Today's Revenue Management Systems Just Aren't Working Anymore; So What Needs to be Done?

By Kelly McGuire Vice President, Advanced Analytics, Wyndham Destination Network | October 14, 2012

Everyone can agree that the job of the revenue manager has fundamentally changed over the past few years (see my article "The Revenue Manager of the Future: How to find the right talent "). As revenue management has demonstrated success and gained visibility, revenue managers are taking on a much more strategic role within the organization. Revenue managers are now expected to take a holistic and strategic view of pricing. They are responsible for managing revenue from other outlets besides hotel rooms (function space, restaurants, and spa), understanding the market forces that impact the hotel's competitive price position, and coordinating with marketing on demand generating activities. Simultaneously, there has been a move towards price optimization, with many industry leaders advocating for the benefits of this approach and some hotel companies starting to implement these technologies.

Unfortunately, the systems that support revenue management decisions have not evolved as quickly as the role. Many revenue managers these days have the sneaking suspicion that their revenue management solutions are no longer providing optimal recommendations. Changes in the market are not reflected in system recommendations, so revenue managers find themselves working outside or around the revenue management system more frequently.

The following three factors are driving the problem with today's revenue management systems:

• The market has changed: price transparency, social media and mobile technologies, unstable economies, and disruptive weather events have fundamentally changed the way that consumers think about hotel purchases. Today's revenue management systems were not designed for these conditions, so pricing recommendations have become sub-optimal.

• The analytics are outdated: Advances in forecasting and optimization technology, access to more data, increases in processing power, the move towards price optimization and new research into revenue management algorithms have outpaced the analytic capabilities of today's revenue management systems.

• The user experience provided by the systems no longer matches the requirements of the revenue manager's role: The role of the revenue manager has become broader and more strategic, but the systems remain tactical in nature. Revenue managers end up spending much of their time extracting and manipulating data, rather than making strategic decisions. Further, today's market is incredibly dynamic, so revenue managers cannot afford to wait for the systems to update or react.

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