I love this time of year. As much as I enjoy working with all the technology companies that we partner with and all the industry CIOs, nothing beats the eye-opening conversations with those who use these technology systems. You always find them when you’re at users’ groups where the programs include so much valuable training. I started my tech career in the PMS industry and I enjoyed when our PMS users came together for these meetings. Last week I was at San Diego for Oracle Hospitality Connect 2020. Being the event was just the hospitality sector was new for Oracle and I thought it was extremely successful. Oracle has had a rough ride after purchasing MICROS five years ago, but both Oracle and its customers agree the path they are on now is the correct one. I got to spend a great deal of one-to-one time with Alex Alt who is now leading Oracle Hospitality. It was very enjoyable to hear his vision of the future. Oracle had a great crowd and support from its partners along with a solid program. Thank you Oracle for inviting me.
After San Diego it was a quick stop back at the Atlanta office, and then off to Orlando to Agilysys Inspire, the Agilysys Users Group. I have been attending for years and one thing that I get from being there is the stories from the gaming and casino world since that has always been a strength of the company. Much of the success for Agilysys over the past 5 years has been with the InfoGenesis Point of Sale system, but at the opening session Agilysys shared how its PMS offering is where the company’s growth will be. Also, during the opening, ex-college and pro basketball star Shane Battier spoke to the group. I thought he was great. If you ever question how data analytics can be used, after listening to Shane speak you will never watch an NBA game the same way again. Thank you Agilysys for inviting me once again.
The third thing happening in our little tech world is the registrations have started rolling in for our 16th Executive Vendor Summit in Nashville, March 25-27. This business has been a big part of my life for 28 years, but nothing makes me prouder than creating an event that brings the leaders of the tech companies together for two and a half days. Competition aside, in the hospitality industry vendors with solutions need to work with each other so users can benefit. The EVS is where these partnerships are born. If you are a provider of technology and have not gotten an invitation, please email me or Anne Boon at [email protected] March 25th can’t get here soon enough.
Here now is the real reason we are here, the latest industry technology news along with Doug Rice and his look at those entering the wild world of Revenue Management. I will see you at the end with this week’s attempt at you-know-what.
Before I get into this week’s topic, a quick reminder that I really need to hear about what YOU have seen that is new or innovative in hospitality tech. Readers often ping me AFTER I write about a topic to tell me about some product or company I should also have looked at. It’s much more useful if you tell me BEFORE I write about it! And indeed, cool new companies I hear about from readers are often my inspiration for a topic. My contact info is at the end of this section, so please reach out … I’m always happy to spend time learning about new companies or products.
Also, while I usually talk to at least some of the more established players when preparing a topic (and often mention them), the main purpose of my column is to expose you to companies and products that might NOT be on your radar already. In most cases, you don’t need me to tell you about the industry leaders. If I don’t mention them, it isn’t that I don’t think they have good products or that you shouldn’t look at them or buy them. It’s just that there’s not a lot for me to tell you that you don’t already know or could find out easily. If you’re happy with an established player, great – but I still encourage you to find out about good ideas from other companies. When you find one, you can talk with your preferred provider about getting that idea onto their development roadmap, or perhaps partnering with one of the companies I highlight.
Now on to this week’s topic…
Revenue management systems were introduced by airlines in the 1980s and first appeared in hotels around 1990. It’s well proven technology which, used properly, will increase revenue for most hotels. A 10% increment is not uncommon for a hotel that implements a true revenue management system. Yet 30 years later, most hotels still don’t use automated revenue management. A recent study commissioned by Expedia says that only 15% of lodging properties globally are using revenue management technology. The usual reasons we hear are it’s too expensive, it’s too complex, or simply “I don’t trust technology to do as good a job as I can.” Sometimes hotels are fooled into thinking they already have revenue or yield management because they bought the optional module from their property management system provider. These are usually reactive modules, which take actions too late to be very useful, and few if any would be considered appropriate by anyone who really understands revenue management.
If your hotel is one of the 85% without a revenue management system, it’s time to take another look. First, you’re almost certainly leaving somewhere between 5% and 25% of revenue on the table. While 10% is a common rule of thumb, I have seen much higher numbers when a hotel was completely unautomated for revenue management and ALL its competitors were already fully automated. In a world where pricing changes minute to minute and online pricing is fully transparent, you are at a big disadvantage if your competitors can react instantly and you can’t.
Second, there are a lot more options than there were a few years back. Some of the more recent entrants focus on ease of use, simplicity, low cost, and understandability. While there are still “black box” revenue management systems that ask you to place blind faith in their actions, it’s getting much more common to see systems that are intuitive and explain their recommendations (and the reasons) in plain language. Most of them will let you override their recommendations – and the better ones will tell you after the fact whether that helped or hurt, and how much.
Early revenue management systems worked by trying to forecast demand, and then set prices to optimize the hotel’s supply of rooms and rates against that demand. If a hotel could forecast strong demand well in advance, then it could keep rates high until that demand actually materialized – which only happened after competitors had sold out of lower rates. Knowing demand would eventually prove strong, the hotel could count on their competitors eventually selling out first, meaning the hotel could capture a premium in the days and weeks just before the peak period, when late bookers realize they had very few choices. It’s unnerving for a GM to look three months out and see nothing on the books, but often that’s the right decision. In periods of extreme demand that can forecasted far in advance, a hotel could sell all of its rooms at the highest rate in the last few weeks, and never sell any discounted rooms. Meanwhile, most of its competitors might sell 2/3 of their rooms at discounts before rudimentary occupancy triggers told them to stop.
From 1990 to the early 2010s, revenue management systems didn’t really change much, continuing to use these demand forecasting approaches. To be sure, they evolved around the edges to improve things like length of stay controls and to better deal with rate fencing and third-party channel management. But the core algorithms were still built on the basic principles from the 1990s (despite marketing claims of secret sauce, patents, and the like).
Only within the last five years have we seen real changes in how revenue management systems work. What’s different? Well a lot, but the biggest driver has been the ability to capture and process huge amounts of data at low costs.
I looked at both some of the established players and newcomers this week to see what was changing. I’ll highlight some of the things to look for and note some of the companies that have innovative approaches. But this isn’t an exhaustive review. Just because I mention one or two companies doing something, doesn’t mean that others aren’t – there are way too many products in the market now for me to have examined them all in depth. But I hope some of these trends might help inform the questions you might want to ask.
The biggest shift I have seen is the incorporation of many more types and sources of data. The theory, obviously, is that the more relevant data you can bring to bear, the better optimization you can run. And whereas the early revenue management systems primarily looked at historical booking data from the hotel central reservations or property management systems, today there are myriad sources for things like market demand data (national, regional, urban area, and even neighborhood); competitive pricing data; external factors such as weather, airline schedules, travel restrictions, medical travel restrictions, or special events; consumer perceptions of hotels; and highly detailed objective descriptive data for hotels within a competitive set.
On this last point, for example, Beonprice collects about 350 attributes for each hotel in a competitive set: things that matter to at least some segments of guests, such as the size of guest rooms, the number of restaurants, or the presence of a fitness center. It then pairs this with lexical analysis of online reviews and review scores to establish a quality index for the hotel. This can then be compared to the selling price to see graphically the price-value relationships. The driving factors are calculated by segment, since the attributes that matter most for a solo business traveler may be totally irrelevant for a couple or family. Numerous academic studies that show that consumers will be satisfied paying a higher price for a higher value product, but this is the first revenue management algorithm I’ve seen that is built around the concept. Curiously, the analysis has shown many hotels that their true competitive set was not the hotels they thought!
LodgIQ ingests more data of the types mentioned above than most systems and uses machine learning to find the key relationships. While others also use machine learning, LodgIQ takes the statistical approach to new levels, basing their design on the approach (proven in high-frequency trading in financial markets) that machines with enough data and processing power, and able to make and implement decisions, can beat humans consistently. With a laser focus on measuring accuracy and learning from the outliers where they missed the mark, they claim they have achieved 95% accuracy on forecasting 90 days out. Their approach also enables them to tell a revenue manager WHY they made a particular recommendation, for example that city demand data accounted for $5 of a proposed price increase.
There is also a trend toward faster, more frequent analysis. Where historical revenue management systems often ran optimizations once a day, and some have increased this frequency to a few times a day, we now see companies like Pace now doing it hourly, and Atomize claims they can do it in real time, reacting to every new reservation (provided they can get a real-time reservation data feed). In yesterday’s analog world, this probably didn’t matter, but with more and more hotels optimizing more frequently, speed of reaction can become critical especially on high-demand days or for hotels where demand may materialize or disappear very quickly.
A few trends are serving to make revenue management more approachable for smaller hotels, for which historical options may have been both too expensive and too difficult to understand. Machine learning can be used to compensate for a lack of historical demand data. Atomize, for example, requires no historical data to get started, and LodgIQ can be deployed this way if needed, relying only on external data for the initial months. In both cases, the system can start collecting data as soon as it is installed, and after a few months, there is enough data to start to make good recommendations.
Some of the newer systems are much more cost-effective for smaller hotels, both in terms of subscription service fees, and in the custom work required to get them set up and interfaced. Normalization and analysis of historical data was often a major factor in the historically large implementation fees assessed by traditional system vendors. Better automation of this, together with the ability of some systems to start without any historical data, has significantly reduced this barrier. For example, RoomPriceGenie charges $6 per room per month, with a minimum of just over $100 a month, meaning that even a 20-room property is above its minimum. It also can connect directly to channel managers, so there isn’t an additional interface cost incurred with the property management system.
User interfaces are being streamlined and simplified, so that an owner, general manager or rooms division executive at a small or medium hotel can see what’s happening easily on a tablet or phone, review recommendations and their reasons, and approve or override decisions. Atomize is designed principally to be used on mobile phones. This can be a big advantage when the person overseeing revenue management isn’t full time and sitting at a desk, but doing revenue management “on the run” between other tasks.
Many hotels use BAR (Best Available Rate)-based pricing. Historically, most revenue management systems determined an optimal BAR, and the hotel (or system) would then set other rates a given amount or percentage above or below the BAR. However, some systems – and particularly the heavily data-driven ones – are opening up new options. The BAR approach was efficient in the days when computer power was more limited, but suboptimal because the supply and demand factors for different rate products often depend on different factors. A $10 discount for a nonrefundable rate might be right on average, but totally wrong for the mix of business expected on a particular day. IDeaS has moved away from BAR-based pricing, and Beonprice does this as well. Having said this, there are hotels that may not be ready for so-called “open” pricing, where every rate is determined separately, so this functionality is typically optional. There may also be rules to enforce consistency even when the algorithm shows otherwise, for example ensuring that a club-level room is always at least some minimum premium above a standard room.
Cendyn (which acquired Rainmaker last year) and IDeaS both talked about optimizing around profit rather than revenue. This is an important trend, and a place where some of the more established players are ahead. However, I found only pieces of the complete profit puzzle in any one solution; we are still some distance away from a solution that truly optimizes the bottom line. Some of the systems can adjust for distribution costs by channel, which is critical. Cendyn looks at profit margin by category of revenue and covers multiple revenue sources besides rooms, which is also a big improvement; but it uses average margin per category, whereas profit is impacted by incremental margin (which varies both by type of product and by guest behavior). IDeaS has done quite a bit to improve profit contributions from group quotes as well, noting automated interfaces with Delphi to help sales managers quote the right rate for an opportunity.
Perhaps one of the most interesting companies I found in the revenue management space is Waylo. It’s not a systems provider for hotels, but rather a company that has built a business model around arbitraging the money that hotels leave on the table by not managing revenue as well as they should. They basically make bets on hotels whose prices they can predict will fall over time, selling rooms to the public at a discount to the hotel’s current selling rate, and only actually booking them later, after prices fall. The model works only if their predictions are right often enough – if prices don’t fall (or worse if they rise), they’ll lose money. The rates are fenced behind a login, nonrefundable, and don’t earn loyalty points or privileges, so hotels haven’t been too concerned about cannibalization.
Waylo uses serious analytics to basically do a better job than hotels of predicting the market. With 85% of hotels not even using revenue management systems, it’s not hard to see why this can work, but even with hotels that do have modern systems, they seem to be able to make it work. I had my doubts, but as I was writing this week’s article, Waylo was bought by eDreams Odigeo, which you can bet did thorough due diligence.
The question is, if Waylo can do this and make money, why aren’t hotels doing it themselves? Yes, hotels try to fence our discounts to avoid cannibalization, but fencing them from the entire OTA community (they are all moving in this direction) won’t be practical; they account in aggregate for too much demand. The answer is for hotels to get into the game and capture the revenue they have been giving away to competitors and channels by not pricing optimally. This means getting with the revenue management game. It’s time.
Email: [email protected]
Recent Headlines, from Hospitality Upgrade and Hotel Online
– Koch Industries Agrees to Acquire All of Infor
Infor, a global leader in business cloud software specialized by industry, announced today that an affiliate of Koch Equity Development LLC, the investment and acquisition subsidiary of Koch Industries, Inc., has entered into a definitive agreement to acquire the remaining equity stake in Infor held by Golden Gate Capital.
People on The Move
– David Millili Named Chief Commercial Officer of Nomadix
Nomadix Inc., the world leader in innovative guest-facing cloud-managed network edge devices, has announced the appointment of its new Chief Commercial Officer, David Millili. In his new role, Millili will leverage his more than 25 years of experience scaling technology businesses globally to spearhead commercial strategy and development for all Nomadix companies.
– Cloud5 Communications Appoints Reed Majors as Executive Director of Business Development for the Western U.S.
Based in Palo Alto, California, Majors will support the growing demand for Cloud5 High-Speed Internet Access (HSIA) and communications solutions from leading hotel brands and management companies in the Western U.S.
– James Naro Joins Broadband Hospitality as SVP, Business and Legal Affairs
Broadband Hospitality (BBH), a preferred provider of cost-effective and scalable total unified technology solutions for hotels, senior living facilities, student housing and MDUs, announced that James G. Naro has joined the company as senior vice president, business and legal affairs.
Guest Management Systems
– Skift Research Reports How Vendors Like RoomKeyPMS Are “Shaking Up” the PMS Space
Within the report, Skift Research ranks RoomKeyPMS as having an increased focus on integrations, thereby significantly contributing to the evolving industry and the future of PMS offerings.
Reservations & Distribution
– Luxury Brand Kempinski Hotels Selects Shiji’s IcePortal for Global Content Management and Distribution
Shiji Group, a global leader in providing secure and scalable technology solutions for the hospitality, food service, retail and entertainment industry, announced today its’ IcePortal content distribution system has been selected by Kempinski Hotels to provide complete visual content management and distribution for its full portfolio of 76 luxury hotels across 34 countries.
– SiteMinder-Backed Research Reveals an Increasingly Tech-Savvy Independent Hotelier on The Rise
New research backed by SiteMinder, a global hotel industry’s leading guest acquisition platform, reveals that today’s independent hoteliers have a greater awareness and appetite around technology when it comes to their marketing and distribution strategies.
– Remarkable Hotels Sees 19 Percent Uplift in Rooms Revenue with IDeaS Revenue Management System
IDeaS Revenue Solutions, a leading provider of revenue management software and services, announced that Remarkable Hotels has seen a 19 percent increase in rooms revenue since implementing IDeaS Revenue Management System (RMS).
– New Agreement Expands Infor EzRMS Functionality and Service Options Throughout the Accor Portfolio
Infor, a global leader in business cloud software specialized by industry, announced that Accor, a global leader in augmented hospitality, has extended its 13-year relationship with Infor by signing a global agreement to continue their collaboration with Infor EzRMS revenue management software. The application is currently used at more than 1,100 properties worldwide.
– SHR Introduces Maverick™ CRM
SHR, Sceptre Hospitality Resources, a pioneer of advanced hotel revenue generation technologies, has rolled out its new Guest Management System, Maverick™ CRM, for hoteliers that want to leverage valuable guest data from their sales channels as well as their property management system.
– The Guestbook Expands Sales Team in Response to Unprecedented Growth
The Guestbook adds two new members to its sales team following a year of unprecedented growth within the company.
– Twenty Four Seven Hotels Updates Accounting to Aptech’s PVNG for 23 Properties
Aptech Computer Systems, an industry standard for hospitality financial systems, announced Twenty Four Seven Hotels updated its Enterprise Accounting for 23 properties to the PVNG Cloud Back Office system.
– Real Hospitality Group Adopts Full Suite of ProfitSword Business Intelligence and Data Management Solutions
ProfitSword, one of hospitality’s premier developers of business intelligence and data integration software, has been selected by Real Hospitality Group in order to obtain a real-time and fully comprehensive overview of its financial performance across the breadth of its organization.
Communications and Infrastructure
– Hotel Internet Services Becomes Choice Hotels Qualified Vendor
Hotel Internet Services (HIS), a full-service provider of internet services and solutions for the hospitality industry, is now a qualified vendor for Choice Hotels International, Inc., one of the world’s largest lodging franchisors. HIS will provide Choice properties with the latest guestroom entertainment and technology, including its industry-leading BeyondTV and BeyondTV GuestCast platforms.
– Too Busy to Text? Beekeeper Rolls Out Voice Messaging for Chats at ALIS 2020
Vying for the event’s ‘Hottest Technology’ title for a second consecutive year, Beekeeper will reveal the coolest new way to communicate effectively with a hotel’s non-desk workers.
– PayFacto Acquires Posera Ltd. and Resto Finances Inc.
PayFacto Payments Inc. (“PayFacto”), a leading payment solution provider, announces the completion of the acquisition of Posera Ltd. (“Posera”), and Resto Finances Inc. (“Resto Finances”). With these acquisitions, PayFacto moves into a payments and technology leadership position in the hospitality industry across North America, Europe and the UK.
– Sandpearl Resort Uses Service Data to Achieve Operational Excellence
The hotel implemented Guestware Suite, an industry leading guest service and maintenance software to help the staff meet and exceed guest expectations.
– Residence Inn Panama City Selects ASSA ABLOY Global Solutions to Ensure Highest Standards in Security, Operational Efficiency and Guest Convenience
ASSA ABLOY Global Solutions has announced the successful implementation of its advanced security access platforms at Residence Inn Panama City. A recently opened extended stay hotel that offers homelike surroundings and a relaxing community atmosphere, Residence Inn Panama City recognized the need to implement advanced security solutions in order to provide each guest with total peace of mind throughout their stay.
– VENZA Joins the Global Effort to Support Data Privacy Day by Becoming a 2020 Champion
VENZA has announced its commitment to Data Privacy Day ‒ an international effort held annually on Jan. 28 to create awareness about the importance of respecting privacy, safeguarding data and enabling trust – by signing up as a Data Privacy Day 2020 Champion. As a champion, VENZA recognizes and supports the principle that all organizations share the responsibility of being conscientious stewards of personal information.
Hospitality Events and Association News
– Dr. Ravi Mehrotra, Founder and Chief Scientist, IDeaS, to be Showcased in ‘Under the Spotlight’ at Opportunity 2020
Dr. Ravi Mehrotra, president, founder and chief scientist of hospitality and revenue management software pioneer IDeaS is set to take part in the renowned Under the Spotlight session on February 11, 2020 at Opportunity2020, hosted by Revenue by Design, Ltd.
– Fuel’s Stuart Butler Selected to Host Session on Google’s Impact on Hospitality at the Navigate Hospitality Leaders Conference
Fuel, the premier provider of hotel marketing software and digital agency services for the hospitality sector, has announced that Stuart Butler, the company’s COO, will present an expert session at the Navigate Hospitality Leaders Conference, taking place March 2-4 at the La Cantera Resort & Spa in San Antonio, Texas.
– 2020 Outlook Improves for North American Hoteliers
TravelClick, an Amadeus company, released new data from the company’s January North American Hospitality Review (NAHR). According to the data, committed occupancy for the first quarter of 2020 through the fourth quarter of 2020 is up 2.0% compared to a year ago. Average daily rate (ADR) is up 2.1% based on reservations currently on the books for 2020.
Piqued Our Interest
And now for you-know-what.…
A defendant was on trial for murder. There was strong evidence indicating guilt, but there was no corpse. In the defense’s closing statement the lawyer, knowing that his client would probably be convicted, resorted to a trick. “Ladies and gentlemen of the jury, I have a surprise for you all,” the lawyer said as he looked at his watch.
“Within one minute, the person presumed dead in this case will walk into this courtroom.” He looked toward the courtroom door. The jurors, somewhat stunned, all looked on eagerly. A minute passed. Nothing happened. Finally, the lawyer said, “Actually, I made up the previous statement. But you all looked on with anticipation. I therefore put to you that you have a reasonable doubt in this case as to whether anyone was killed and insist that you return a verdict of not guilty.”
The jury, clearly confused, retired to deliberate. A few minutes later, the jury returned and pronounced a verdict of guilty. “But how?” inquired the lawyer. “You must have had some doubt, I saw all of you stare at the door.”
The jury foreman replied, “Oh, we did look, but your client didn’t.”