2016 RMS Guide

The 2016 Smart
Decision Guide
to Hospitality
Revenue
Management
TM
Everything you need to know about Hospitality Revenue Management

and how to select the right solution and/or services for your organization.
Underwritten by:
Independently produced
and distributed by:
Table of Contents
Introduction
pg. 3
Chapter 1: Topic Overview and Key Concepts
pg. 5
Chapter 2: Buying Considerations and Evaluation Checklist
pg. 13
Chapter 3: Must-Ask Questions
pg. 20
Chapter 4: Roadmap and Recommendations
pg. 25
Chapter 5: Inside Voices and Outside Voices
pg. 30
Appendix
pg. 33
The 2016 Smart Decision Guide to Hospitality Revenue Management
Entire content 2016 Starfleet Media, LLC. All rights reserved. Unauthorized use of reproduction is prohibited.
Introduction
Yield management is hardly a new concept. Airlines have been using supply
and demand data to maximize their revenues and profitability for decades. A
fast-growing number of hotels, resorts and other lodging properties have
followed suit with their own variation of the game. In most cases, their efforts
have been a resounding success and their technology investments in what is
commonly known as Hospitality Revenue Management have paid off in spades.
Hospitality Revenue Management is fueled by the rapid growth of big data
processing, advanced analytics, demand forecasting and pricing optimization
models and next-generation technology platforms. These combined
capabilities and technologies are helping to automate the pricing
recommendations and decision-making processes that enable not only better
inventory management and increased room occupancy, but higher revenues
and profitability across all parts of the hotel, resort or other lodging property.
In recent years, Hospitality Revenue Management has gone from being an
undertaking with uncertain financial upside potential to being a strategic
imperative with predictable revenue outcomes. Indeed, when properly
executed, the practice can be used to deliver very substantial increases in top-
Hospitality
Revenue
Management
has gone from
being an
uncertain
undertaking
with financial
upside
potential to
being a
strategic
imperative.
line revenue growth and profitability. In fact, according to research conducted

for this Smart Decision Guide, the implementation of Hospitality Revenue
Management results in a 9 percent average increase in revenue per available
room (RevPAR) for large and very large hotels. That percentage increase can
translate into millions of dollars in additional profit on an annual basis.
Introduction
This Smart Decision Guide seeks to educate hotel and resort owners,
operators, property managers and others who aim to bring the science of
next-generation Hospitality Revenue Management to their businesses. Just
to be clear, the goal is not to teach pricing strategies or forecasting
techniques. The nuts and bolts of how to apply the principles of capacity
management and duration control or use displacement analysis to calculate
group rates or develop rate fences is not the focus of this Smart Decision
Guide. There are educational programs specially designed for that purpose,
some offering a large curriculum of related coursework. There is also a
sizable body of literature on the topic authored by industry practitioners,
solution providers, consultants and academics, many of them sporting PhDs
in statistical analysis and computational and behavioral science. That said,
gaining expertise in Hospitality Revenue Management generally requires
that one not only acquire the requisite knowledge base but also actually
spend time practicing revenue management in a real-life hotel environment.
So what is the purpose of this Smart Decision Guide? As the name suggests,
it is intended to provide a roadmap for achieving increased hotel revenue
and profitability by leveraging next-generation revenue management
technologies and capabilities. The key takeaways include insights for
The nuts and

bolts of how to
apply capacity
management
and duration
control or use
displacement
analysis to
calculate
group rates or
develop rate
fences is not
the focus of
this guide.
evaluating and selecting the right solution and/or services in the context of a
hotel or resorts specific needs. It also includes practical advice for putting
the right organizational resources, business processes and performance
metrics in place to help ensure continuous performance improvement.
Chapter 1
Topic Overview
and Key Concepts
Chapter 1: Topic Overview

What is Hospitality Revenue Management? It begins with a basic concept that
nowadays we take for granted: market segmentation. The concept was
formalized in the 1950s by a little-known economist named Wendell Smith,
who viewed market segmentation as a heterogeneous market as a number of
smaller homogeneous markets in response to differing product preferences.
When it comes to hospitality, different categories of guests should be viewed
as having differing wants, needs and behaviors. Families generally have
different requirements than guests traveling alone. Business travelers behave
differently than leisure travelers. First-time guests tend to have different
expectations than repeat guests. Guests who book through a discount site,
who purchased a package deal or who took advantage of a special rate
promotion may be grouped together for price sensitivity. Length-of-stay can
be another useful segmentation criteria. So can the extent to which guests
utilize the spa, casino and other hotel facilities. Effective market segmentation
lays the foundation for revenue management. It can also benefit a range of
other departments and functions, including sales, marketing and distribution.
Effective
market
segmentation
lays the
foundation for
Hospitality
Revenue
Management
while at the
same time
benefiting
other hotel
function areas.
Another key concept is price elasticity of demand. Demand is sensitive to

changes in price and price is sensitive to changes in demand. Of course, some
products and services have more elasticity than others. Revenue management
techniques are fairly useless when consumers are willing to pay full price to
purchase, for example, the latest electronic gadget. Most lodging properties,
on the other hand, have a significant amount of elasticity, given that the
product in demand is fixed in capacity and perishable.

Managing pricing in a way that dynamically responds to changes in demand
for guest rooms and optimizes profitability based on a deep understanding of
elasticity gets to the essence of Hospitality Revenue Management. The classic
definition of revenue management is: Sell the right space at the right price at the
right time to the right customer. In this case, space generally refers to guest
rooms (large, full-service hotels may have a dozen room types). Price refers to
the room rate, which is influenced by any number of factors, including time
(e.g., how far in advance the reservation is made) and market conditions (e.g.,
how much competitors are charging). As discussed, guests (including groups)
can be segmented using multiple factors, including geo-demographic
attributes, price sensitivity, purpose of the visit and length of the stay.
Hospitality Revenue Management has evolved to the point that the goal is no
longer just about increasing guest room occupancy rates, with no
consideration for the implications of the pricing decisions. Nor, again, for that
matter, is it just about rooms. Revenue streams such as conference hosting,
recreational facilities, restaurants and spas which, taken together, typically
account for one-quarter of a full-service hotels revenues also now factor into
Hospitality
Revenue
Management
has evolved to
the point that
it is no longer
just about
increasing
guest room
occupancy
rates, with no
consideration
for the
implications.
the equation. Yet another consideration is the optimization of profitability and

not just revenue. This means analyzing ancillary revenue streams (e.g., food
and beverage as well as golf, spa, etc.) along with the related cost data to
understand profit contributions by customer segment. For hotels with casino
operations, even the theoretical loss (the amount of money a player can be
expected to lose during their stay) can be incorporated into the pricing model.

Ideally, a hotel, resort or other lodging property would be able to generate precise demand forecasts for
every night of the year across every room type, every season and day of the week and every customer
segment. For a hotel chain that numbers a few thousand rooms, that would mean generating some fifty
million new forecasts on a nightly basis. While the number crunching can be tremendous, so, too, can the
payoff. Consider: a mere $2 reduction in the average daily rate (ADR) for a 500-room hotel with a 75 percent
occupancy rate would cost a hotel more than a quarter million dollars in lost profit in a single year.
Increasing hotel revenue and profitability is obviously the primary benefit of Hospitality Revenue
Management. Its not the only one, however. Other major benefits include improving marketing and sales
efficiency and effectiveness, generating competitive intelligence and market insights into occupancy trends
and guest demographics, and benchmarking overall performance against competitors in the same market.
Gain reliable expectations
(occupancy, arrivals, etc.)
Generate accurate
reports
Identify key patterns
Improve marketing
and sales efficiency
Reduce time associated
with traditional pricing
Increase revenue
Increase profitability
Maximize occupancy
Increase ancillary revenue
Research Data Point

What are the biggest benefits one can expect to gain with Hospitality Revenue Management?
Increase hotel revenue and profits
97%
Reduce time and costs associated

with tradition pricing tactics
Improve marketing and sales
activities
Gain competitive intelligence and
market insights
88%
81%
76%
0
20
40
60
80
100
Research findings are derived from the Q4 2015 survey on Hospitality Revenue Management.
Chapter 1: Key Concepts

Hospitality Revenue Management has its own jargon. It consists of terms like
capacity management, duration control, overbooking practices and displacement
analysis. These terms describe practices and considerations related to
maximizing revenue and profitability from a perishable product in a market
where supply (i.e., guest rooms) is fixed while demand (i.e., travelers in need of
guest rooms) can greatly fluctuate. Although obviously important to the dayto-day practice of revenue management, these terms arent necessarily useful
when it comes to understanding how Hospitality Revenue Management is
evolving today or to evaluating the enabling technology solutions and services
currently available to hotel operators. Given the focus of this Smart Decision
Guide, this section on key concepts is limited to providing an overview of
pricing analytics (intelligent pricing), explaining the importance of capturing
and integrating relevant data, and taking a look at the key metrics that are
commonly used today to track and measure success with Hospitality Revenue
Management to drive performance improvement. Lets start with the latter.
Revenue management metrics. The metric most commonly used today to
assess how well a hotel , resort or other lodging property is managing its
inventory and rates to improve revenue performance is revenue per available
room (RevPAR ). RevPAR is calculated in one of two ways: by either multiplying
Hospitality
Revenue
Management
has its own
extensive
vocabulary
consisting of
terms like
capacity
management,
duration control
and
displacement
analysis.
the average daily rate(ADR) by occupancy or by dividing the total guest room
revenue by the total number of available rooms and then dividing that number
by the number of days in a given time period. Just to be clear, occupancy refers
to the percentage of guest rooms that are occupied during a given time period
while ADR refers to the average revenue per occupied room. Some hotel
operators still make the mistake of focusing their promotional efforts solely on
increasing room occupancy, no matter that higher occupancy can, in some

cases, actually lead to lower profits. Hotels that have yet to do so need to shift
their focus from occupancy to RevPAR which, again, combines occupancy
and ADR into a single metric that has become the industry standard. Yet while
RevPAR provides a far more accurate picture of a hotels overall performance,
it fails to measure actual productivity. Thats because RevPAR doesnt take into
account costs per occupied room (CPOR). Without knowing the operating
costs, its not possible to calculate the actual profit margin or, for that matter,
determine target optimal occupancy. Hence the emergence of another metric,
called gross operating profit per available room (GopPAR), which takes into
account not only the amount of revenue generated but also the actual
operational costs. Still, there remains a problem. Neither RevPAR nor GopPAR
look at non-room revenue streams such as restaurants, casinos, parking, spas,
golf courses, etc. This shortcoming is glaring. It helps explain the advent of
additional metrics as if there werent enough already designed to
measure economic performance in a more comprehensive manner. Revenue
Generating Index (RGI), also known as RevPAR Index (RPI), looks at relative hotel
Without
knowing the
operating costs,
it becomes
difficult to
calculate actual
profit margin or,
for that matter,
determine the
target optimal
occupancy.
revenue performance, by measuring the extent to which a hotel is achieving

its fair share of revenue in comparison to a defined group of hotels. RGI is
calculated by dividing the hotels RevPAR by the RevPAR of the competitive
set (the data for which can be obtained through a third-party provider).
Similarly, Average Rate Index (ARI ) measures the extent to which the hotel is
achieving its fair share of ADR. It is calculated by dividing the ADR of the
hotel by the ADR of the competitive set. RGI and RPI and, also, market
penetration index (MPI) provide a solid basis for performance comparison.
10

Revenue management data. Just as a soup is only as good as the
ingredients that go into it, a revenue forecast is only as good as the
information that goes into it. And like a soup, which may require only a few
select ingredients to achieve the desired taste, accuracy in forecasting is not
necessarily a case of the more the merrier when it comes to volume of data
or number of data sources. Revenue managers may be excited about the
ever-growing number of data sources available to them. But they should
exercise caution in incorporating every last bit of data into their models.
More data can simply mean more noise. At a certain point, there are bound
to be diminishing returns. In fact, new data that may seem highly relevant at
first glance may, in fact, create integration headaches while failing to move
the needle on forecasting accuracy. The volume and depth of clean historical
data related to occupancy, rate and revenue figures (including bookings
dates, rate codes, arrival dates, departure dates and revenue by day) provide
the strongest basis for forecasting accuracy. All this data should reside in the
Property Management System (PMS). The greater the number of years for
which a hotel has data, the more accurate the forecast is likely to be. Marketlevel data, including competitive pricing, future flight demand, weather
Like a tasty
soup, which
may require
only a few
select
ingredients,
accuracy in
forecasting is
not necessarily
a case of the
more the
merrier when it
comes to the
volume of data.
reports and geographical information (where guests are arriving from), may
also be used for forecasting purposes. Web shopping data (the number of
consumers booking rooms and at what price, as well as the percentage of
visitors abandoning the hotel website) may also provide some insights into
current and future room demand as well as price sensitivity. The number of
website visitors tends to correlate to the frequency of last-minute arrivals.
11

Intelligent pricing. With Hospitality Revenue Management, timing is
everything. Forecasting demand for available rooms and dynamically
pricing room rates based on demand and capacity as well as competitor
activity needs to happen in a near-real-time manner. Starfleet Research
defines intelligent pricing as making decisions for how to maximize room
occupancy at the best possible price while factoring in all the related revenue
questions in a real-time or near real-time manner. These questions include:
What is the optimal price to charge in order to maximize revenue, accounting
for the fact that demand will change as the price changes? What is the best
possible rate the hotel can hope to get for a guest room, taking into account
the type of room as well as the length of stay? How can a hotel ensure that
discounted price promotions wont dilute revenue and profits in the long
run? Intelligent pricing addresses these questions by analyzing demand
forecasts, competitor rates, price sensitivities and various other inputs and
factors, including demand drivers like seasonality, day-of-week differences
and market dynamics. Here its worth noting that, until recently, the standard
approach to pricing strategy has been a fixed-tier approach based on one
overall best available rate (BAR) for each room and also on the expected
supply and demand of rooms for a particular date. Ideally, when pricing
multiple products, solutions should account for different room types and also
Intelligent
pricing means
being able to
forecast
demand for
available
rooms in a
real-time
manner and
being able to
maximize
occupancy at
the best
possible price.
for the impact of multiple public products on one another e.g. advanced
purchase versus BAR. Some hotels are now adopting a pricing strategy based
on the idea is that different prospective guests should be offered different
rates depending on which guest segment they fall into as well as which
channel theyre using for booking their reservation. As technology innovation
makes it possible for hotels to price their room types, channels and dates
independently of each other, the approach would seem to hold promise.
12
Chapter 2
Buying Considerations
and Evaluation Checklist
13
Chapter22: Buying Considerations

Chapter
The tools and services that enable revenue management are evolving rapidly
in response to a number of factors. These include the proliferation of online
travel agencies (OTAs) with differing pricing and commission structures,
shrinking booking windows, the emergence of more advanced pricing
strategies, and ever-more intense hotel competition. Leading solution
providers are investing heavily in R&D and running agile software
development and release cycles to try to say ahead of the competition. The
flurry of change can make selecting the right solution a daunting task. The
buying considerations are sure to depend to a large extent on a hotels specific
needs and situation. That includes category, size and typology (including the
number and types of non-room revenue streams) as well as the teams level of
experience (including whether it has one or more dedicated revenue
managers and the right corporate culture in place). Should the hotel hire an
outside firm to conduct an assessment of current pricing practices? Should it
use a BAR approach or should each channel and segment be priced
independently? Should it price by arrival date or length of stay? For these and
countless other questions, the answer is: it depends. Still, for most buyers, there
are a number of key considerations to keep in mind, including the following.
The tools are

continuously
evolving in
response to the
growth of OTAs
with differing
pricing and
commission
structures,
shrinking
booking
windows and
refined pricing
strategies.
Technology integration capabilities. Hotels, resorts and other lodging

properties have always had extensive technology integration requirements. A
revenue management solution, especially, cant be treated as a standalone
application. Rather, it needs to integrate as seamlessly as possible with
multiple data streams, starting with the Hotel Property Management System
(PMS) to provide for unified bookings, analytics and reporting. It also needs to
14
Chapter22: Buying Considerations

Chapter
integrate with systems used for marketing, sales and distribution as well as
OTAs and any number of other third-party technologies and channels. For
integrations to work optimally, technology partners need to independently
test and certify data and functionality. They need to ensure that systems are
compatible and that all historical data has been extracted and validated.
Internally, within the organization, point of sale (POS) data needs to integrate
with PMS data to provide a holistic view of a guests overall stay, including
their ancillary spending on food and beverages, guest services, spa visits, etc.
Data processing power. Hotels are importing increasingly large volumes of
data into their pricing models. For a large property, the data set may include
dozens of customer segments, a dozen or more room types, several years of
historical booking and reservations data, and upwards of a dozen length-ofstay types. Add to the mix competitive rate data, demand data, multi-market
economic data, and even air traffic and weather predictions. Combining all
these data sets for just one hotel could easily amount to 200 million-plus
observations. Generating the pricing recommendations for that property
It quickly
becomes clear
that Hospitality
Revenue
Management is
a big data
challenge; to be
successful
means having a
solution that
can address
that challenge
head-on.
could require more than 15 gigabytes. Multiply that number for a hotel chain
with dozens of properties and it quickly becomes clear that, more than
anything, revenue management is a big data challenge. Until recently, the
technologies have underperformed by most measures, partly because they
were unable to overcome the data processing constraints and optimize the
needed calculations in highly compressed timeframes. Today, however, most
revenue management solutions are able to address that challenge head-on.
15
Chapter 2: Buying Considerations

Channel management and optimization. With pricing recommendations
in a continuous state of flux, its imperative that rates and inventory
information gets updated as quickly, and with as few errors, as possible
across all OTA and other distribution channels (including the hotels own
website). Otherwise, unfortunate situations can arise. The prices being
presented to prospective guests on some channels may be lower than
desired, for example. Or rooms presented on some channels as available
may, in reality, be overbooked. The potential fallout could be damaging,
generating a flurry of negative online reviews. Inputting room rate and
availability changes manually can, at the least, result in money being left on
the table. Channel management capabilities help ensure that a hotels
room rates as well as its inventory are up-to-date across all OTAs and other
partner- and guest-facing channels. An important buying consideration,
therefore, is the extent to which room change updates are handled
automatically rather than manually, and what the average lag time is to
implementing channel updates. Although not yet achievable in many
markets, including the United States, advanced channel optimization
capabilities should be used when possible to identify the most profitable
channels, factoring in the associated costs, including commissions,
transaction fees and search engine marketing (SEM) expenses, and
Hotels should
be able to
automatically
identify and
track their most
profitable
channels,
factoring in the
associated
costs, including
commissions,
transaction fees
and SEM
expenses.
dynamically adjust the pricing on a channel-by-channel basis.
16

Cloud versus on-premise hosting. Another important decision criteria to
consider is whether the Hospitality Revenue Management solution is an
on-premise installation or cloud-based, with a software-as-a-service (SaaS)
model that allows for continuous software updates. The main downside of
on-premise installation lies in the fact that the lodging property is
responsible for installing and maintaining the hardware and providing IT
support and data security. As with most enterprise technology solutions,
most Hospitality Revenue Management systems are moving to the cloud,
and hotels are benefiting from the global scale and distributed access to
interfaces and information. Other benefits include reduced stress on hotel
technology infrastructures, and, in some cases, more seamless integration
with other applications, including Hotel Property Management Systems. A
big advantage of true SaaS is that software updates and bug fixes can be
pushed as they become available, meaning that every user is always on the
most recent version of the software.
User experience. A good user experience begins with an interface that is
well-designed and flexible. Revenue managers and other users should be
able to define dashboards to meet their needs and suit their styles. While
notifications should drive the workflow, users should be able to look under
Hotels should
be able to
automatically
identify and
track their most
profitable
channels,
factoring in the
associated
costs, including
commissions,
transaction fees
and SEM
expenses.
the hood to, for example, dive into price sensitivity data and quickly see
what inputs are behind the pricing recommendations at a detailed level.
They should not have to wait for actual booking numbers to become
available to understand the impact of their overrides and determine
whether they made the right re-optimization decisions. Of course, users
have differing needs, depending on the characteristics of the hotel, resort
17

or other lodging property as well as their own personal preferences. Any solution, therefore, is likely to
require at least some degree of customization. Users should be able to create notifications as well as
define the data inputs and specific needs around analytics and performance reporting. Flexibility in
configuration is needed to not only mine the right data, based on selected parameters, but also generate
impact
actionable insights. Users should not be spending the bulk of their time extracting andThe
manipulating
of
cloud
data, as is often the case today. Rather, they should be making strategic decisions thatthe
can be
used tohas
been
drive revenue growth and increased profitability.
enormous,
empowering
Research Data Point
physicians,
How would you rate your companys success in terms of utilizing revenue
office managers
management to improve financial performance?
and others with
Midsize and Limited
anytime,
Successful
Somewhat successful
Very successful
Service Hotels
anywhere
Have
utilized revenue
management
access for
to8.5
all
years, on average
Have
increasedand
RevPAR
patient
21%
24%
17%
by 7% on average
operational
25%
have one or more
revenue
managers
activities.
27%
32%
26%
Research findings are derived from the Q4 2015 survey on Hospitality Revenue Management.
Large and FullService Hotels

Have utilized revenue
management for 10-plus
years, on average
Have increased RevPAR
by 9% on average
75% have one or more
revenue managers
18
Chapter 2: Evaluation Checklist

This Evaluation Checklist offers a framework for conducting an apples-to-apples comparison of
technology solutions for Hospitality Revenue Management using the buying considerations outlined
previously. Other key considerations can be added based on individual buyer priorities. Relative
weightings can be assigned on a scale of 1 (This buying consideration has no bearing on our purchase
decision) to 10 (This buying consideration is a very important factor in our purchase decision).
Buying Consideration
Weighting
Vendor 1
Vendor 2
Vendor 3
1. Technology integration
2. Data processing and analytics
3. Pricing management
4. Channel (OTA) optimization
5. Customizability to property needs
6. Cloud (SaaS) / on-premise hosting / hybrid
7. Flexibility in data analysis and reporting
8. User experience
9. Other features and functionality
a. Demand forecasting management
b. Group pricing management
c. Multiple property management
e. Non-room (e.g. function space) rev. mgmt
f. Competitive rate shopping management
e. Other _____________________________
10. Support, training and consulting services
11. Reputation / install client base
12. Cost (TCO)
Overall Rankings
N/A
19
Chapter 3
Must-Ask Questions
20

Every hotel, resort and other lodging property naturally
wants to ensure that any technology investment that it
makes will ultimately drive increased financial success.
Research Data Point

Percentages of lodging properties that
view each of the following success factors
as important or very important.
On that basis, the business case for upgrading to nextgeneration revenue management capabilities tends to
be one that is easy to make. But which solution is the
right one for the organization? By asking the right
97%
Importing all historic

booking, reservation,
competitive and other
relevant data into the
solution
91%
Creating the right

revenue management
culture within the
organization
87%
Integrating revenue
management activities
with sales and
marketing activities
82%
Performing an audit
or assessment of
existing pricing
activities and practices
questions, prospective buyers can quickly rule out

some options while narrowing down others. Just as the
buying considerations are bound to vary depending on
property size, category and other factors, so, too, are
the must-ask questions. In fact, even hotels within the
same category or typology (e.g., single-property luxury
beach resorts) often have different customer demand
patterns, different profile mixes, different room
inventory and different ancillary revenue streams. The
information they will want to ascertain from solution
providers is therefore also likely to vary amongst them.
That said, they are also likely to have many questions in
common. Following are just a few of the questions they
may wish to explore with solution providers to help
ensure that, once implemented, they will be better
able to identify patterns, forecast demand changes,
make rapid and accurate pricing decisions, and so on,
resulting in positive revenue outcomes and leaving
no doubt that the technology investment was money
well spent.
Research findings are derived from the Q4 2015 survey on

Hospitality Revenue Management.
21

Will the solution provide the answers we need to our pricing questions?
Ideally, given access to the requisite data, a revenue manager or other
qualified user of a next-generation solution should be able to answer all of the
day-to-day questions that are needed to maximize the companys financial
performance. Such questions might include: By how much should we increase
or decrease our rates for a given type of room? How many customer groups,
and what size groups, should we accept on a given day? How much should we
charge walk-in customers? What should be the floor and ceiling for our rate
range? Are the changes in demand and bookings likely to represent a shortterm or long-term pattern and, if the latter, what actions should we take in
response? To what extent should we discount negotiated rates? What should
be our rack rates for the coming year? What discounts and promotions, and to
what target customer segments, are likely to perform well right now and in the
near-future? What discounts would likely dilute profits and should we
therefore avoid? To what extent should we mark up our premium rooms,
based on the current and near-term demand patterns? What, if any,
competitors price moves would likely affect these demand patterns and how
should we respond should those possible moves become reality? How can we
counteract cancellations and no-shows, group wash, extensions and early
departures to capture optimal profitability? Tip: Compile a comprehensive list of
Compile a
comprehensive
list of
anticipated
pricing
questions and
verify that the
solution will be
able to address
the questions in
a relatively
rapid and
automated
manner.
pricing questions and verify that the solution will be able to address these
questions in a straight-forward manner. Make sure the solution provides for
flexibility, which is important when it comes to setting pricing rules, flagging
special events, adjusting segmentation schemes, etc.. Also, make sure its able to
apply the most optimal techniques to not only price but also manage the business
and that it understands contract elements such as Last Room Availability (LRA).
22

To what extent does the revenue management solution offer depth and
flexibility in data analysis and reporting? Revenue management is not like
assembly line work. Rather, it is a quantitative puzzle with ever-changing
numbers, patterns and results and a need for continuous refinement. Delving
into the data, testing different if/then scenarios, and collating actual results
requires a high degree of flexibility. Not all data queries can be anticipated. A
significant percentage of pricing questions may, in fact, need to be investigated
on an ad hoc basis. Out-of-the-box functionality may satisfy the needs of
beginners or small properties with relatively simple needs. But it is likely to be
insufficient for more sophisticated revenue managers and larger properties
with multiple room types, customer segments and ancillary revenue streams. A
solution should make it easy to accommodate virtually any need, including the
need to monitor and measure individual property, portfolio, and departmental
performance, the need to create customizable hierarchies for different geomarkets, channels, room types, time periods, loyalty programs, and the need to
do manual overrides of the automated rates suggestions for OTA channels.
Important questions might include: Once problem areas are identified, can the
solution guide users on how to take appropriate action? Can tactical decisions,
Revenue
management is
a quantitative
puzzle with an
ever-changing
palate of
numbers,
patterns and
results and a
need for
continuous
adjustment and
refinement.
including the overall impact, be tested live? Can the dashboards provide
exception reporting, identifying areas needing the most attention, and be led
to taking the most appropriate action. Tip: Verify that the solution is flexible in
terms of keys areas of functionality, including custom reporting, and validate all of
the vendors claims. If customized reporting is possible, find out what is involved in
the process of filtering and sorting data according to a specified set of parameters.
Make sure reports can be exported to Excel and other formats that may be needed.
23

What is the solution providers track record for stability, reliability and
continuous innovation? As with any technology solution purchase,
reputation and customer satisfaction are important factors in the decisionmaking process. Nobody wants to purchase and implement a revenue
management solution that falls short of expectations due to known
shortcomings in stability, reliability or promised benefits. No input may be
more important to the buying decision than that which can be gleaned from
existing clients, preferably lodging properties that share some commonalities
in terms of size, typography and existing technology infrastructure. A solution
provider or consultant may be willing to provide one or more client
references. And some clients, particularly those operating in noncompetitive
markets, may be willing to share their experiences and perhaps even disclose
results in terms of percentage increases in RevPAR, for example. Client
testimonials and success stories can also be valuable sources of information.
Tip: Seek information about what performance issues may arise though
conversations with existing clients, preferable ones that are similar in size and
existing technology infrastructure. Ask about the product roadmap for the future.
What type of customer support is included? Its important to have a clear
set of expectations around customer support and problem resolution as well
as the training that may be needed to get up to speed. More than three-
No input may
be more
important to
the buying
decision than
that which can
be gleaned
from existing
clients,
preferably
lodging
properties that
share some
commonalities.
quarters (78%) of survey respondents agree that user training ranks as a key
success factor in ensuring that a solution is utilized as effectively as possible.
Does the solution provider or a certified subcontractor offer online or inperson training programs? Does it offer an assigned point of contact? How
quickly will questions be answered and problems get resolved? Unexpected
interruptions in revenue management activities can be costly. Tip: Make sure
that resources will be available to resolve issues in a timely manner.
24
Chapter 4
Roadmap and
Recommendations
25
Chapter 4: Roadmap
According to estimates, less than 15% of the approximately 175,000 hotels worldwide have
implemented revenue management solutions to date. That percentage is increasing rapidly, however.
Hotel operators that rely on Excel spreadsheets or even basic software solutions for their revenue
calculations will be hard pressed to compete against those with pricing optimization capabilities. The
diagram below illustrates the migration path that revenue management solutions are taking as they
evolve in sophistication and accuracy and as the scope of applicability continues to broaden.
Legacy Systems
Next-generation Systems
Uncertain ROI and financial upside

potential
Proven ROI and predictable (and

substantial) revenue outcomes
Best-available-rate pricing only
Dynamic and flexible approaches

to pricing to optimize profits
Increased room occupancy as the

primary goal
Increased net revenue as the

primary goal
Manual calculation, or only partial

automation, of pricing and
inventory recommendations
Complete automation of pricing,

inventory and all other
recommendations
Revenue management separate

from marketing & sales activities
Revenue management integrated

with marketing and sales activities
Manual distribution of rates to

OTAs and other online channels
Automated channel management

and channel optimization
Revenue management applied to

guest rooms only
Revenue management applied to

all property revenue streams
26
Chapter 4: Recommendations
Next-generation revenue management solutions harness the power of big
data. They calculate price sensitivity of customer demand, taking into
consideration such factors as season, lead time and room type, and derive an
analytical solution to competitive price effects. Thats no small feat, and not
something that can be easily done in Excel. Given the ability to improve
financial performance by upwards of 10%, its no wonder that properties are
looking to take their existing capabilities to the next level. That means not
only implementing the right technology solution and using the right data set
(again, its important to be able to demonstrate the value of a data source in
improving forecast accuracy or pricing decisions), but also creating a revenuemaximizing culture. Following are a few recommendations for buyers to keep
in mind as they look to upgrade their revenue management capabilities.
Hire a revenue manager. The hotel booking ecosystem is complex and
optimizing financial results across channels requires specialized skills, no
matter that pricing recommendations are becoming increasingly automated.
The role of the revenue manager has never been more important. According
to estimates, there are currently only about 10,000 hotel revenue managers
worldwide. Some industry observers contend that revenue managers should
Calculating
price sensitivity
of customer
demand and
deriving an
analytical
solution to
competitive
price effects is
no small feat,
and not
something that
can be easily
done in Excel.
be highest paid employees, given their potential contribution level. Of course,

the revenue manager and general manager are oftentimes one and the same,
particularly in smaller hotels with limited budgets. Indeed, many revenue
decisions today are being made by general managers who may have little or
no formal training in the science of demand forecasting and price
optimization. Needless to say, the results are bound to be suboptimal.
27
Build a revenue management strategy and culture. What is a revenue
management strategy? Simply put, its a blueprint for improving financial
performance over a specific period of time. The strategy should incorporate all
of the revenue streams from across all parts of the hotel as well as all of the
revenue drivers, from the sales department to the online distribution channels.
The strategy should be built upon a solid foundation of revenue goals using
targeted RevPAR, ARI and other relevant metrics for tracking progress. It should
include a timeline with key milestones and spell out the tactics for achieving
success. The strategy should be as specific as possible, detailing, for example,
how the property approaches pricing e.g., whether it is dynamically pricing
the best available rate based on forecasted demand (BAR) or on actual
demand. Ideally, the strategy will instill a revenue strategy culture, creating
cognitive alignment amongst all employees regarding the value of Hospitality
Revenue Management and communicating and celebrating the results.
Think in terms of Total Revenue Management. Until recently, most revenue
optimization algorithms managed room price and nothing else. But nextgeneration Hospitality Revenue Management means also taking into account
Thinking in
terms of Total
Revenue
Management
and not just
revenue
management as
it pertains to
guest rooms
can mean
leaving a lot
less money on
the table.
the ancillary spending that takes place in hotel restaurants, bars, conference
centers, banquet rooms, golf courses, etc. For larger, upscale hotels and
resorts, these revenue sources typically account for one-quarter of total
company revenue. Thinking in terms of Total Revenue Management and not just
revenue management as it pertains to guest rooms can mean leaving a lot less
money on the table and significantly boosting revenue and profitability.
28
Partner with the sales and marketing departments. The pricing
recommendations and market insights generated by revenue managers can
be valuable across multiple parts of the organization. Access to the tools and
dashboards should be made available to marketers, in particular, who are
charged with demand generation activities. Insights, such as those that
forecast periods of high demand versus low demand and that reveal which
customer segments are planning to book rooms for a certain period, should
inform every campaign. The insights should inform how aggressive to be with
marketing offers and promotions, toward which customer segments the offers
and promotions should be directed, and when, exactly, to present the offers
and promotions, and which marketing tactics are most likely to elicit the
desired responses. To achieve optimal results, its imperative that revenue
managers work hand-in-hand with the sales and marketing functions and
integrate all of their customer acquisition strategies.
Track and measure progress. A whole alphabet soup of metrics is now
available for tracking revenue performance. These metrics , defined in Chapter
1, should be used diligently. Many of the metrics have moved beyond RevPAR
To achieve
optimal results,
its imperative
that revenue
managers work
hand-in-hand
with the sales
and marketing
functions and
integrate all of
their customer
acquisition
strategies.
and ADR, and also beyond just guest rooms. Consider banquet room revenue
performance, which can be measured in terms of function space utilization,
profit per available space/time (ProPAST) and profit per occupied space/time
(ProPOST). As discussed, its important to benchmark performance against the
competitive market, using such metrics such as MPI, ARI and RGI, all of which
are also becoming standard revenue management measurements.
29
Chapter 5
Inside Voices and

Outside Voices
30
Chapter 5: Inside Voices

Revenue managers, hotel executives and managers with first-hand experience in the art and science of
Hospitality Revenue Management tend to have a lot to say about the topic. Following are a few
perspectives gleaned from individuals who participated in the survey that produced the research
findings included in this Smart Decision Guide.
It seems to me that the revenue

management function is combining with
the sales and marketing functions. To be
truly successful at this game, you have to
eliminate the traditional walls that stand
between these different functions.
Everyone across the organization benefits
when they work cooperatively to optimize
revenue. Using a centralized technology
that everyone can access can help a lot.
A luxury resort like ours has a lot of

different revenue levers. lts really
important that were able to look at all
of these levers in a single dashboard.
Having a holistic view of all the OTAs
and all the channels and all of the data
that feeds into the model is the only
way to optimize revenue performance.
Marketing manager, full-service hotel

Revenue manager, full-service hotel
Its hard to know when demand is going to

shift. Its just as harder to act on that
knowledge in real-time and make the
appropriate pricing adjustments. Demand is
in a constant state of flux. It can turn on a
dime. It takes an advanced revenue
management solution to detect change and
immediately implement pricing decisions.
Senior executive, mid-size hotel
Hotels need to have a standard

approach to market segmentation.
Revenue managers and employees
need to adhere to it. Everyone needs
to use the same rate and channel
codes. Everyone needs to follow the
same operational procedures.
Success requires consistency.
Senior executive, full-service hotel
31
Chapter 5: Outside Voices

Following are a few additional perspectives from industry observers, including trade magazine editors and
research analysts, with insights into next-generation Hospitality Revenue Management.
Train strategic thinkers and think total revenue

management; not just rooms revenue. Dont allow
revenue managers to rely on automated tools so
much that they forget to use their own experiences.
Adopt new dynamic pricing tactics. Also, determine
whether the collection of big data is worth the cost.
Work with the marketing team to streamline how to
test and measure the data, then evaluate whether
whats being collected is actually being used.
Bob Gilbert, President, The Hospitality Sales and

Marketing Association International
Hotels can better manage

their revenue by taking
advantage of various
technologies that make it
easy to monitor the current
state of the economy, the
hotel industry itself and the
historical performance of the
hotel.
Ahmed Mahmoud, founder,
RevenueYourHotel.com
Choosing the right people

or partners and tracking,
managing and acting on
data (while staying on top
of all aspects of traditional
revenue management such
as managing rates, yielding,
forecasting, visibility etc)
remains crucial in todays
hotel environment.
Pamela Whitby, editor, EyeforTravel.com
As the market evolves, capabilities that were once

cutting edge become default and new
functionality becomes differentiating. Customer
segmentation and rate fencing have become
Table Stakes capabilities and should no longer be
used to differentiate solutions. Instead focus on
seamless integration with other systems to build a
guest profitability view in order to get the best fit
for your requirements.
Vendor Landscape: Revenue Management Systems,
Info-Tech Research Group
32
Appendix
Research Notes and

Underwriters
33
Appendix: Research Notes

In Q4 2015, Starfleet Media conducted an online survey, consisting of both multiple choice and open text
questions, to capture the perspectives of industry practitioners with firsthand experience with Hospitality
Revenue Management. Some of the research findings are highlighted in this publication. Following is some
basic information about the 137 qualified survey respondents who participated.
Job level / role of

survey respondents
Size / category of
survey respondents
hotel (or other lodging
property) employers
47%
35%
16%
Staff
Managers
Senior executives
14%
49%
37%
Small hotels
(including motels and
bed & breakfasts)
Geographic location
of survey
respondents
66%
North America
Midsize and limited

service hotels
Large and full service

hotels and resorts
28%
6%
Europe
Other
34
Appendix: Underwriter
Duetto delivers the most powerful revenue strategy solutions to the worlds
leading hotels and casinos, allowing them to better manage pricing, revenue
and business-mix decisions with superior, actionable data.
The unique combination of hospitality experience and technology leadership
enables Duetto to provide new insights on pricing and demand as a true
cloud-based software-as-a-service. With solutions that address the challenges
of todays distribution landscape, Duettos applications are a GameChanger
optimizing profit and guest loyalty.
Nearly 1,000 hotels and casinos in more than 50 countries have partnered to
use Duettos revenue strategy solutions.
www.duettoresearch.com
Contact:
250 Sutter Street, Suite 400,
San Francisco, 94108
info@duettoresearch.com
+1-415-968-9389
35
With more than one million rooms priced daily on its advanced systems,
IDeaS Revenue Solutions leads the industry with the latest revenue
management software solutions and advisory services. Powered by SAS and
more than 25 years of experience, IDeaS proudly supports more than 7,000
clients in 94 countries and is relentless about providing hoteliers more
insightful ways to manage the data behind hotel pricing.
IDeaS empowers its clients to build and maintain revenue management
culturesfrom single entities to world-renowned estatesby focusing on a
simple promise: Driving Better Revenue.
IDeaS has the knowledge, expertise and maturity to build upon proven
revenue management principles with next-generation analytics for more
user-friendly, insightful and profitable revenue opportunitiesnot just for
rooms, but across the entire hotel enterprise.
www.ideas.com
Contact:
8500 Normandale Lake Blvd, Suite 1200
Minneapolis, MN 55437
askme@ideas.com
+1-952-698-4200
36
Infor is fundamentally changing the way information is published and

consumed in the enterprise, helping 70,000 customers in more than 200
countries and territories improve operations, drive growth, and quickly adapt
to changes in business demands.
Infor offers deep industry-specific applications and suites, engineered for
speed, and with an innovative user experience design that is simple,
transparent, and elegant. Infor provides flexible deployment options that give
customers a choice to run their businesses in the cloud, on-premises, or both.
www.infor.com
Contact:
641 Avenue of the Americas
New York, NY 10011
hospitality@infor.com
+1-866-244-5479
37
Rainmaker is the market leader in profit optimization solutions for the

hospitality, gaming, and multifamily housing industries. Its software and
consulting services help hotel, resort and casino hotel operators secure those
customers who will increase their profitability. Similarly, Rainmaker enables
multifamily housing operators to maximize revenue from apartment leases.
The first company to incorporate total guest value into its revenue
optimization model, Rainmaker leverages cutting-edge research and
innovation to offer highly sophisticated systems that guarantee the highest
possible profits.
Among Rainmakers many marquee clients are Caesars Entertainment, Wynn
Las Vegas, Omni Hotels and Resorts, and One & Only Resorts. For five years
running, Rainmaker has been ranked on the Inc. 5000 list of Americas fastestgrowing privately held companies. It is also on the Atlanta Business
Chronicles list of the 100 Fastest Growing Companies in Atlanta.
www.letitrain.com
Contact:
4550 North Point Pkwy., Suite 400
Alpharetta, GA 30022
Contact@LetItRain.com
+1-678-578-5700
38
Appendix
RateGain is a leader in hospitality and travel technology solutions for revenue

optimization, rate intelligence, electronic distribution and brand engagement
helping customers around the world to streamline their operations and sales.
The company provides Cloud based solutions to Hotels, Airlines, Online Travel
Agencies, Car Rental Companies, Cruise Liners and Tour/Wholesale Operators.
Unity by RateGain, is an revenue optimization suite that helps hotels
streamline their rate intelligence, reputation management, pricing
optimization and distribution systems into one unified box by combining all
the above in a easy to use single cloud platform.
Unity delivers optimized prices by considering multiple factors such as
competitive pricing, reviews and ratings, market compression, Occupancy
data etc and the same system helps hotels distribute those optimized prices
to over 600 channels globally. Hotels can also access various components
such as competitive pricing or reviews and ratings as a standalone module to
help them with their day to day strategy or prepare for that important
meeting! Unity helps hotels increase Revpar by up to 15%.
www.rategain.com
Contact:
Devonshire House
60 Goswell Road
London
EC1M 7AD
marketing@rategain.com
+44 2035141419
Entire content 2014 Starfleet Media, LLC. All rights reserved. Unauthorized use of reproduction is
prohibited.
39
This Smart Decision GuideTM is the result of primary and secondary research conducted by
Starfleet Research, which is the IT market research arm of Starfleet Media. It was independently
produced, without editorial involvement from the company underwriters. Our approach to
content production provides for unbiased, fact-based information. It represents the best and
most comprehensive information, analysis and recommendations available at the time of
publication. Starfleet Media assumes no liability for the use or interpretation of any information
contained in this Smart Decision Guide. Purchase decisions based on the information contained
herein are the sole responsibility of the individual decision maker(s) and/or the companies they
represent. Unless otherwise noted, the entire content of this publication is copyrighted by
Starfleet Media. It may not be reproduced, distributed, archived, or transmitted in any form or by
any means without the prior written consent by Starfleet Media, except by the company
underwriters that have secured perpetual licensing rights to the content. For additional
information, please contact Starfleet Media at info@starfleetmedia.com.
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The 2016 Smart

Everything you need to know about Hospitality Revenue Management

Chapter 1: Topic Overview and Key Concepts

Chapter 2: Buying Considerations and Evaluation Checklist

Chapter 3: Must-Ask Questions

Chapter 4: Roadmap and Recommendations

Chapter 5: Inside Voices and Outside Voices

The 2016 Smart Decision Guide to Hospitality Revenue Management

line revenue growth and profitability. In fact, according to research conducted

The 2016 Smart Decision Guide to Hospitality Revenue Management

The nuts and

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter 1: Topic Overview

Another key concept is price elasticity of demand. Demand is sensitive to

Chapter 1: Topic Overview

the equation. Yet another consideration is the optimization of profitability and

Chapter 1: Topic Overview

Research Data Point

Reduce time and costs associated

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter 1: Key Concepts

Chapter 1: Key Concepts

revenue performance, by measuring the extent to which a hotel is achieving

Chapter 1: Key Concepts

Chapter 1: Key Concepts

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter22: Buying Considerations

The tools are

Technology integration capabilities. Hotels, resorts and other lodging

Chapter22: Buying Considerations

Chapter 2: Buying Considerations

dynamically adjust the pricing on a channel-by-channel basis.

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter 2: Buying Considerations

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter 2: Buying Considerations

Large and FullService Hotels

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter 2: Evaluation Checklist

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter 3: Must-Ask Questions

Research Data Point

Importing all historic

Creating the right

questions, prospective buyers can quickly rule out

Research findings are derived from the Q4 2015 survey on

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter 3: Must-Ask Questions

The 2016 Smart Decision Guide to Hospitality Revenue Management

Chapter 3: Must-Ask Questions

Chapter 3: Must-Ask Questions

The 2016 Smart Decision Guide to Hospitality Revenue Management

Uncertain ROI and financial upside

Proven ROI and predictable (and

Best-available-rate pricing only

Dynamic and flexible approaches

Increased room occupancy as the

Increased net revenue as the

Manual calculation, or only partial

Complete automation of pricing,

Revenue management separate

Revenue management integrated