The Evolution of Revenue Management and Big Data

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | March 20, 2016

The hotel sector has never been a stranger to the winds of change. What was once considered leading-edge customer service practices, like offering free internet to guests or express checkout options, are now basic expectations that travelers view as standard services. Just as the hotel industry has evolved over the years, so have the approaches that hotels have taken to attract the right guests at the right prices.

Revenue management has been used successfully in the hospitality industry for decades. However, early revenue management systems focused primarily on demand management. They did not commonly focus on optimizing price as a lever, but rather as opening and closing the rate structures that a hotel already had. Over time, and with the entrance of online travel agents (OTAs), revenue management systems evolved to meet the changing needs of the hotel industry and its operating environment - eventually becoming tasked with optimizing prices for guest rooms.

The practice of revenue management, and the systems used to make accurate pricing decisions, have become even more precise and sophisticated in recent years. Most recently, these systems have begun incorporating data on competitor pricing activity and the pricing of services outside of guest rooms, like function spaces. Undoubtedly, the biggest change in revenue management today is the influx of large volumes of guest data and its impacts on future pricing decisions and hotel promotion.

Data, Data Everywhere

Good revenue management decision making starts with good data. The data sources that support revenue management commonly include: stay history, inventory history, future reservations, future inventory and future rate information. While this data has been historically recognised as fundamental to practicing revenue management, it has also become more widely understood in recent years that the more data gathered - and the longer it is kept for - becomes even more valuable. By gathering future reservations data, hoteliers can build and asses the booking profiles of its guests and examine if these profiles are seasonal or experience any changes over time.

There is no argument that good data is critical to today’s successful hotel operations. But how did the amount and types of data that hoteliers use in the revenue management process become so important? The short answer is that today’s big data exists largely in part of the changing ways that hotels are interacting with guests. This has been driven primarily by changes in hotel technology over the last 30 years, including:

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.