Success with Hotel Revenue Management Means Asking the Right Questions

According to the The 2018 Smart Decision Guide to Hospitality Revenue Management, which is now available for complimentary access, more than one-quarter (28%) of hoteliers who have not upgraded their revenue management within the past 3 years plan to do so in the next 12 months. 

By asking the right questions, decision makers can determine which revenue management solution on the market best fits their needs and is most likely to deliver the benefits they seek, with minimal risk and expense. The hotel’s revenue manager(s) — people who know the nuts and bolts of inventory management and length of stay control and who understand, for example, how to calculate group rates and apply rate fences — should be included in the evaluation process. 

Most revenue managers want solutions that provide visibility. They want to be able to look under the hood and dive into price sensitivity data and observe at a detailed level what inputs are behind the system outputs that are being made and how adjustments to the decision model would change revenue outcomes. They do not want to wait for actual booking numbers to come in to understand the impact of their strategies and determine whether they made the right decisions. In short, revenue managers need to be comfortable that the new solution will enable them to do their jobs with maximum effectiveness.

Illustration with a hotel room and a tablet

Make sure the revenue management solution can provide answers to pricing questions

To be effective, revenue managers require tools that will enable them to answer all of their day-to-day pricing questions. These questions may be voluminous, and some may be difficult to always know in advance. 

Such questions might include: By how much should we increase or decrease our rates for a given type of room? How many groups, and what size groups, should we accept on a given day? How much should we charge walk-in guests? What should be the floor and ceiling for our rate range? Are the changes in demand and bookings likely to represent a short-term or long-term pattern – and, if the latter, what actions should we take in response? To what extent should we discount negotiated rates? What should our best available rates be for the coming year? 

Additional questions: What discounts and promotions, and to what target customer segments, are likely to perform well right now and in the near-future? What discounts would likely dilute profits and should we therefore avoid? To what extent should we mark up our premium rooms, based on the current and near-term demand patterns? What competitors’ price moves would likely affect these demand patterns and how should we respond if those moves become reality? How can we counteract cancellations and no-shows, group wash, extensions and early departures to capture optimal profitability? 

It’s a good idea to compile a comprehensive list of pricing questions and verify that the solution will be able to address these questions in a straight-forward manner. 

Make sure the revenue management solution can offer depth and flexibility in data analysis and reporting 

Revenue management is a quantitative puzzle with ever-changing numbers, patterns and results and a need for continuous refinement. Delving into the data, testing different if/then scenarios, and collating actual results requires a high degree of flexibility. Not all data queries can be anticipated. A significant percentage of pricing questions may, in fact, need to be investigated on an ad hoc basis. 

Out-of-the-box functionality may satisfy the needs of novice users or small properties with relatively simple needs. But it is likely to be insufficient for more sophisticated revenue managers and larger properties with multiple room types, customer segments and ancillary revenue streams. A solution should provide for flexibility, which is important when it comes to setting pricing, noting special events, adjusting segmentation schemes, etc. 

A solution should make it easy to accommodate virtually any need, including the need to monitor and measure individual property, portfolio, and departmental performance, the need to create customizable hierarchies for different geo-markets, channels, room types, time periods and loyalty programs. Important questions might include: Once problem areas are identified, can the solution guide users on how to take appropriate action? Can tactical decisions, including the overall impact, be tested live? Can the dashboards provide exception reporting, identifying areas needing the most attention? 

It’s a good idea to verify that a revenue management solution under consideration is flexible in terms of keys areas of functionality, including custom reporting, and validate all of the vendors’ claims. If customized reporting is possible, find out what is involved in the process of filtering and sorting data according to a specified set of parameters. 

The 2018 Smart Decision Guide to Hospitality Revenue Management is now available for complimentary access.