Outside-In Vs Inside-Out Hotel Demand Forecasting
A 21st Century Approach to Pricing Hotel Rooms
By Ravneet Bhandari Chief Executive Officer, LodgIQ | August 28, 2016
Rate optimization is arguably the most critical component of a successful Revenue Management strategy, but most hoteliers still tend to fall into two broad categories when it comes to this discipline: Set-it-and-forget-it, or follow-the-market. Both of these approaches are sub-optimal as they simply ignore the evolving purchasing patterns of increasingly savvy customers. We live in an era of disintermediated distribution, and the reality is that meta search and third party aggregators have made it easier than ever for customers to shop and compare options.
Luckily, computing power, advanced algorithms and more detailed information insight are working in concert in ways never seen before. And it's giving hoteliers the edge. That advantage is arriving in the form of ready access to a multitude of data sources, and advanced machine learning platforms that can quickly transform multi-dimensional data into actionable recommendations. Together they provide hoteliers a myriad of opportunity to create personalized guest pricing, while also allowing price sensitive guests to book earlier and take advantage of lower rates. Simultaneously, it empowers experience-driven guests to craft their own individualized stays.
The breadth of these new data sources and morphing booking patterns are making an already complex job, even more complicated. Add in the reality that segment-based "rate fences" are increasingly out of date as tech-savvy guests shop multiple online sources, it can all add up to an overwhelming sensation for hoteliers that feel they'll never figure out this new rate setting paradigm.
Hoteliers using traditional pricing methods are being left behind by increasingly sophisticated data science. Don't worry though, updating your pricing strategy is not as difficult as you think. Here's why you don't have to panic at the incredible pace of change.
How can revenue managers increase occupancy, ADR and RevPAR by making a single change in their revenue management strategy?
There are a multitude of external factors that can make or break a property's financial success. Revenue managers considering only their own property's internal demand history and forecast – essentially the traditional, "inside-out" view – are missing valuable external business drivers. To fully leverage marketplace potential, hoteliers must look beyond the standard data provided by their internal PMS. No matter how good that information may be, it's simply not enough in today's hyper competitive market.