News for the Hospitality Executive
|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.
JDA Software Group, Inc.
JDA Investor Relations Contact:
|Also See:||Carlson Hotels Worldwide Selects JDA Software to Support its Stay Night Automated Pricing (SNAP) Initiative; JDA's New Travel Price Optimizer will Drive the Next Phase of Carlson Hotels Worldwide's Revenue Optimization Program / March 2009|
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