, a significant contributor to lost revenues.  By implementing a system that eliminates the human error element will ensure rates are optimized for the best booking rates with the highest RevPAR available – at all times. As your 24/7 revenue robot, a good RMS system keeps an unblinking, unsleeping eye on reservation limits, OTA allotments, rates-to-bookings ratios, and even subtler changes in the intricate, 24-hour supply and demand cycle. 

An added bonus of automated RMS?  Having such a system eliminates the day-to-day menial, tedious data-crunching tasks, so that revenue managers can use their online sales knowledge and internet expertise to focus on the big picture - to actually manage revenues and grow business. 

4. It’s not dynamically integrated with online travel agencies
Hotel bookings are increasingly dominated by a few major players – Expedia, Hotels.com, Orbitz, Travelocity, Bookings.com and Priceline, among others.  Your hotel simply cannot afford not to be doing business with them.  There are 200+ travel search engines and hotel booking channels serving many different niches, so revenue managers need to be on the constant lookout and ensure they have a solid presence on the most number of sites possible.  Of course, more sites to manage means more headaches and rate parity issues, so automating the process with a robust RMS system makes absolute business sense – and cents!

5. It doesn’t help differentiate your property from your competitors
Competition in the hotel industry has been exploding for more than a decade.  Not only is there more room capacity in almost every major market, the increasingly prevalence of internet bookings has facilitated widespread comparison shopping and bargain-seeking.  Online is now a lifeline for the hospitality industry, and by increasing your hotel’s online visibility, managing complicated internet opaque channels, and having the perfect competitive rate always listed on your website while keeping rate parity and best rate guarantees will lead to a substantial increase in sales.  Pricing competitively at all times – which a strategy a robust RMS can help you achieve -- will keep your hotel in front of your online competitors, and will re-direct guests to your hotel, keeping your rooms full and profits ticking over nicely.

6. It doesn’t work and play well with others
Integration is vital to improving efficiencies across all hotel operations, and this is particularly applicable to systems. Even the best revenue management system is ineffective if it can’t interact with your property operation and management system.  So rather than running multiple systems or tools that do not communicate with each other, you must look for a consolidated RMS system with a user-friendly interface to provide maximum pricing optimization flexibility, online rate distribution, competitive webpage positioning and inventory control.

Today’s operating environment demands a comprehensive, flexible RMS system.  If your revenue management system isn’t working for your property, then you need to take immediate action.  This is a tough climate and it will only get tougher.

The first step?  Speak with industry experts and seek out a strong, effective revenue management system before it becomes too late.  Your bank account will thank you for it!


Jean Francois Mourier is CEO & Founder of RevPar Guru.

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Contact:

Jean Francois Mourier
jfmourier@revparguru.com
www.revparguru.com
 

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Also See: A Response to the News about Starwood’s Discounting Strategy: Filling Rooms at Any Cost Is Not The Answer To Our Problems / July 2009
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