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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 group sales.
Sales channels will continue to expand.

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.
In order to maximize RevPAR, rates will need to be adjusted at an ever-faster pace.

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.
Concepts from other industries will be more widely utilized in the hotel revenue management field.

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.
Comprehensive revenue management systems and full system integration will become more attractive to hotels.

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. 
As with more prognostication regarding revenue management, some of these predictions may turn out to be false.  But they all speak to the increased role revenue management systems will play in hotels, as well as to the technological trends the industry ought to be quite familiar with.  The revenue management systems of the next decade may not resemble todayís systems at all, but they will certainly be the product of increased access to information, cross-disciplinary conceptual development, better and faster automation, a more robust internet and other sales channels and more complete integration of systems in a given property.  They are also sure to be beneficial to the innovative hotels that utilize them.
And, it is REVPAR GURUís intention to develop and produce them!
REVPAR GURU provides hotels around the world with an alternative revenue management software solution, to manage RevPAR intelligently and effectively, and deliver maximum profits. REVPAR GURUís custom-designed Yield Dynamic Price Engine meets the rapidly changing needs of hotels in a demanding business environment - dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management, and GDS sales distribution, to increase a hotelís RevPAR while maintaining rate integrity and automated rate parity. It is the only revenue management solution that automatically optimizes and updates hotel rates across all major consumer travel websites, based on all market variables and in real time, and provides a strategic room inventory control.  Once deployed, hotels can boost their occupancy rates and cut their distribution costs dramatically.  Headquartered in Miami, Florida, additional information can be found at or by calling +1.786.478.3500.


Jennifer Rodrigues
Phone:  305.749.5342 ext. 234

Also See: Six Reasons Your Revenue Management System Isnít Working / Jean Francois Mourier / July 2009

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