The Impact of Machine Learning and Personalization on Your Revenue Management Strategy
By Ravneet Bhandari Chief Executive Officer, LodgIQ | July 31, 2016
The hotel business is in the midst of a peer-to-peer revolution, and it's seriously threatening the industry's financial stability. A new wave of accommodations spurred by the birth of the sharing economy is radically altering how many people prefer to stay while traveling. According to a survey of US travelers, consumer preference for staying at traditional hotels is halved (79 percent vs. 40 percent) once they've experienced peer-to-peer housing.
In addition to Airbnb, there's a rising number of peer-to-peer accommodation sites appealing to specific market segments. Those include the high-end home rental group OneFineStay, and the family friendly HomeAway, which are both nipping at the traditional hotel business. And if hoteliers don't meaningfully respond, that nip could become a significant bite to the bottom line.
So how can hoteliers make their property stand out from the other hotels in their destination? And how can hotels ensure that their rates are competitive with the alternative accommodation options?
First, it's critical secure a grasp on a property's macro and micro markets. Perhaps that's business travellers and weekend baseball tournaments, for example. With the right future-focused machine learning revenue management system (RMS), hotels can automatically collect and compute large amounts of data to determine the best room rate - including competitor pricing, historical market rates, and supply and demand. You can even track the immediate and long-term impact from major events such as an annual music festival or that massive snow storm from last winter. That gives hoteliers using machine learning the edge.
By implementing an RMS utilizing machine learning technology, profits are dramatically increased. These systems empower revenue managers to make the significant leap in creating rate offerings specialized to different market segments, increasing likelihood the potential guest will choose to book with you rather than your competitor.
So what is machine learning? Machine learning is the newest frontier of computing, and it creates the ability for computers to learn and adapt in unheard ways before now. It's kind of like the computer HAL from 2001 Space Odyssey, but without all the bad vibes. Machine learning is achieved through using advanced algorithms to process data and perform calculations with logical, adaptive reasoning to perform specific actions. The more the system is utilized, the more it learns and the better it becomes at increasing revenue profitability.