Mr. Kohlmayr

Revenue Management

Revenue Management in an Increasingly Networked World

By Klaus Kohlmayr, Senior Director - IDeaS Consulting, IDeaS Revenue Solutions

In recent years there has been a steady increase in the use of internet sites by customers, especially the use of third party booking programs to assist them in planning their holidays. This has helped to dramatically change the way in which hotels manage their room rates and occupancy levels around the clock. In 2008 alone, it has been estimated that 40% of all hotel bookings will be generated by third party internet booking sites.

A figure of such potential magnitude as this obviously represents a large slice of a hotels potential clientele base. As the majority of hotels are continuing to embrace this new technology, many are forgetting to ensure they have the correct revenue management support in place beforehand.

The nature of implementing effective revenue management and pricing strategy's is constantly evolving due to the advent of new technologies, which are continuing to change the face of the hospitality industry. With the increase in the various choices of distribution channels for Hotels, it is no longer appropriate to expect a Reservation or Revenue Manager to handle a multitude of manual Extranets to ensure revenue management and pricing integrity.

Hoteliers are now faced with a key decision, of which the outcome will directly affect their hotel's overall revenue potential. The choice involves having key staff spending a number of hours per day updating these channels manually or creating an environment where the implementation of any pricing decisions is largely automated.

The second option actually means that resources are freed up to focus on strategically important issues aimed at enhancing a Hotels performance. The Hospitality industry is continuing to steadily move towards a more dynamic pricing environment, which means it is vital that the correct technology infrastructure is in place to meet the growing needs from day one.

With the advent of the internet and other online customer forums, consumers are becoming more aware of factors that influence the prices they are offered. With this increase in consumer awareness, there is a growing imperative for hospitality organisations to be aware of the effect that pricing can play on their overall revenue potential and their ability to reach financial stability.

While it is widely accepted that poor marketing can ultimately damage the reputation of a hospitality business, hotels throughout the world are only now beginning to recognise that poor pricing strategies have the potential to not just negatively impact on the revenue of an individual business, but can damage an entire market. This can cause long term financial instability for their own hotel, but also for their region and industry.

Technology used in hotels needs to be able to guarantee Hotel Owners and Hotel Managers a seamless flow of revenue management and pricing decisions throughout their integrated system. This will allow for a reduction in the need for any form of human intervention at the tactical level, saving hotels time and in turn money. The time saved in this area can then be re-directed to other equally important jobs, including sales and marketing development and implementation.

All revenue decisions will now be significantly optimized by a Revenue Management System based on internal and external data as well as some level of human input. The decisions then flow from the Revenue Management System and are implemented across the various internal and external channels in real time.

The advent of the third party booking sites now means that an automated and flexible pricing system needs to be in place to meet the ongoing and fluctuating levels of demand.

The growing popularity of third party booking sites, now means customers throughout the world can book their hotel visits around the clock. This also means they have access to the prices on offer at numerous hotels in any one city or country simultaneously. This second point is of particular importance and needs to be understood before choosing to sign up to numerous third party booking sites.

Some Hotel Owners and Hotel Managers see the option of signing up their hotel with as many third party booking sites as they can find as very appealing, searching for safety in numbers. However if a Hotel Owner or Hotel Manager does decide to do this, they need to carefully plan their strategy, and need to execute it with the appropriate systems in place to support it effectively.

The appropriate in-house revenue management structure needs to be in place before this is done, or else the resources and money being spent will heavily outweigh any potential financial benefits. If the correct system is not put in place to meet growing levels of demand, the hotel may not be able to meet the customer expectations.

Also, if the correct pricing strategies are not in place to match the exposure to other hotels, the long term effects could be disastrous for a small to medium sized hotel.

Many hotels often find that they are actually underprepared for the steady increase in workload that comes with having to manually update multiple rates according to information being received from different channels.

As a result of the increasingly networked operating environment, hotels that still manually operate their room rates can often find themselves lagging behind the competition - both when attempting to meet their revenue potential and also when attempting to deal with different periods of patronage that may occur.

Through using a trusted revenue management partner like IDeaS Revenue Optimization, all the various hotel and third party booking systems and distribution channels are integrated and interfaced so that the information seamlessly flows between all systems in a timely and efficient manner.

When Hotel Managers and Hotel Owners decide to pursue certain market segments, they need to have the confidence that they have the correct revenue management systems and procedures in place to help support them. By ensuring the correct systems and strategies are in place, hoteliers will be prepared for whenever customers decide to book with them.

This will mean the hotels will have a greater chance of reaching their own revenue potential and achieving greater financial stability. This is of great importance for hoteliers who are currently feeling the pinch as a result of the present economic conditions.

Klaus Kohlmayr currently holds the position of Senior Director - IDeaS Consulting for IDeaS Revenue Solutions, the global leader in Hospitality Revenue Optimization. (www.ideas.com) He is responsible for leading and growing the revenue management consulting and advisory division assisting clients in the Hospitality and Travel sector worldwide to develop, implement and enhance best practice revenue optimization, pricing and forecasting strategies and tactics. Mr. Kohlmayr can be contacted at 612-840-3301 or Klaus.Kohlmayr@ideas.com Extended Bio...

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