Is Your Hotel Ready? Revenue Management Predictions for 2015
By Paul van Meerendonk, Director of Advisory Services, IDeaS Revenue Solutions
Another year has come and gone, and hoteliers worldwide are already planning for the months and quarters ahead. Renovations, expansions and overall segment growth will continue to fuel the industry and will gain much attention throughout the year, but it will also be crucial to monitor the constant evolution of today's hotel management environment. Change is upon us, and the ways hoteliers operate more efficiently while driving better revenue is the newest frontier. Take revenue management for example: no longer dictated by gut instincts or stagnant spreadsheets, the practice of revenue management-and the technologies driving it-continues to incorporate new strategies for maximum profitability. Not only are hotel operations more tightly integrated with revenue management technology overall, but that technology is extending to other areas within hospitality as well, enabling hoteliers to take a more holistic revenue approach. But these are just some examples of what to look for in revenue management as we begin a new year. Let's explore a few more.
Powerful Analytics is Key
A pricing trend to watch this year will be the continued adoption of powerful analytics to drive overall strategy. Analytics can answer questions like "why is this happening?" or "what will happen next?" Even before the surge of big data, analytics performance of automated revenue management systems was a primary consideration for revenue managers when selecting a system for their properties. Now with the abundance of big data, an important differentiator for revenue managers to understand clearly is what types of data are integrated into their systems' decision making engine versus the types of data that are merely displayed or just used for reporting. When used as an integral part of the pricing algorithm, big data can be a powerful analytics capability.
Big Data Doesn't Have To Be a Big Headache In 2015
Advanced analytics are already a key business tool in a range of industries. For hoteliers looking to drive performance and increase profits, analytics are an invaluable tool for examining and creating trustworthy pricing decisions for one property or worldwide estates.
Data today comes in all types of formats and some can feel overwhelmed by the sheer volume of information coming at them daily: structured, numeric data in traditional databases, information created from line-of-business applications, unstructured text documents, email, video, audio, stock ticker data and financial transactions etc.
When we look at the hospitality industry we know specifically that social media data, pricing system data, CRS, CRM, RMS, channel production, mobile, and more all must be watched, measured and codified. Talk about information overload. The key for hoteliers today is to cut through the noise and leverage the most relevant and valuable data for the organization. The BIG in big data is a challenge across industries, but this year it will be increasingly important to find and rely on the information that's most relevant for you: the data that has the most impact on pricing and revenue strategies.
By taking a more strategic approach and avoiding a big data overload this year, revenue managers will be able focus on quality versus quantity. Technology can help, too, and we will see continued and significant advancements in revenue management software to not only display and report on the massive amounts of data, but incorporate it into their demand forecasting and algorithms in a way that enhances the forecasting performance.
Extending Revenue Management Beyond Rooms
Function spaces in hotels-the areas dedicated to meetings and events-can often account for up to 60 percent of a hotel's overall revenues. These spaces are serious profit drivers for a hotel property, but major amounts of money can be left on the table if these spaces go undersold or unsold altogether.
For some time now, leading hoteliers and academics around the world have recognized the potential of function space revenue management. A 2011 survey by Sherri Kimes, Professor of Operations Management at Cornell University and a leading revenue management academic, recognized function space as the area with the highest likelihood of success outside of traditional rooms revenue management. Despite these types of findings, it's an area that has proved to be notoriously hard to measure and capture value. While the fundamentals of revenue management can be extended beyond rooms, a number of crucial differences in Key Performance Indicators (KPIs) and the need for profit driven optimization for multiple revenue streams bring additional challenges to the field. Most importantly, the organizations will need to strategize to decide on the best team structures, responsibilities, incentives, and processes to support profit maximization across the entire hotel. Despite these challenges, a core trend to watch in 2015 will be a tighter integration of meetings and events spaces into an overall revenue management strategy.
The Continued Rise of Social Booking
Social media and online travel agencies: once relegated to the periphery of a revenue management strategy, they have today become so integral and crucial to pricing that entire software systems are being developed to manage the influx of social media data and review information coming at hotels. In today's digital ecosystem, consumers-read guests-have more power than ever before, and the trend is only gaining momentum. Pricing strategies throughout 2015 and beyond will centralize around social media sentiment and online reviews, not only by showing this social data for interpretation, but also by totally integrating it into pricing decisions from the start. Social media, online sentiment and reviews must be accounted for in pricing decisions in order to maximize profitability.
And with competition always on the rise, the need to differentiate your property from the hotel across the street or in the next browser tab is more important than ever before. OTAs give guests (or potential guests) a sounding board to rate and review your property, and we all know what research data says about the impact those reviews have on price.
Embassy Suites recently released its 2013 business travel survey and more than 75 per cent of respondents said online reviews are "critical" when preparing for business travel. Hoteliers must embrace this online feedback and user-generated content to shape future marketing initiatives and promotions to attract new clientele, as well as to improve a hotel's facility, services and even shape staff training. Because, as clever hoteliers know, a low room price is no longer enough to overcome negative reviews and perceptions shared online.
Ongoing Convergence: Revenue Management and Marketing
Faced with increased competition and an evolving booking environment, hoteliers need to understand their guests better than ever before. They must be able to target these guests (or potential guests) with tailored offers to secure their business. The challenge in 2015 will be to continue the convergence of traditional roles: sales, marketing, and revenue management. It will take the entire team-not just one department or group-to capture the right guest, at the right time, for the right rate.
A hotel marketing team is charged with the task of connecting directly with consumers to generate demand, whereas the revenue management team controls demand through profitable pricing strategies. This can often lead to a disconnect in the messages coming from a hotel, either indirectly or directly. By joining forces, marketing and revenue management teams can complement each other. For instance revenue management will be able to pinpoint areas of priority for demand generation, while marketing is well placed to know which customers they need to communicate with to fill the void.
An Exciting Year Ahead
The hospitality industry is always evolving, and 2015 will be another year of change as the landscape becomes even more dynamic. Hoteliers are taking a more holistic, strategic approach to their revenue management-expanding the practice beyond just rooms by using the right pricing data. Social media continues its meteoric rise and pricing strategies must continue to advance for maximum profitability. Savvy hoteliers are keeping up with the trends and will look forward to another year of success.
But that success will ultimately be defined by building cultures that embrace revenue management principles and practices-empowering people to truly understand and appreciate the importance of revenue management and its ability to drive profitability for hotels of any size. The technologies that propel revenue management today: from big data analytics to social media tools, are nearly meaningless until the appropriate culture and learning opportunities are in place to make the most of these technologies. One of the most prevalent trends to watch this year will be the influx of learning tools provided by technology suppliers that can be used to train and reward hoteliers for expanding revenue management throughout the organization.
The key thing to remember throughout the year is that creating an alignment across all teams within a hotel will ensure success-not only for each department or group, but also for the organization as a whole.
As Director of Advisory Services for IDeaS Revenue Solutions, Paul van Meerendonk leads a global team of revenue management advisors focused on hotel revenue optimization projects. Mr. van Meerendonk is responsible for global development, management and operations of the Advisory Services team. He oversees the hiring, training and management of industry-leading consultants located in London, Beijing, Singapore and Atlanta. Mr. van Meerendonk also represents IDeaS on industry thought-leadership initiatives related to trends and best practices within revenue management, including authoring a number of white papers, conducting public speaking engagements, as well as leading key client webinars with an average audience of over 200 global representatives. Mr. van Meerendonk can be contacted at +44 (0) 118-82-8100 or Extended Bio...
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