By Jean Francois Mourier 
April 29, 2011

In recent years, technology has played a bigger and more important role in everyday life. Today, it’s possible to call a customer service number and resolve a problem without ever speaking to an actual person, or to pay for your groceries at the supermarket without ever seeing a human being at the cash register. And just as these things have changed, so have common business operations, particularly in the hotel industry.

One of the key elements to a hotel’s success is the strength of its revenue management strategy. While still a fairly new concept, some hoteliers are embracing the use of automated revenue systems, which have the ability to formulate complex algorithms that can generate an optimal rate with accuracy and speed, even with rates and information constantly changing because of the Internet. It seems like the perfect solution, yet still, hoteliers are hesitant to trust this new technology. Many hoteliers would argue that with a strategic and precise revenue management system being essential to a hotel’s financial success, computer-generated revenue management simply could not be entrusted with such an important task.  And if it could, what would happen to the traditional hotel revenue manager whom remains an indispensible component of a hotel’s staff?

So which revenue management strategy is right?  Are humans or machines more suited for the intricate, never-ending rate calculations, updates and pricing analysis of hotel revenue management?

 It’s Your Move—The Chess Game of Revenue Management
Anyone whose played chess—or at least attempted too—knows it’s a game of skill, strategy and intelligence. This also holds true for hotel revenue management. In order to win, both of these “games” require the ability to use historical information to make the best moves, predict a competitor’s move before it is made, and use quantitative reasoning and problem-solving skills to win. With that said, is a computer a more valuable chess player than a human being? Does the same hold true for an automated vs. human revenue manager?  And, is it possible to use the computer’s skills to improve your own?

When it comes to computers, virtually the only errors that occur are committed by the people who operate them. Like a computerized chess player, an automated revenue system will perform strategies as perfectly as they can be executed. The speed, multi-functioning capabilities and ability to make sophisticated calculations are unmatched in both cases—not to mention, computers are ready and available to perform 24/7. For a hotel revenue manager, a sophisticated automated revenue management system can perform up-to-the-minute price adjustments, calculate supply, demand and competitor pricing to create an optimal rate flawlessly. A computer can perform these functions, all day, every day. These abilities are especially important due to the shrinking booking window of today’s economy, where maintaining RevPAR and sales has proven to be particularly challenging.

But regardless of their speed and accuracy, computers ultimately work better with skilled individuals working alongside their technology. Sometimes, humans can even teach computers a thing or two. For instance, in the chess world, there was the case of genius chess player Gary Kasparov, who ultimately beat IBM’s Deep Blue computer in a 1996 tournament, despite the fact, that in May 1997, an updated version of Deep Blue defeated Kasparov 3½ to 2½ in a highly publicized six-game match.

The Human Element—Still an Important Piece of the Puzzle
So yes, hoteliers and revenue managers should be embracing technology, coupled with skilled individuals who now have the flexibility to focus their talents on other important aspects such as analyzing data for future strategies, and spending more time with hotel staff to generate stronger marketing and sales initiatives, can ultimately result in a more successful hotel operation.

In chess, using these computers can also help individuals gain new information and learn new skills of the game. The same can be said for a revenue manager who works alongside a sophisticated automated system which can maintain, in real-time, the automated distribution, allocation, pricing and yielding, while benchmarking against all competing hotels in a destination.

The best approaches to revenue management in general are those that emphasize the usage of revenue management systems to enhance revenue managers’ efficacy, rather than making revenue managers be forced to keep up with today’s never-ending information, calculations and pricing updates. 

Both humans and machines have their strengths; are your property’s revenue management strategies using them to the best advantage?

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And looking forward to the next article in the revenue management series from REVPAR GURU & Hotel-Online…
 
A Tale of Two Strategies
There are many differences between a large, often multi-national hotel chain and a small boutique operation. They cater to differing segments of the market, sure, but they’ve also gone their separate ways in terms of sales and distribution strategy. While chains have traditionally fallen back on their global distribution systems for bookings, boutiques usually don’t have this luxury. Consequently, they lack the safety that comes from being part of a large network with many potential customers. However, a good revenue management system well handled can target the right distribution channels and allocate the right number of rooms at the correct price to the ideal customers. This hones the competitive edge of boutiques, allowing them to more effectively compete with their larger and wider rivals. Consequently, the chains can harness RM systems to tailor their offerings - like boutiques do – making them more nimble and flexible, thus more attractive to the guest who would normally stay at a rival. We’ll discuss these differences further in the next article of the series which will be running on May 13, 2011 on Hotel-Online.

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Jean Francois Mourier is CEO & Founder of RevPar Guru, a company that has developed an alternative type of revenue management and real-time pricing solution (combined with automated online distribution) to help hotels maximize occupancy and increase their profits. The company’s Yield Dynamic Price Engine, an integrated revenue management and pricing solution, adds unprecedented power and real-time adaptability to the pricing process, leaving managers more time to run their hotels. You may reach him through www.revparguru.com or by calling +1.786.478.3500.