A celebrated physicist once famously remarked that prediction can be very difficult, especially when it’s about the future. That certainly applies to forecasting demand for hotel guest rooms.
With the advent of next-generation revenue management capabilities, however, predicting the future has become a lot easier, more accurate and more profitable. Hospitality revenue management Ñ also commonly known as yield management, demand pricing, dynamic pricing, time-based pricing and (in the world of ridesharing services) surge pricing Ñ is nothing new.
Companies in the airline industry have been using supply and demand data for decades in their incessant quest to maximize revenues. More and more hotels are also now jumping on the bandwagon. For those that have implemented next-generation revenue management solutions, the investment has generally paid off in spades.
In fact, according to The 2017 Smart Decision Guide to Hospitality Revenue Management, published this month by Starfleet Research (and currently available for complimentary download), large and very large hotels have enjoyed a 10 per cent average increase in revenue per available room (RevPAR), potentially resulting in millions of dollars in additional profit.
Fueled by the rapid growth of big data processing, demand forecasting and pricing optimization models, these solutions generate pricing recommendations based on real-time analysis of relevant data. They automate the decision-making process, driving increased revenue from not only guest rooms but from all parts of the hotel property. This gives hoteliers unprecedented inventory management and pricing control.
By now, of course, most hoteliers have come to embrace the concept of revenue management as a strategic imperative, given the opportunity to improve the financial performance. That said, it is important to note that revenue management can take many different forms, some of which are far more sophisticated Ñ and effective Ñ than others. Different approaches, difference technology solutions and different organizational resources can yield dramatically different business outcomes.
The prospect of increasing hotel revenue and profitability is the primary impetus for investing in a next-generation hospitality revenue management solution. The business case is easy to make from an ROI perspective. But this is not the only benefit.
According to the new research, other key benefits include the ability to improve marketing and sales efficiency and effectiveness, generate competitive intelligence and market insights into occupancy trends and guest demographics, and benchmark performance against competitors in the same market to drive continuous improvement. Given all this, it is little wonder that so many hoteliers today are focused on taking their revenue management capabilities to the next level.
About the author
Jeff Zabin is Research Director at Starfleet Research, which benchmarks best practices in hospitality technology. Recent titles include The 2016 Smart Decision Guide to Hotel Property Management Systems, The 2016 Smart Decision Guide to Hospitality Revenue Management and The 2016 Smart Decision Guide to Restaurant Management and POS Systems. A globally-recognized market research executive, Mr Zabin’s bestselling business books on data-driven marketing improvement have been translated into more than a dozen languages. His has also written hundreds of popular benchmark reports and articles in leading trade publications across multiple industry sectors, including hospitality.