Cashing In: How Revenue Management Can Help Bolster the Bottom Line

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | August 10, 2014

In recent years both the residential and commercial real-estate sectors have resembled more of a roller-coaster ride than a sensible place to invest for capital growth. The same can be said specifically about hospitality. Increasing levels of competition have led to a near oversupply of rooms and decreasing levels of ongoing customer loyalty. Hotel owners and investors alike have also faced major challenges around how to best manage their hotel assets to increase the value of their properties and maximize ROI.

While the past five years have seen some hotel markets face key challenges to maintain profitability, many markets are experiencing strong growth, leading to increased interest from investors in the sector. A recent report focusing on the Australian hotel market recorded that, “Investment in the hotel industry outperformed all other competing property sectors in terms of financial returns for the quarter ending Mar 2014, posting an 8.8% annualized return.”(1)

In other words, things are getting better. But hotel owners and investors today face new challenges to look beyond balance sheets toward the technology and systems they’re using to drive bottom-line value.

Technology moves quickly, and while keeping up with these constant changes can be difficult, owners should still understand the role technology can play in their business strategy. In the past, many hotel investors and owners have viewed revenue management technologies and strategies, for example, as a discipline that is too ‘micro-level, ’ this could not be further from the truth in today’s dynamic and technology-driven industry.

Jake Egberts, Senior Vice President at Jones Lang LaSalle Hotels, highlighted a key reason why investors should have an increased interest in revenue management technologies: The ability to extract value from an asset even in the face of increased competition. He said, “In a competitive hotel market, revenue management is a key tool to manage the business. It assists management in understanding their markets and helps to maximize revenues. Investors should expect their operators to be leading the way on this in order to help them to extract optimum value out of the asset.”(2)

Leading the way how? Continued advancements in technology, coupled with a seemingly endless number of booking channels, are necessitating revenue management tools to maximize revenue from hotel guests, in both high and low periods of demand. Revenue management technologies can create a high flow of additional revenue that directly impacts bottom-line results, making it a key tool in increasing a hotel’s valuation.

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.