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Hotel Revenue Management Systems: How to Choose the Right One

Feb 7, 2013  By 

During our series on Yield Management Strategies, we covered the basics using simple, easy-to-understand examples. As we emphasized, though, if you’ve been running your small or independent hotel for any length of time, you know how often reality manages to throw a monkey wrench into the best-laid strategies.

Control Issues

A good, automated hotel revenue management system is designed to take almost every variable into account and show you the best course of action. Depending on how hands-on you like to be, you can choose from a couple different types of systems:

 “Decision” Systems
A decision system takes your input based on the four-step revenue management cycle, and automatically takes the reins to deploy the best course of action in your central reservation system (CRS, also known as a global distribution system, or GDS). Once you hit “go,” you don’t have to lift a finger.

 “Recommendation” Systems
A recommendation system stops short of choosing and deploying the best course of action. It will show you a list of possible choices, leaving the final decision and input into the CRS up to you.

In general, the recommendation system requires more time, training, and monitoring than the decision system.

Ch-ch-ch-changes!

Another consideration is that there is no one yield or hotel revenue management system that will exactly fit how you do things at your small or independent hotel. Whichever one you choose may require you to move some of your engrained business practices out of a rut, but don’t worry; it’s good to shake things up once in a while. The effort it takes to adjust and streamline your business practices to ensure the system works for you is well worth it.

Cha-ching?

A revenue or yield management system is designed to, of course, increase revenue. Increasing revenue involves more than manipulating room prices, though. Adjusting your hotel operations to maximize the effectiveness of the automated system has its own set of positive impacts on your bottom line, just as measurably as the numbers on the computer screen. Make sure you take these collateral effects into account.

Culture clash?

Once the culture within a business is engrained, it can be a challenge to change, even if you’re lucky enough to have a staff sent from business heaven. When choosing a yield management system, look at your existing culture and envision how your staff will handle the training, installation and support processes required to make the system run smoothly and consistently.

The best yield management system in the world won’t work if your employees don’t feel like they’re part of the integration process. When you take an honest look at your staff, you probably already know who’s going to jump in with both feet and who might dig their heels in. Keeping this in mind will help you figure out the best way to approach the training process.

Chain Reaction

An added benefit of implementing a good, automated revenue or yield management system is the ability to more easily coordinate and access data from more than one property. If you’re the owner of a small, independent hotel chain, this is a priceless plus!

Caution Signs

There are a couple of common mistakes to avoid when transitioning to an automated revenue or yield management system.

1- There is such a thing as too much upselling. As discussed in our Yield Management Strategies series, one way to optimize demand is to discount only a limited number of rooms, and when they’re reserved, the rest of your rooms are regular price. Be careful with this practice, though; if it’s overused, you could get a reputation for using “bait and switch” tactics.

2- Relying on an automated system can lead to complacency. The temptation is to let the system make all your room pricing decisions, but the system isn’t keeping an eye on your competition for you. The system may be telling you not to sell rooms below a certain rate, but what is your competition doing? If they are selling rooms in that rate class, they’re going to cut into your market share.

Properly used, an automated revenue management system will provide the feedback you need to improve your pricing strategy. It will show you how to raise potential revenues in ways you may not have discerned before—but it’s not a substitute for your business experience and gut instinct.

Are you ready to get started with hotel revenue management strategies custom-designed for your small or independent hotel? Call us today!

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About Smart e Hotels

Smart e Hotels

Smart E Hotels help independently owned hotels and small hotel chains maximize their GDS and booking engine sales.

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