Total Revenue Management - The Next Big Step In Revenue Management

By Jaavid Bharucha Corporate Director of Revenue Management, Arbor Lodging Management | October 08, 2017

Revenue management is widely defined as the application of disciplined analytics that predict consumer behavior at the micro-market level and optimize product availability and price to maximize revenue growth. The primary aim of revenue management is selling the right product to the right customer at the right time for the right price. The essence of this discipline is in understanding customers' perception of product value and accurately aligning product prices, placement and availability with each customer segment.

The Evolution of Dynamic Pricing

While the term certainly continues to be a buzz word within the hospitality industry, revenue management has existed in different variations for several decades; in its first iteration, revenue management first gained traction in the airline industry, with airlines matching supply and demand and cross referencing market conditions to anticipate consumer travel patterns. At this time, the discipline was referred to as “dynamic pricing, ” which took it to the next level in terms of frequency. It became increasingly common for price changes to occur on a daily - or even hourly – basis, depending on the market. This was an enormous shift from the longer form fluctuations that would be seen across the board. In high volume markets, dynamic pricing allowed hoteliers to flex the rates as needed, which was a significant departure from any system they had previously employed.

This practice enabled hotels to create a nimble pricing and performance strategy, one which would go on to dictate the future of the industry. Even beyond this, on demand rate shop reporting was an added bonus, making it easier for the revenue managers to review competitor rates and make adjustments at a fast clip. In contrast to the previous practice of having to call competitor hotels periodically or manually visit their websites, the ability to access “dynamic pricing” would forever change the name of the game in the hotel world.

Growing the Business of Revenue Management

Beyond dynamic pricing, the business of revenue management was only just beginning to grow. Over the past five to seven years, revenue management has evolved to incorporate ecommerce and distribution as key components of the function of revenue management. Several hotel management companies continue to hire revenue management positions separate from the ecommerce and distribution. In fact, revenue managers tend to have an ongoing relationship with ecommerce partners to their benefit, selling rooms on various distribution platforms, featuring namely hotel websites ( branded or independent ), GDS ( Global Distribution System ) such as Sabre and Worldspan, and OTA’s ( Online Travel Agencies ) including Expedia and Booking.com.

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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.