Features Week: The World Is Turning - Innovations in revenue management for the new year
Jan 06, 10 | 1:58 am
By Jean Francois Mourier, CEO of REVPAR GURU
If necessity is the mother of invention, then economic challenge is the mother of innovation. This is certainly true of the hotel industry as it exits a particularly challenging 2009 and enters into an uncertain 2010. The soft demand environment of the past year has forced hotel managers and owners to consider new ways to increase occupancy and RevPAR, and has fostered the growth of businesses that have created solutions to address these issues. This is the beauty of innovation; it often arises from the ashes of old ideas, and becomes the standard for future growth.
This hasn't always been the case in the hospitality industry. Though no stranger to innovation, the lodging business has also clung to certain traditional practices that seem a bit out of place in today's hyper-connected, information-on-demand world. Other industries rushed to make profitable the use of competitors' information and the sophisticated predictive abilities of the web-enabled information age, and yet many in the hotel industry continue to stick with history-based rate setting, across-the-board discounting (as a way to boost occupancy), and other time-worn tactics that have been business-as-usual for the better part of a century, but that are no longer effective in today's market. And while the boom years of the early and mid 2000s helped mask the lack of innovation on the part of industry laggards, the current economic environment isn't nearly as forgiving.
In no other area of the hotel industry has this been more apparent than the revenue management industry.
The industry's revenue management innovation was not only spurred by the slack demand environment; in fact, it has its true roots in the online booking revolution of the late 1990s. As online bookings took off and OTAs rose to prominence, hotels were faced with not just one or two sales channels, but potentially hundreds. Whereas, once hotels could rely on their own telephone-based reservations departments and a network of travel agents to generate bookings, they now saw every potential guest acting as their own travel agent, booking their own room and travel. Hoteliers also soon realized that they could not direct all online traffic to their own websites without sacrificing valuable bookings, and thus encountered multiple sales channels (the OTAs) that must be managed effectively by a hotel's revenue manager to maximize occupancy and RevPAR.
Up until now, this has largely been conducted with a series of ad-hoc strategies; few enterprises engaged in comprehensive revenue management solutions across multiple sales channels. But as the economy put a higher premium on innovation - and rewards those that embrace it - new revenue management solutions are receiving the attention they deserve.
Innovation in revenue management is an imperative for hotels entering the new decade of this millennium. Innovative revenue management can help hotels get the best possible rate for their inventory, which in turn can provide hotels with much-needed revenue in a year of uncertain demand.
Today's operating environment has rewarded those hospitality enterprises that have embraced innovation and incorporated forward-thinking practices into their operating strategy. The slim margin of error presented by the decline in business travel and the limiting of travel expense accounts has placed the leaders and followers in the hospitality industry in stark relief; for a hotel, the smallest variations in offered rates can make the difference between optimized occupancy and RevPAR, and leaving money on the table. The benefits of real-time rate adjustment and the incremental revenue enhancement it can bring are being realized by innovators in the industry already, but as the industry enters 2010 it is becoming more important than ever.
Such innovations in revenue management are relatively new developments. Only a handful of companies currently offer the sorts of revenue management solutions that can truly optimize a hotel's rates, and the large chains use often-unwieldy proprietary systems to manage the myriad of sales channels now available. And as mentioned, many independent properties continue to rely upon historical forecasts to set rates and revenue management staff to manually coordinate website, online travel agent and telephone room sales rather than equipping them to focus on the bigger revenue management picture.
The science of revenue management has evolved to include complex algorithms that leverage the incredible amount of information available on a moment-by-moment basis, including the rates set by hotels within a destination group, instantly updated demand levels, and the traditional forecasting metrics. This technological evolution is the hallmark of innovation in the revenue management field as the hotel industry enters 2010 and will continue to be, long into the future.
Innovation is inevitable; nothing stays the same. Being on the right side of it, however, is up to individual businesses, and their vision of the future. Innovative revenue management strategies are just one component of the innovation happening right now in the hotel industry. As the industry moves forward, it is these solutions that are poised to pay dividends for hotels, well into the future.
So is your hotel ready to compete in 2010's innovative new world?
About the Author
Jean Francois Mourier is CEO and founder of REVPAR GURU, creators of a revolutionary revenue and inventory management solution that increases hotels' RevPAR, occupancy and online bookings. The company's Yield Dynamic Price Engine, an integrated revenue management and pricing solution, adds unprecedented power and real-time adaptability to the pricing process, leaving managers more time to run their hotels. REVPAR GURU has grown rapidly, now working in 40 cities and 15 countries, and offers full XML integration through its partnerships with leading travel booking sites. Reach him at jfmourier@revparguru.com or visit www.revparguru.com for more information about the company's services.
About REVPAR GURU
REVPAR GURU provides hotels around the world with an alternative revenue management software solution, to manage revPAR intelligently and effectively, and deliver maximum profits. REVPAR GURU's custom-designed Yield Dynamic Price Engine meets the rapidly changing needs hotels in a demanding business environment - dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management, and GDS sales distribution, to increase a hotel's revPAR while maintaining rate integrity and automated rate parity. It is the only revenue management solution that automatically optimizes and updates hotel rates across all major consumer travel websites, based on all market variables and in real time, and provides a strategic room inventory control. Once deployed, hotels can boost their occupancy rates and cut their distribution costs dramatically. Headquartered in Miami, Florida, additional information can be found at www.revparguru.com or by calling +1.786.478.3500.
