Mr. Nathraj

Revenue Management

Optimizing New IT Revenue Tools to Your Advantage

By Yatish Nathraj, Hotel Broker, HTL Hospitality Advisors

Technology is becoming an ever more growing part of the hospitality industry and it has helped us increase efficiency for guest check-inn, simplified the night audit process and now has the opportunity to increase our revenue production. These systems need hands on calibration to ensure they are optimized for your operations. As a manager you need to understand how these systems work and what kind of return on investment your business is getting. Although some of these systems maybe mistaken as a "set it and forget it" product, these highly sophisticated tools need local expert like you and your team to analysis the data it gives you and input new data requirements.

It's very important to ensure that the development of our IT systems is comparable to the training of and investment in our employees; they can only be successful when you train them to succeed. These new tools have the ability to learn and adapt to changing environments. Knowing how to optimize these tools and tweak them to benefit your business model will help increase productivity and revenue.

Many of the well-known franchises have already implemented sophisticated computer revenue systems that use algorithms to maximize revenue streams but these systems are still in their infancy. For instance most of the revenue tools out there don't have a correlation to help analyze guest satisfaction compared to price change, which most industry experts would say is a direct affect on customer satisfaction. Some of these systems cannot make that judgment; this is where most of the computer systems fail to bridge the gap between technology and hospitality.

Most of the franchise models that are out in the hospitality industry have been pushing guest satisfaction and revenue growth. Collecting accurate customer information helps provide better customer service as well as creates an opportunity for revenue growth in the future. Every general manager in the hospitality industry already knows this, but when you apply new technology to manage these simple functions, the output of data is not always the answer to our problems. We must be more collaborative with the software developers to ensure it is both user-friendly from the front end but also has the ability to adapt to management to ensure customer satisfaction. We must be engaging the software developers in all stages of their iterations to help the systems you use grow and be flexible for your business environment.

Systems are rolled out and technology takes over simple forms of revenue management, which can create complex human resource problems. With the amount of technology coming into the hospitality industry most industry experts wonder if we should be looking towards Silicon Valley for the next revenue or general manager in the hospitality industry. At UNLV as a student many professionals stressed that the computer would one day replace the general manager of most hospitality businesses but if that general manager was prepared, they will be rehired to manage those same computer systems. Most of the new revenue management systems are over simplified but do not have the complexity and judgment of a seasoned manager. But if we use them right they have the ability to adapt quickly to changing environments and benefit us all.

It's important for us to remember IT systems are only as good as the users behind them. We must optimize, monitor and re-optimize the same systems until it has enough data to have better judgment overtime by itself. With today's technology there seems to be a set it and forget it mindset. I have seen seasoned managers make this mistake and end their careers because of their unwillingness to adapt to new technology with due diligence. Most of the revenue technology being rolled out is based on competitive sets data and controlled inputs from management. As these systems grow so does the task of managing and handling these systems.

Finding the right people on your team to manage these systems is very important. These systems can make adjustments every second if the right control polices are set in place. We also need to ensure our people have the right access and ability to correct errors and issues to ensure guest satisfaction. Sometimes these systems fail and we still need to be able to operate our business, we need to ensure the people on the ground that these systems help support are not dead in the water when the system goes down.

In recent years we have heard of the airline industry canceling flights just because their IT infrastructure went down. We in the hotel business unfortunately do not have the pleasure of just letting our guest wait in the lobby until the system comes back online. Building in redundancies and backup plans should be a number one priority when relying on new tools. We also need to be able to proof the data by check computer systems output. Remember computers are only as good as a users input, and if that input is one decimal off that could mean the difference of millions of dollars. Since most of the software we use is connected to the Internet this could have disastrous consequences. As these systems grow and become more sophisticated so should the way we manage them. Learning their strengths and weaknesses is important to help fine-tune these machines.

Some of the weaknesses in these systems are not necessarily because of the software but rather the user analysis. Lets look at correlation between price and guest satisfaction more closely. Consumers are price sensitive, as demand grows we want to increase our rate as fast as possible, but sometimes even if the consumer is willing to purchase an item at that price, it does not mean they will be satisfied with their purchase. By analyzing customer diminishing returns it helps us understand how to reduce the number of unsatisfied guests we will have the next day.

For example if a chain hotel is priced at $70 average throughout the world, a consumer expects that price to be somewhat constant but is willing to pay a little more for location. If you increase your price on goods 10-20% percent, consumer satisfaction won't change drastically if all things stay constant. But once the price changes more then 30%, most hotel managers can see a direct correlation between rate growth and guest dissatisfaction at this point. This is when you need to tweak your guest satisfaction questionnaire and be more in tune with finding out what could have made their stay more satisfactory.

The problem with the new revenue systems is they do not take the human element into consideration, which is a big aspect of the hospitality industry. When increasing rates you must be able to help the consumers justify that price hike by providing more amenities, good and services. These systems are not able to yet tell us which amenities, goods or service would keep guest satisfaction up and at what price the consumer is willing to pay without reducing their satisfaction level.

The strength of these systems really depends on the depth of the user and understanding of how the system and algorithms work. Knowing how to do the basic and complex functions of these systems by long hand would be very helpful and practical for long term career oriented hospitality executives. It might sound redundant to learn how these systems work from the ground up considering the fees they charge to use them; but makes sense as they become more and more integrated into our everyday operations.

Most people are reluctant to go this far in depth but highly successful hospitality industry leaders tend to know the finer details of the systems that help increase their revenue year over year while there competitors struggle to keep up. Hilton and Marriott have had most of these systems in place for quite a while.

We have seen the hospitality industry change in the last few years. Guests can now check themselves in without real front desk interaction, property management systems can run night audits without any human intervention, and now the revenue management systems are becoming integrated into every channel and system of hotel operations. We must embrace it but do not forget that a big part of this industry is customer service and human interaction. Our guests thrive on the ability to interact with knowledgeable staff at a hotel with great amenities and extra goods and services that they have to offer.

We must tailor these systems to help us improve and increase the personal interaction with guest and staff. These systems can be very beneficial to improve revenue and streamline simple and complex tasks that can help free up time for staff to be more dedicated to providing exceptional guest satisfaction. We must appreciate the systematic pace at which these systems process and simplify our way of life. These simplifications help us concentrate on more important concepts like social interaction that really drives the hospitality industry and the guests that enjoy staying at hotels. These systems are never going away and will only become a bigger part of the operations pushing our ability to manage it and the policies that guide the system to success.

Yatish Nathraj is a Hotel Broker with HTL Hospitality Advisors in Southern California. He started as a handy man at a small motel in Riverside which led him to more responsible roles within the industry. He has worked in management positions at award-winning franchised properties such as Best Western and InterContinental Hotel Group, including Hampshire Hotels a full service Boutique Hotel chain located in Africa. He has held almost every position in a hotel and now advises investors and managers in makimg critical decisions in their hospitality operations. Mr. Nathraj has traveled globally to help hospitality investors find key markets for investments. Mr. Nathraj can be contacted at 951-906-4916 or ynathraj@htlha.com Please visit www.htlha.com for more information. Extended Bio...

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