The end of every year brings a time for everyone to look back on the year prior and make resolutions for how we will live and what we will accomplish in the coming year. As we near the beginning of 2014, many hoteliers will be doing the same. Before deciding on their action plan for 2014, they will need to first examine the successes and failures of the year prior, in order to improve future performance.
One of the first priorities of a hotel business should be to examine your revenue and distribution strategy from the previous year. Did you earn as much profit as possible from each room, every single day of the year? Or were you leaving money on the table? Did you reach close to 100% occupancy on a regular basis or were you averaging closer to 50% (or even lower)?
Chances are, most hoteliers will find that they performed fairly well, but that there was definitely room for improvement. Of course, an important part of earning the most revenue from each room – while increasing occupancy is your revenue management system. In order to help you determine whether your system is up to par, we are happy to provide you with a checklist that breaks down the key features that all revenue management systems should have in today¹s technologically advanced world. (And if you don¹t yet have an RMS at your property, this checklist will help you to figure out which one will provide the most benefits for your property without breaking the bank.)
1 – Does your property analyze and provide rates based on historical data, AS WELL AS real-time market data?
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Market data includes star rating, guest reviews, rate averages, trends, region and sub-region, sold-out hotels, page positioning, overall demand, etc. All of these factors can have a big impact on the success or failure of your revenue management strategy.
If your RMS doesn¹t take into consideration market data, you are missing out on a HUGE piece of the pricing puzzle. Historical data is important but on its own, it cannot predict the best possible rate for your property because it only looks backwards (at what happened last year), instead of looking at what is happening today or what will happen tomorrow. With the growth of mobile bookings (and the shrinking booking window), only looking at historical data completely misses last-minute bookings and any cancellations. Make sure you have the full picture so you can make educated decisions when it comes to managing your revenues.
Strangely enough, the majority of revenue management systems don¹t factor market data into the rates that they provide. Of course, that means that a revenue manager is required to make the calculations (to factor in the market data) manually, entirely defeating the purpose of having an automated system! Be selective and only choose an RMS that gives you this feature.
2 Does your RMS use pricing parameters to ensure that your rates help you achieve your strategic pricing goals?
Many revenue managers and hoteliers shy away from revenue management systems because they are afraid that they will not be able to maintain control over the rates for their property. As such, they are only looking for a system that allows them to approve (or deny) every single suggested rate change no matter whether the suggested rate is an increase or decrease (of rate).
While this makes sense in theory, having to approve/deny every change doesn¹t factor in the globalization of the hotel industry as people are now booking travel 24/7 and most revenue managers only work from Monday to Friday, 9am-5pm. So what happens if your RMS suggested an increased rate at 4am on Saturday? Because no one is there to approve the change, you will lose money on every booking until you come into the office on Monday at 9am and approve the increase. Over time, that could yield a large loss in profits.
That being said, I do agree that it is important for a revenue manager to have control over a RMS¹ rate suggestions – as computers can only analyze data, not factor in a property¹s revenue management strategy (as humans can). So instead of looking for a system with an accept/decline feature, look for an RMS with the ability to incorporate minimum and maximum rate parameters (which specifies the boundaries of flexibility that your pricing strategy can have). In practice, that means that suggested rates that are above your minimum threshold will automatically be updated across all online distribution channels (by your RMS), but if it¹s below, no change will happen. By setting a minimum threshold, you ensure that your rate increases when the market can bear it (according to the RMS¹ analysis) and that you won¹t be selling your rooms for an unacceptable price if demand slows.
3 The cloud is everywhere and so is your data.
In recent years, cloud technology has exploded into our day-to-day technology, allowing us to store everything from documents, to music, to entire hard drives in the cloud, providing access to our files/info from any computer, smartphone or tablet. While most revenue management systems are still desktop-based, which means that you can only make changes to your RMS/pricing when you are sitting in front of your computer at the office, there are a few solutions that are cloud-based. These cloud-based RMS allow you to make changes to your rate from your iPad or iPhone (or any other tablet or smartphone), so that your property¹s revenues won¹t take a hit when you can¹t be physically present in the office.
Last week, I wrote Part One of this article series, which provides a checklist for hoteliers to determine whether your revenue management system is up to par for 2014. As I’m sure you know, the online and mobile channels are growing rapidly so if your RMS is not optimized for both of these channels, you will be leaving money on the table.
4 – Are you thinking about the future?
Many RMS only consider historical booking pace when providing pricing suggestions, which is only half (or maybe even less!) of the revenue management puzzle. As well as historical data, RMS must also take into consideration future booking pace to ensure that your system is providing the most accurate pricing information as the market and a property’s occupancy and booking pace changes.
In general, I recommend that you increase your rates when your booking pace picks up, and decrease your rates when your pace slows but as you know, occupancy is always changing. So if your RMS isn’t taking how your property is filling up into consideration, how can you consistently adjust your rate to take advantage of a possible increase in booking pace, especially if it happens on Saturday afternoon or during a holiday (when your revenue manager is out of the office)? The answer is simple: you can’t.
5 – Real-time means ‘in real time’.
Most RMS providers claim that their solution updates a property’s rates in “real-time” when the reality is, most systems are not able to update in real-time because of the sheer processing power it would require. Every property relying on a system that does not update rates in real-time is leaving money on the table more often than not, because in most cases, they are only able to update rates a few times a day. While I’m sure that I don’t need to state the obvious, I’ll say it: a couple of times a day is not the same as updating rates in real-time, all day/night, everyday.
Not only will you lose out on opportunities to increase your rate as your property’s booking pace increases (or as availability in your destination shrinks) between pricing updates, you could also miss any sudden changes to crucial revenue management data that factors into rate determination because your RMS will not see the change until the next pricing update – which could be hours or even days!
Let’s look at an example. Before taking off, pilots are provided with information about their coming flight – flight plan, weather information, etc. As you can imagine though, they have systems that continue to update this information for them through the entirety of the flight so that they can provide the best and safest flight experience for passengers. Now, imagine if they didn’t continue to use up-to-date information while flying (and simply used the data that they received before takeoff). If a massive storm hit right in the airplane’s flight path, the pilot would not have had time to either avoid it or adjust his airplane’s settings accordingly, which could put the flight and all of its passengers at risk. It is the same with revenue management…
People from around the world are booking hotels 24 hours a day, seven days a week, so if your property isn’t optimizing your rates in real-time 24/7 as conditions change, then you are putting your property’s revenues at risk.
So there you have it – all five characteristics that every property’s RMS should have in order to be as successful as possible in 2014. This is the future of revenue management technology… and the future is today. After all, technology is making it affordable for hotels with any size budget to have the most sophisticated system on the market for a fraction of the price that you would have paid for a traditional system.
