Hotel Business Review Archives

Is pricing in “nines” merely a 20th century pricing technique that has lost its relevance in the 21st century? The answer is like most things… it depends. One thing is certain though: the nice smooth supply/demand curves our economics teachers drew on whiteboards are nothing like real life. I recently met with executives at a large retailer and learned about price elasticity studies they have done in merchandising. The results are very interesting. It turns out price elasticity is not a nice smooth curve… it’s lumpy. So how can hotels benefit from this insight?

With the world economy better resembling a roller coaster ride, hoteliers need to have an effective pricing strategy to maximise profits, while riding out the ups and downs in the market. Currently transient demand in the US hotel sector is breaking all records, yet subsequent price increases are not keeping pace. Since April 2010 the increase in average daily rates has been growing at half the speed that it dramatically fell, when the full impact of the global financial crisis kicked in September 2008. The European economy is still in turmoil, with daily ups and downs, leaving the direction for the hotel industry hard to predict. If forecasting was easy, all weathermen would be rich. In these erratic and uncertain times, pricing decisions will have one of the biggest impacts on hotel profitability. It is more vital than ever that revenue managers understand industry best practice and the latest supporting technologies to ensure their hotel rooms and services are priced at the right rate regardless of periods of high or low demand.

It is clear that hotel revenue management is taking on a more strategic role and that the discipline is moving from traditional inventory optimization to price optimization. In the midst of this evolution, one thing remains constant; the person that fills the revenue management role is the key to a successful revenue management program. This role requires an analytically-minded leader, who can successfully work across the organization to drive results. In this article, I’ll discuss the skills and experience you should watch for when hiring or developing revenue management capabilities within your organization.

As an industry, the hotel sector has become good at proactively chasing bad business. Every time you turn around it seems that there is another opportunity to dump inventory at drastically reduced rates. Recent economic pressures made it even more tempting to unload distressed inventory through channels some hoteliers may never have considered four years ago. As demand recovers though, hoteliers now have an opportunity to change their mentality and cultivate high value segments and improve revenue performance. However, in order to properly target the right guest and attract them to the hotel at the right price, it is vital that a hotel’s revenue management and marketing departments collaborate and work closely together.

The fact that hotel revenue management is becoming more sophisticated, encompassing more functions and respect, is a given. So, too, is the prevalence and importance of online competition. But the impact of online data availability and increased competition on the qualifications of the revenue manager can be overlooked. The skills, courses, training and focus of the revenue manager of tomorrow will be markedly different than those of yesterday. Understanding the kinds of analytic, leadership, communication skills that revenue managers will need in an ever-changing, increasingly web-centric world will help hoteliers find a competitive edge in today’s – and tomorrow’s – economy.

It’s an age-old story: Revenue managers are paid to improve unit-revenues and profit margins, but down the hall, the sales department is paid to hit sales targets. Question: What’s wrong with this picture? Answer: Nothing. The yin and yang of RM departments disagreeing with Sales organizations, if managed properly, is healthy and moves a business closer to great results. However, if not managed carefully, it can deteriorate into power struggles and politics that will doom an organization to fail. The keys are communication, communication and communication — and an RM team that understands how to position revenue management techniques as a win-win-win for the company, the salespeople and the customers.

The global hotel market is at a tipping point. Booking windows have shrunk from weeks to days, and the increase in mobile bookings is leaving hotels behind who are trying to stick with the old ways of managing distribution channels. If hoteliers are not using the right tools and techniques to maximize bookings across all available platforms, they are risking a fate of continually playing catch-up to those hoteliers who have embraced channel management technology and the advantages that these systems bring. To help hoteliers on the road to a successful channel management program, here are the top five mistakes that are commonly made in this field, and how to avoid them.

At its core, revenue management in the lodging industry is simple – in theory. In practice, it is an art and science, executed in a strategic manner. Evolving relatively quickly from simple inventory control, revenue management has transitioned from a tactical nuts-and-bolts operation to a profession requiring strategic thinking, analysis and execution. Understanding the strategic implications of revenue management decisions, and how they affect every part of the organization – large or small – is critical to understanding guest behavior. Managers at every level who understand the strategic role of revenue management will be able to make a bigger impact on the bottom line.

Many companies have tactical social media programs managed by the marketing department, but the industry as a whole has yet to fully exploit the potential of this emerging data and communication resource. The revenue management department, as it takes a more strategic role within the organization, is poised to be an early adopter of the opportunities provide by social media. In this article, I will discuss a framework for evaluating social media-related, revenue management opportunities which can be used in revenue management and across the organization understand the role of social media in supporting better business decisions.

Many revenue management professionals struggle when it comes to measuring and articulating the impact of their initiatives to senior management. Industry professionals should spend time considering the methods they use to measure the impact revenue management is having on their hotel so that steps can be undertaken to provide a compelling value proposition. In order to be truly effective in the job, revenue managers need to understand that devising, implementing and agreeing on “what success looks like”, in many cases, is as important as the activities themselves, and will ultimately go a long way towards supporting their success story.

In the old days yield management systems worked best when paired with complex and arcane pricing structures such as the ones that were used at airlines and hotels. For other industries, though, the complex techniques and price structures from airlines and hotels weren't really applicable. Fast forward to 2011. The emergence of state of the art pricing and revenue management systems has introduced a shift from a "yield" approach to "pricing" approach. Whereas "inventory classes" and "yield management" was something that a few industries like airlines and hotels cared about, "pricing" is something that impacts every industry.

In today's highly competitive hospitality market, a heightened understanding of a guest's preferences and total worth will enhance a guest's experience, maximize revenue and ensure loyalty, while establishing market share for your hotel. While there have been many advances in revenue management throughout the years and market segmentation and channel management strategies have become more targeted in identifying and reaching guests who could add revenue to a hotel, some hoteliers do still not understand the full value of their guests.

The formal practice and profession of revenue management continues to be one of change and evolution. Keeping up with advances in technology, changes in marketing and increasing numbers and types of distribution channels requires more flexibility than ever before. Amid these developments, the online travel agency (OTA) has forever changed the rules of revenue management, affecting areas ranging from communications to rate parity. Here, Christian Koestler of Lixto, Inc., outlines some of the significant ways OTAs are impacting revenue management today, and what managers can look forward to in the future.

In pricing and revenue management, hedging your bets with a tried-and-true process may actually be riskier than taking a chance on something different. It sounds counterintuitive, but the fact is that the conservative route to pricing practices is costing big hospitality firms millions in revenue, risking their future viability. Over the past few decades most hotel chains have adopted some form of automated revenue management (RM) system. But there are still some medium and large chains that have not. Worse yet, as some of these chains churned through acquisitions and ownership changes, their RM systems were abandoned or shut down. During the last decade’s brand consolidations, industry realignment and ownership changes, business intelligence (BI) tools were growing in maturity and sophistication.

Hotel Revenue Management (RM) is maturing, and more and more hotels have implemented RM programs along with advanced RM software to automate pricing. As the discipline matures, the law of diminishing returns begins to apply. More and more effort is required to squeeze our fewer and fewer dollars from hotel rooms. Smart revenue managers are turning to revenue generating assets outside of the hotel room, like function space , restaurants , golf courses and spa, as the next potential for revenue gains. In a world where most hoteliers are already doing more with less, how do you even get started?