|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.