Revenue Management Insights: An Interview with Jean Francois Mourier
July 23, 2015 10:22am
We spoke with Jean Francois Mourier, CEO of REVPAR GURU, to find out his thoughts on the best practices in revenue management, specifically as related to choosing an effective revenue management system (RMS).
Overall, what trends do you see being important for revenue managers to consider in 2015 and beyond?
JFM: There have been many positive developments in the revenue management industry of late. In general, hoteliers and revenue managers are becoming more aware of the importance of a revenue management system in increasing bookings and revenue through the online channels – which is a very important realization, one that will help the industry as a whole become more profitable.
In regards to RMS, more revenue managers are looking for solutions that will offer more frequent price updates (though real-time updates should be the standard!), which is an absolutely critical consideration. As technology becomes more sophisticated, more frequent updates are becoming the necessity in order to stand out from the competition online. While this is a step in the right direction, hoteliers and revenue managers should not be accepting any system that does not enable truly dynamic pricing using live data from the local market, meaning that there is a real-time assessment of all variables (that can have an effect on pricing) followed by real-time updates across all online channels.
Are there any specific features that revenue managers should be looking for when purchasing a new RMS?
JFM: Revenue managers should be looking a solution that provides integration with multiple internal systems/platforms, using either XML or API (Application Program Interface), which are the most reliable and fast methods of transmitting information. A fully integrated system should gather competition data, hotel data, historical data and other available market data in order to offer comprehensive pricing recommendations, as well as offering fast updates via the built-in channel manager – all-in-one integrated solution.
An example of this type of integration: reservation delivery imports all of the information from every booking directly from multiple OTAs into the property’s existing PMS, which makes data more current, decreases staff time spent on data entry and eliminates costly data entry mistakes.
Your RMS should be totally compatible with both iOs and Android smartphone platforms, enabling complete control over rates and revenue management decisions, anytime, anywhere.
Avoid systems that use historical data alone as a basis for pricing calculations. If past decisions were not made correctly or if mistakes occurred, it doesn’t give revenue managers accurate pricing information that will earn the highest ROI. As well, it’s important to note that the past is not always a true indication of the future; your strategy may have worked last year because of a very popular local event (increased demand), but if the event is canceled this year or a recession happened last year, your historical data will not provide an accurate price.
Solutions that use comp sets as a basis of the pricing decisions (rather than factoring in all available properties within a destination) are no longer viable solutions. Due to the advent of the Internet and online travel agencies (OTAs), consumers now have access to a great deal of information about all the properties within a destination – not just those in your property’s comp set. By using a solution that only establishes pricing based on your comp set, it is not taking into consideration consumers’ booking habits, how they think or what factors they use to select a hotel room. As such, systems that establish pricing using comp sets will not yield a positive impact on a property’s revenue.
Revenue managers should be looking for an RMS that executes more frequent updates. My definition of an "update" is an updated re-evaluation of all the market data parameters – and can include updates from the hotel’s booking data, from the algorithm and, when necessary, an update across all of the property’s OTA channels. Most RMS will do one to three updates per day, which means that your rates are not optimized for the majority of the day. Hotels need an automated system that works 24/7 and executes updates in real-time as the market changes – including factors, such as change in the price of the competition, change in all new bookings, cancellations, booking window/time factor changes, etc. - to ensure that your RMS is always earning the most money for every online booking – no matter the time of day or night.
Most RMS companies will attempt to persuade hotels that less updates (and therefore, less work) is better, simply because their solution is incapable of collecting and analyzing the huge amounts of data necessary to execute real-time updates. Revenue managers should keep in mind that their customers can book or cancel at any hour of the day because customers can be booking from many countries, in different time zones, worldwide.
A final point is that an RMS does not need to be expensive to be highly effective. In recent years (with advances in technology), pricing has become more affordable and available to sync with more PMS platforms. Finally, if your property can’t afford to purchase a solution outright, there are options for solutions that will offer a RMS for only a small start-up fee and a recurring monthly fee, making it even easier for all properties to afford a sophisticated solution.
Is data security an issue with RMS?
JFM: Definitely. In order to determine whether the RMS that you are considering will keep your data secure, consider the following four factors:
First and foremost, your contract should include all of the details related to the RMS’ security features.
Secondly, a RMS should have a data encryption level of 256k (or more) as a standard. Make sure that the number of cycles of repetition are at least 14 cycles for 256-bit keys.
Your data should also be hosted by a company that offers redundant power supplies and data communications connections, environmental controls (i.e. air conditioning, fire suppression, etc.) and multiple security controls (i.e. management of fires using water or nitrogen gas, availability/closeness of the data center, etc.). I recommend only Level 4 data centers, which are the most stringent because they are designed to host mission critical computer systems, with fully redundant subsystems and compartmentalized security zones, all controlled by biometric access.
Last but not least, ensure that your Internet up-time is at least 99.995% or better, to ensure that you will always have access to your important data.
What features should revenue managers avoid when choosing a RMS?
JFM: Avoid systems that provide you with too many reports. In many cases, the companies are attempting to overwhelm you with data to hide/justify their shortcomings.
Avoid using systems that were created before the invention of the Internet because they will use old concepts, old math and mostly historical data to provide a forecast.
Buying non-integrated solutions, such as buying an RMS from one company, a channel manager from another and rate shopping reports from a third tends to be less reliable, more problematic, more costly and more time consuming as it will have poor integration across all three systems. We always recommend buying from a company that offers all three services through one integrated solution because it will always be more effective and will help revenue managers save valuable time.
Any other tips on how hotels can increase bookings and revenue?
JFM: List your property on as many OTAs as possible, and ensure that your RMS can handle updates to all of them in real-time, to ensure that you are benefiting from the billboard effect. According to a 2009 report done by Cornell University’s Center for Hospitality Research, the billboard effect is “a boost in reservations through the hotel’s own distribution channels (including its website), due to the hotel’s being listed on the OTA website.” In other words, by having a greater presence on the OTAs, your property is also more likely to generate additional bookings through direct booking channels (no commissions!).
Use a platform that offers a booking engine that looks great and makes it easy for customers to book (which, in our experience, is the exception, rather than the rule). As well, the booking engine should offer SEO set-up and adequate keyword policies.
Invest in a Google AdWords strategy to attract customers directly to your website, which can help increase your direct bookings and decrease acquisition costs.
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Contact: Jean Francois Mourier
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