How to ensure a successful revenue-management upgrade

The goal of any revenue-management system is to ensure meaningful revenue lift and to maximize total profit throughout the organization. Photo credit: Rainmaker (How to ensure success when upgrading revenue management capabilities)

Undertaking a successful revenue-management system upgrade is all about organizational alignment around a hotel’s technology investment. Doing a little homework and finding the right balance of people, processes and technology within an organization will help hotels achieve overall revenue success.

How well hoteliers execute revenue-management capabilities depends on how effectively they bring people on board and processes up to par, in addition to choosing the right technology and aligning a business strategy, said Klaus Kohlmayr, chief evangelist for IDeaS Revenue Solutions.

“People often tend to be averse to change, so think about your organization’s change-management culture,” Kohlmayr said. “When you have an RMS, your hotel will run differently than before. But how ready are your colleagues to accept that? Some will likely be eager, others not so much. Consider which people at your hotel will be for or against RMS implementation and what approach you will take to effectively manage these different personas.”

A hotel’s revenue management capabilities and how well they are executed depends a lot on how effectively a hotel brings its people on board and processes up to par. Photo credit: IDeaS Revenue Solutions

The ability to forecast supply and demand, and more importantly the ability to learn from situations that present themselves throughout the year, is key, said Matt Curry, Rainmaker’s SVP and head of sales. “RMS shouldn’t be a static system; there should be science behind it that allows the forecast to improve from customer data collected to continually provide the most accurate forecast,” he said. 

Processes for forecasting, pricing, distribution, data collection and analysis already exist at hotels, but how well they are documented and consistently followed across the organization is key, said Kohlmayr. “Are you following best practices in all your standard operating procedures or are there areas in need of refinement? Ironing out and improving your processes up front will help avoid some major pain points farther down the road of RMS implementation.”

Another key to success is being able to leverage real-time intelligence and technology to create dynamic and intelligent offers for potentially every hotel guest, regardless of booking channel or the availability of contact data, said Nor1 CEO Jason Bryant. “Insights also serve as the backbone of decision-making. Machine learning is streamlining creation, fine-tuning and creating revenue contributions of upsell and cross-sell strategies by automating the entire process,” he continued. 

The goal of any revenue-management system is to ensure meaningful revenue lift and to maximize total profit throughout the organization. “This means that your system must make your business smarter and more efficient to bring in your most profitable mix of customers,” Curry said. “Your platform should provide clear, actionable intelligence.”

Ultimately, it’s all about the guest, Bryant said. “For every minute your team is doing data entry, managing a system or manually operating a merchandising initiative, that’s a minute they aren’t focusing on serving your guests,” he said. “Technology should enable operational efficiencies and automation that allow hotel staff to focus their time on providing every guest with a unique and unforgettable experience.”

Success Factors for 2019

This year is the right year to prepare for the coming tidal wave of machine-learning-based products to revenue management. Bryant said hoteliers will need to identify tools and approaches that feature a machine-learning approach. They also will need to understand that the quality and timing of data is as important as the quantity of data when it comes to machine learning. 

“Hoteliers need to recognize and reinforce the new skills that revenue managers will need to optimize a machine-learning approach,” Bryant continued.  Automation in revenue management is quickly becoming standardized, which in turn frees up more time for the people in these roles to use their brain capacity to think more strategically and creatively about the future, said Kohlmayr.

Hoteliers need to harness available data to be as dynamic as possible with their revenue-management practices. Photo credit: Rainmaker

“We’d all prefer to avoid a robo-pocalypse, but there’s a safe middle ground that exists in data-analytics processing,” he said. “The fact of the matter is, human brains just can’t possibly analyze and interpret the vast amount of data to arrive at the most profitable outcomes in complex decision-making.”

There are many factors that can influence a hotel purchase decision: online ratings and reviews, competitive pricing, strong loyalty programs, location and more. Hoteliers need to leverage and analyze every one of those factors—and the data sources that drive them—to build guest loyalty, provide a personalized guest experience, boost marketing return on investment, attract an optimal business mix and improve market performance.

For a successful data-driven approach to holistic revenue management, it is critical to employ analytical tools and technology that incorporate market intelligence, ancillary revenue data, online reputation sentiments, competitor pricing and historical data. 

Curry suggests that hoteliers need to optimize total profit—not simply room revenue – across all business segments and channels to be successful with revenue management. 

Attribute-based and customer-choice pricing tactics will enable your guests to pay for the elements of their experience they value most. “Delivering the right product to the right person at the right time for the right price—it’s what revenue management is all about,” Kohlmayr said.

How to Acquire Untapped Revenue Potential

The prevailing trend total hotel revenue management, a concept that looks beyond rooms to include revenue and profit from other sources. That’s why ancillary revenue generation needs to be a key strategic objective and not just as an afterthought, according to Bryant. “It goes beyond maximizing profits to also increase guest satisfaction and enhance guest engagement,” he said. “However, setting the right prices for the most relevant and timely recommendations is critical to the success of any upsell campaign.”

Hoteliers need to realize is that revenue management practices and the automated solutions available are not just for standard hotel operations anymore. Photo credit: IDeaS Revenue Solutions

Total guest value is contingent upon whether the hotel can capture the data or not, Curry said. Generally, any information captured by the property-management system or stored in a customer database is accessible by the hotel. “Hoteliers with a clear understanding of their guests and competitive differentiators can enhance their guests’ experience while simultaneously increasing ancillary revenue,” he said. “By mining various data sets at a granular level, including both guest stay and guest spending history anywhere on property, your hotel can offer the best rates and ancillary products to your most valuable guests.”

Steven Rubin, EVP of operations and partnerships at LodgeIQ, said revenue-potential planning for the future needs to include three things: rate parity, alternative accommodation partnerships and expanding the revenue channels. Agreements need to be renegotiated to add in more flexibility for room type, seasons and more. Hotels should not contractually guarantee 100 percent rate parity to anyone, he said. 

Hotels need to find their individual comfort level, whether it is adopting new policies at reduced costs, advertising to a new audience, expanding distribution channels or renovating the physical room. Travelers like alternative accommodations for a reason, meaning hotels need to evolve or risk financial implications. “Hotels are too focused on driving revenue within the four walls of their physical structure,” Rubin continued. “The industry needs to break down these walls and find new revenue generation via local partnerships, revenue sharing, really anything new and innovative. Hotels need to take more risks.”

Untapped revenue potential exists at every hotel, but to get at it, you may have to ditch some preconceived notions and start to think outside the guestroom, Kohlmayr said. “With 40 to even 60 percent of your hotel’s total revenue coming from nonroom revenue streams, it’s time to look at your meetings and events space with fresh eyes,” he said. “Progressive hoteliers and other hospitality leaders have seen the light and have explored dynamic pricing strategies and analytics technology to optimize the profitability of their function space. Revenue-management practices and software that have proven successful for hotel rooms have now been refined and tailored for meetings and events.”