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: