Consideration for Evaluation Revenue Management System

By.  Ahmed Mahmoud 26th May 2011

As a basic of RM, we all knew that the airline was the first to realize that the principle of “supply and demand” could be used to maximize revenue.

With the time revenue management implemented to the hotel industry , the very old tactics’ was to keep all the available data as daily, monthly and yearly as reports and notes to be used in later stage for budgeting and forecasting , this was mainly the job of the front office manger, few years later part of the game was dedicated to the reservation department, finally it becomes independent department taking care of , pricing, budgeting , forecasting , overbooking, inventory control, market segmentation, GDS, third party ……etc, lot of jobs and tasks , sometimes revenue managers need more than 24 hours/days to complete what is required to maintain the hotel revenue, ADR, Occ., and Revpar among the competitors.

Was it really an easy job to track , monitor, control all of this in Excel files , taking notes , in some how at the time it was not easy but sufficient specially in analyses and comparing apple to apple , i.e. if you have a historical data about Feb. 2007 and 2008, can’t forecasted Feb. 2009 the same , because you will take into consideration the struggling economy as effected factor in your forecast, plus your pick up , low demand ……., this all comes within not only a historical data but also following up what is going on.

Remember the above case, will not be the case if you are using a revenue management system, where you load only the data, but the system will not draw your attention or notifying you of what is going on???!! .

I would say that the revenue management has become as a hotels fashion, after the prove of it’s functions, and how effective it is in generating revenues and increase the RePar, GOP, … to the hotels ,thus with the technology create easy solutions and systems for the hotels to help them to maintain the concept .

The concern here will be for the many medium-sized and smaller properties which can’t afford to hire even a revenue management specialist and haven’t yet experienced the results which managing revenue can produce. The owners of smaller independent and franchised hotels sometimes struggle just to keep the front desk staffed. Revenue management is no less important to them, but they have to make do with what they can afford and what is practical for them.

What the hotels normally do if they want to move forward and having revenue management systems, many of them will go to HITEC and look at the latest in revenue management systems, it is good to stop and pause prior to being seduced by the most sophisticated technology. It is prudent to establish exactly what the requirements of the hotel are in terms of functionality and how an RMS system can make the process more effective resulting in increased revenue. Thinking of the needs of a 100-room boutique hotel are quite different from those of a 900-room hotel with multiple revenue sources such as F&B outlets, catering revenue, spa, etc, and a large group component. A hotel company with several hotels within a geographic area has different requirements than a national company with hotels spread across the country and no two of them in a close proximity.

In anticipation of implementing a new system or upgrading an existing one, some criteria should be established in order to evaluate the potential ROI of individual Revenue Management Systems and their suitability for the objectives of one hotel.

So is it Benefits for Smaller Properties? Is the system under consideration “scalable” – can some parts of the system be implemented without purchasing more functionality than necessary? Will the benefits deliver an appropriate ROI on the investment? Will the modules of a new system interface with those of the system already in place? The most important, can you negotiate that details with the suppler or it will be half or full package where most of the modules you will not need it.

So if you have already think to rely on a revenue management system , have you consider and experienced the below :

Business Mix Channel Management and Multiple Revenue Sources.

Although most systems do this adequately. But how sophisticated a system you have is dependent upon the complexity of your business mix. Will the system allow you to evaluate different channels revenue streams or are all of them dropped into the same basket? In the other hand how well does the system manage and evaluate revenue from unique revenue sources? For example, a property with a water park in addition to the usual hotel revenue sources needs to be able to manage the park’s revenues effectively and evaluate business that maximizes revenue to all departments. What id the same property has a popular spa needs to evaluate how the revenues of both are interrelated and manage both the inventory of rooms and spa services.

Analyzing and Predicting Customer Behavior.

How will the system incorporate customer behavior into its forecasts? Can it provide reports of customers’ decision making timelines by market segment so that Marketing can use it to target campaigns? Will the data enable Customer Relationship Management to catch the repeat guest at the right time with the right offer at the right price?

Evaluate Group Business.

Many sales people complain that they have been relegated to booking groups only on the weekends because you have a low demand or high demand during the period and the revenue managers conversely complain that sales only wants to sell “cheap” rooms although this might be the case because there will be other benefits coming behind, can be public relation, free more awareness about the hotel . How will the system enable the sales department to make good group bookings that satisfy the requirements of the hotel’s revenue management strategy and the sales persons’ desires to meet their goals? How finely can the system “drill down” the data to enable the decision making process in RFPs and contracts?

Manage Demand within a Geographic

 “Cluster?” Some hotel companies have multiple properties within close geographic proximity to each other. Can a revenue management system assist in the redistribution of demand so that all of them can maximize their revenue based on geographic demand?

Back to point Zero, how much really you can rely on revenue management systems, if it is only optimization solutions, insightful business intelligence in some types of modular functionality. designed to provide hoteliers with a vision to their data, it is all about data entry , formulas, results, but still your input as human needed for final decisions. The system will not inform you about the other factors effecting your supply and demand, weather forecast, fuel prices, ………………… without you as a humane factor where you represent almost 90 % of the formula and the system can represent a 10 % , the Revenue Management pivot can’t be achieved , Selling the right product to the right customer at the right time to the right customer just think if you away from the hotel from few days, can the system manage your absence.??!!

About  Ahmed Mahmoud

Ahmed Mahmoud has more than a decade of experience in the hospitality industry and business administration, Ahmed began his career early by holding a variety of management positions with such top hotel chains as Accor Hotels, Hyatt International and Starwood hotels. With decades of revenue management experience Ahmed founded the very dedicated site for revenue management news, articles,

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