News for the Hospitality Executive
The Future of Revenue Management
By Jean Francois Mourier , June 2010
The formal practice of revenue management, in the big scheme of things, hasnít been around all that long. It was only in the late 1980ís that hotels (and hotel schools) began to consider the science of yield management in terms of hotel room inventory, and even less time ago than that that hotels began to implement policies and systems specifically for the purpose of managing revenue.
In that time, understandably, revenue management has evolved considerably. Technology has encouraged these transformations at every phase; computer systems have grown more capable of performing the tasks crucial to revenue management, the rise of the internet and online travel agents injected the complexity of myriad sales channels into the mix, and sophisticated algorithms have been developed to better predict changes in pricing and booking pace. As befits a relatively young field, change is the only constant.
Making accurate predictions in an environment of this sort, then, is a dubious proposition. What can be reasonably expected of the future of revenue management if change and evolution is so pervasive? Of course, at REVPAR GURU we have always insisted that the future- of trends or of room rates- can be predicted not only from historical data, but also from the rigorous analysis of up-to-the-minute information.
So we will follow our corporate philosophy, and not shrink from this challenge. Here are REVPAR GURUís predictions for the future of revenue management:
Automated revenue management systems will rise to prominence.
Hoteliers and revenue managers will all wake up to the fact that an
automated RMS, rather than threatening the relevance of revenue managers
and revenue management staffs, will actually augment them do their jobs
better. By freeing revenue managers from the tedium of tasks that
need to be performed hourly (rate adjustments, inventory allocations, etc.),
automated revenue management systems enable personnel to engage in more
productive pursuits, like devising new sales techniques or focusing on
As sales channels continue to expand, the effective revenue management
systems will have to be able to manage an ever-growing number of sales
channels. There is still room in the online space for additional
sales channels, through new OTA launches or social media integration, etc.
The mobile space is also emerging as a channel for consumers to make reservations;
a good revenue management system will need the capability to process mobile
bookings in addition to online, phone and in-person bookings.
This is simply a function of the rate at which information becomes available,
and how much information is out there at any given time. This is
multiplied by the fact that if more hotels utilize automated systems, their
rates will be adjusted more rapidly, forcing other automated systems to
adjust, and so on and so on. But in general, history has indicated
that more and better information will be available tomorrow than there
was today, so we feel confident in predicting that in the information-saturated
environment of the near future, rates will have to be adjusted quicker
to take advantage of fluctuations in supply and demand.
Since revenue management involves a certain measure of prediction, it
stands to reason that revenue management systems will draw from other industries
where prediction is at the core of their business. To use one example,
the REVPAR GURU system incorporates stock market principles to help generate
optimal room rates. Other systems may also use primarily financial
instruments to make predictions, or leverage emerging techniques like crowdsourcing
or artificial markets. At any rate, the RMS that only use backwards-looking
techniques are fast becoming obsolete.
The reason these ideas- comprehensive systems that are integrated property-wide-
havenít already gained significant traction isnít because they arenít good
ideas, itís because hoteliers assume that they are expensive ideas.
Well, thatís partially true; comprehensive revenue management systems are
investments (when compared to the pricing of simple RMS systems that require
constant manual updates and data analysis), but the advantage conferred
by a comprehensive system well outstrips its cost. Over time, this
is a concept that hotels will come to understand, making these kinds of
systems the standard for effective revenue management.
|Also See:||Six Reasons Your Revenue Management System Isnít Working / Jean Francois Mourier / July 2009|