Hotel Revenue Management – Dark Art or Science?

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On the 3rd of August, 2016 the Hospitality Sales and Marketing Association invited some of the ‘experts’ from around the region to share their insights and trend forecasts for all things revenue management under the title‘Revenue Optimization Continuing Education & Training Event’.

When you go to these events, you tend to see two main types of people.  There are the people who truly believe that Revenue Management is a science and have faith in the tools that they use ranging from Excel Spreadsheets to amazingly complex pieces of software that apply algorithms to big data and generate those ‘magic’ numbers, and then there are the ‘old school’ crowd that believe that they can ‘beat the system’ and rely on their well weathered gut feeling to know where the sweet-spot is for room pricing of of their hotel.

After hearing the experts speak at the event, one thing was clear – the variables used to determine what price you’re going to be selling your room at tomorrow night are many and more complex than what things were like 15 years ago by many orders of magnitude.

Fabian Bartnik, VP of Asia Pacific LodgIQ in his presentation on “The Art & Science of Pricing” spoke about data trends that were both mind boggling, as well as slightly disturbing.

Big Data

According to Bartnik, 90% of all data was created in last 2 years, and this will grow 50 times over the next few years.  Why is that important? Because this data is being used by machines to learn about human behaviour and predict consumer behaviour to frighteningly accurate degrees.

This data is also turning consumers into ‘smarter’ consumers too.  Some of the statistics regarding data and data usage included:

  • 65% of consumers look up more information online now than they did three years ago;
  • 200% increase of ‘Near Me’ searches in the past 12 months;
  • 100M+ hours of ‘How To’ content has been watched on YouTube over the past 12 months;
  • 82% of consumers consult their phone while in a store contemplating what to buy;
  • 29% increase in mobile conversion rates in the past year;

Bartnik warned hoteliers, that if they don’t stay on top of the data and the trends in what’s being done with data, it can come back and bite them.

He also questioned whether the impacts of ‘Best Available Rate’ (BAR) and ‘Best Rate Guarantee’ (BRG) were truly realised by hoteliers.  He believes that the concepts of BAR and BRG were originally set as policies when very different data was being used to drive the business.  Now things have become much more complex and BAR might not be up to the job anymore.  ‘Super Saver Prices’ are not enough anymore with the many other options that are available to consumers including GPS driven geo-located ‘pings’ that could offer a special rate as someone walks by a hotel.

Forecasting Accuracy

IHG’s Commercial Director for South East Asia and Korea, Graham Lewis also spoke about the increasingly complex job of the Revenue Manager and how to maximise forecasting accuracy. Why is forecasting accuracy important?  Lewis believes because it:

  • Enables effective action planning – bad forecasting is a distraction;
  • Helps you to resource effectively and align priorities as a team;
  • Allows you to identify risks and opportunities early and plan strategies;
  • Enables central support to focus on need areas (e.g. tactical campaigns);
  • Helps us stay ahead of the competition;
  • Enables hotel/owners to manage cash flow to meet financial obligations;
  • Builds and establishes your reputation and credibility;

What Questions Should You Be Asking Your Revenue Manager?

He emphasised the importance of Total Revenue (TORE) forecasting and gave the following list of questions that GM’s should be asking their Revenue Managers:

  • Are we up or down on this year’s OTB compared to the same time last year?
  • Which segments are impacted positively or negatively compared to last year?
  • Are there changes to lead times compared to last year?
  • Is trending in line with last year – with budget and with expectations?
  • What analysis and data is there to support the forecasts?
  • What market risks and opportunities have been identified and how are they included / excluded in forecasts?
  • How is our performance compared to local competitors (E.g. in RevPAR)?
  • What competitor intelligence do we have that might impact our revenues? (e.g. key marketing campaigns, events, future pricing etc.)
  • What opportunities do we have from city / area events coming up in the next 3-6 months to maximise revenues?

From once being a skill akin to water divining, Revenue Management is becoming more and more complex and the fate of your property could well lie in the hands of your revenue manager.  They need to be up to date with the latest technologies, and know how all technology is influencing what is happening and will happen in the future at your property.

See original article at http://hotelintel.co/revenue-mangement-dark-art-science/

Representasia is a partner of Duetto Research, whose GameChanger solution is transforming hotel revenue management worldwide. To find out more, visit our website or contact us.

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Founded by two travel and technology professionals with years of experience in Asia, Representasia specialises in sales & marketing representation throughout Southeast Asia for travel/hospitality technology providers and travel-related startups, as well as providing marketing consultancy services for hotels and travel businesses in the region.

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