The Next Generation of Revenue Management Strategies

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | February 16, 2014

There is one constant in the hospitality industry – change. What was once considered leading practice in terms of customer service, like express check-outs to avoid morning queues or offering free Wi-Fi to guests, is now expected by many travellers as base level service. Just as service offerings to guests have evolved through the years, so have the operational technologies hoteliers themselves use to ensure that their properties are running as efficiently and profitably as possible.

Revenue management has been used in the hospitality industry for well over a decade. The practice was first used to simply fill rooms, with no real view to the long term effects of these pricing decisions. Using revenue management in this way provided hoteliers in the short term with more customers and spikes of increased revenue, however, this approach also led to longer term negative effects and hoteliers who simply slashed their rates to fill rooms usually took time to recover financially from short term pricing decisions.

Over the years, revenue management has evolved to become more reliant on advanced technologies which promote a strategic, longer term approach to pricing and sales. However, even using revenue management to strategically price hotel rooms and ancillary services is no longer enough in today’s dynamic operating environment where the way guests choose the hotel they want to stay in and what price they are willing to pay is constantly changing. It is time that hoteliers stop thinking about revenue management as it has been known, and start thinking about the next generation of revenue management strategies that are adapted for today’s digital environment and take additional revenue streams into account.

Today’s Hotel Guest is Empowered, in Charge and Online

All hoteliers need to realize that their guests have never had more power. While many hotel managers will argue that the guest has always been their core focus and offerings, services and the way rooms are packaged and sold has been tailored towards them, it is not the same guest from the past. Today’s hotel guests have increased expectations and are in control of every part of their experience.

Both business and leisure travelers have changed the way in which they book hotels over recent years – in the past they may have been more reliant on travel agents or travel brochures to actually inform them of the best places to stay and relied more heavily on a traditional star rating process and descriptions of the hotel generated by the hotel themselves. These days, when a traveler goes to book a room in a location that they may not be familiar with; their selection process is much different. In many cases potential guests search for information on the hotels in the area online and specifically look to third party review sites for impartial past guest reviews to “aid” in the selection process.

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.