Smart Decision Guide To Hospitality Revenue Management RateGain

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

and how to select the right solution and/or services for your organization.
Underwritten, in part, by:
Independently produced
and distributed by: 1
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. 2
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
Hospitality Revenue Management is fueled by the rapid growth of big data Management
processing, advanced analytics, demand forecasting and pricing optimization has gone from
models and next-generation technology platforms. These combined being an
capabilities and technologies are helping to automate the pricing uncertain
recommendations and decision-making processes that enable not only better
undertaking
inventory management and increased room occupancy, but higher revenues
with financial
and profitability across all parts of the hotel, resort or other lodging property.
upside
potential to
In recent years, Hospitality Revenue Management has gone from being an
being a
undertaking with uncertain financial upside potential to being a strategic
strategic
imperative with predictable revenue outcomes. Indeed, when properly
imperative.
executed, the practice can be used to deliver very substantial increases in top-
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 The nuts and
group rates or develop rate fences is not the focus of this Smart Decision bolts of how to
Guide. There are educational programs specially designed for that purpose, apply capacity
some offering a large curriculum of related coursework. There is also a management
sizable body of literature on the topic authored by industry practitioners, and duration
solution providers, consultants and academics, many of them sporting PhDs control or use
in statistical analysis and computational and behavioral science. That said, displacement
gaining expertise in Hospitality Revenue Management generally requires analysis to
that one not only acquire the requisite knowledge base but also actually calculate
spend time practicing revenue management in a real-life hotel environment. group rates or
develop rate
So what is the purpose of this Smart Decision Guide? As the name suggests, fences is not
it is intended to provide a roadmap for achieving increased hotel revenue the focus of
and profitability by leveraging next-generation revenue management
this guide.
technologies and capabilities. The key takeaways include insights for
evaluating and selecting the right solution and/or services in the context of a
hotel or resort’s 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.” Effective
market
When it comes to hospitality, different categories of guests should be viewed
segmentation
as having differing wants, needs and behaviors. Families generally have
lays the
different requirements than guests traveling alone. Business travelers behave
foundation for
differently than leisure travelers. First-time guests tend to have different
expectations than repeat guests. Guests who book through a discount site,
Hospitality
who purchased a package deal or who took advantage of a special rate
Revenue
promotion may be grouped together for price sensitivity. Length-of-stay can
Management
be another useful segmentation criteria. So can the extent to which guests
while at the
utilize the spa, casino and other hotel facilities. Effective market segmentation
same time
lays the foundation for revenue management. It can also benefit a range of benefiting
other departments and functions, including sales, marketing and distribution. 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
Hospitality
right time to the right customer. In this case, space generally refers to guest
Revenue
rooms (large, full-service hotels may have a dozen room types). Price refers to
Management
the room rate, which is influenced by any number of factors, including time
has evolved to
(e.g., how far in advance the reservation is made) and market conditions (e.g.,
the point that
how much competitors are charging). As discussed, guests (including groups)
it is no longer
can be segmented using multiple factors, including geo-demographic
just about
attributes, price sensitivity, purpose of the visit and length of the stay.
increasing
guest room
Hospitality Revenue Management has evolved to the point that the goal is no
occupancy
longer just about increasing guest room occupancy rates, with no
consideration for the implications of the pricing decisions. Nor, again, for that
rates, with no
matter, is it just about rooms. Revenue streams such as conference hosting,
consideration
recreational facilities, restaurants and spas – which, taken together, typically
for the
account for one-quarter of a full-service hotel’s revenues – also now factor into
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. It’s 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

Increase revenue Improve marketing
(occupancy, arrivals, etc.)
Increase profitability and sales efficiency
Generate accurate
Maximize occupancy Reduce time associated
reports
Increase ancillary revenue with traditional pricing
Identify key patterns
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

88%
with tradition pricing tactics
Improve marketing and sales
81%
activities
Gain competitive intelligence and
76%
market insights
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 Hospitality
guest rooms) can greatly fluctuate. Although obviously important to the day- Revenue
to-day practice of revenue management, these terms aren’t necessarily useful
Management
when it comes to understanding how Hospitality Revenue Management is
evolving today or to evaluating the enabling technology solutions and services
has its own
currently available to hotel operators. Given the focus of this Smart Decision
extensive
Guide, this section on key concepts is limited to providing an overview of vocabulary
pricing analytics (“intelligent pricing”), explaining the importance of capturing consisting of
and integrating relevant data, and taking a look at the key metrics that are terms like
commonly used today to track and measure success with Hospitality Revenue capacity
Management to drive performance improvement. Let’s start with the latter.
management,
duration control
Revenue management metrics. The metric most commonly used today to
assess how well a hotel , resort or other lodging property is managing its
and
inventory and rates to improve revenue performance is revenue per available displacement
room (RevPAR ). RevPAR is calculated in one of two ways: by either multiplying 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 hotel’s overall performance,
it fails to measure actual productivity. That’s because RevPAR doesn’t take into
Without
account costs per occupied room (CPOR). Without knowing the operating
knowing the
costs, it’s not possible to calculate the actual profit margin or, for that matter,
operating costs,
determine target optimal occupancy. Hence the emergence of another metric,
it becomes
called gross operating profit per available room (GopPAR), which takes into
account not only the amount of revenue generated but also the actual
difficult to
operational costs. Still, there remains a problem. Neither RevPAR nor GopPAR
calculate actual
look at non-room revenue streams such as restaurants, casinos, parking, spas,
profit margin or,
golf courses, etc. This shortcoming is glaring. It helps explain the advent of
for that matter,
additional metrics — as if there weren’t enough already — designed to
determine the
measure economic performance in a more comprehensive manner. Revenue target optimal
Generating Index (RGI), also known as RevPAR Index (RPI), looks at relative hotel 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 hotel’s 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.

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 Like a tasty
necessarily a case of “the more the merrier” when it comes to volume of data soup, which
or number of data sources. Revenue managers may be excited about the may require
ever-growing number of data sources available to them. But they should only a few
exercise caution in incorporating every last bit of data into their models. select
More data can simply mean more noise. At a certain point, there are bound ingredients,
to be diminishing returns. In fact, new data that may seem highly relevant at
accuracy in
first glance may, in fact, create integration headaches while failing to move
forecasting is
the needle on forecasting accuracy. The volume and depth of clean historical
not necessarily
data related to occupancy, rate and revenue figures (including bookings
a case of the
dates, rate codes, arrival dates, departure dates and revenue by day) provide
more “the
the strongest basis for forecasting accuracy. All this data should reside in the
merrier” when it
Property Management System (PMS). The greater the number of years for
comes to the
which a hotel has data, the more accurate the forecast is likely to be. Market-
volume of data.
level data, including competitive pricing, future flight demand, weather
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.

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 Intelligent
occupancy at the best possible price while factoring in all the related revenue pricing means
questions in a real-time or near real-time manner. These questions include: being able to
What is the optimal price to charge in order to maximize revenue, accounting forecast
for the fact that demand will change as the price changes? What is the best
demand for
possible rate the hotel can hope to get for a guest room, taking into account
available
the type of room as well as the length of stay? How can a hotel ensure that
discounted price promotions won’t dilute revenue and profits in the long
rooms in a
run? Intelligent pricing addresses these questions by analyzing demand real-time
forecasts, competitor rates, price sensitivities and various other inputs and manner and
factors, including demand drivers like seasonality, day-of-week differences being able to
and market dynamics. Here it’s worth noting that, until recently, the standard maximize
approach to pricing strategy has been a fixed-tier approach based on one occupancy at
overall best available rate (BAR) for each room and also on the expected
the best
supply and demand of rooms for a particular date. Ideally, when pricing
multiple products, solutions should account for different room types and also
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 they’re 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.

Chapter 2
Buying Considerations
and Evaluation Checklist

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 The tools are
strategies, and ever-more intense hotel competition. Leading solution continuously
providers are investing heavily in R&D and running agile software
evolving in
development and release cycles to try to say ahead of the competition. The
response to the
flurry of change can make selecting the right solution a daunting task. The
growth of OTAs
buying considerations are sure to depend to a large extent on a hotel’s specific
with differing
needs and situation. That includes category, size and typology (including the
pricing and
number and types of non-room revenue streams) as well as the team’s level of
commission
experience (including whether it has one or more dedicated revenue
structures,
managers and the right corporate culture in place). Should the hotel hire an
shrinking
outside firm to conduct an assessment of current pricing practices? Should it
booking
use a BAR approach or should each channel and segment be priced
windows and
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
refined pricing
are a number of key considerations to keep in mind, including the following.
strategies.
Technology integration capabilities. Hotels, resorts and other lodging

properties have always had extensive technology integration requirements. A
revenue management solution, especially, can’t 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

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. It quickly
Internally, within the organization, point of sale (POS) data needs to integrate becomes clear
with PMS data to provide a holistic view of a guest’s overall stay, including that Hospitality
their ancillary spending on food and beverages, guest services, spa visits, etc. Revenue
Management is
Data processing power. Hotels are importing increasingly large volumes of a big data
data into their pricing models. For a large property, the data set may include challenge; to be
dozens of customer segments, a dozen or more room types, several years of successful
historical booking and reservations data, and upwards of a dozen length-of- means having a
stay types. Add to the mix competitive rate data, demand data, multi-market solution that
economic data, and even air traffic and weather predictions. Combining all can address
these data sets for just one hotel could easily amount to 200 million-plus that challenge
observations. Generating the pricing recommendations for that property 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.

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

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 Hotels should
responsible for installing and maintaining the hardware and providing IT
be able to
support and data security. As with most enterprise technology solutions,
most Hospitality Revenue Management systems are moving to the cloud,
automatically
and hotels are benefiting from the global scale and distributed access to identify and
interfaces and information. Other benefits include reduced stress on hotel track their most
technology infrastructures, and, in some cases, more seamless integration profitable
with other applications, including Hotel Property Management Systems. A channels,
big advantage of “true SaaS” is that software updates and bug fixes can be factoring in the
pushed as they become available, meaning that every user is always on the
associated
most recent version of the software.
costs, including
User experience. A good user experience begins with an interface that is
commissions,
well-designed and flexible. Revenue managers and other users should be transaction fees
able to define dashboards to meet their needs and suit their styles. While and SEM
notifications should drive the workflow, users should be able to look under 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

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
actionable insights. Users should not be spending the bulk of their time extracting andThe impact
manipulating of
data, as is often the case today. Rather, they should be making strategic decisions thatthe
can be cloud
used tohas
drive revenue growth and increased profitability. been
enormous,
empowering
Research Data Point physicians,
“How would you rate your company’s success in terms of utilizing revenue office managers
management to improve financial performance?”
and others with
Midsize and Limited
Very successful Successful Somewhat successful anytime,
Service Hotels
anywhere
• Have utilized revenue
access for
management to8.5
years, on average
all
21% 24% 17% patient
• Have increasedand
RevPAR
by 7% on average
operational
• 25% have one or more
activities.
revenue managers
Large and Full-

Service Hotels
• Have utilized revenue
management for 10-plus
27% 32% 26% years, on average
• Have increased RevPAR
by 9% on average
• 75% have one or more
revenue managers
Research findings are derived from the Q4 2015 survey on Hospitality Revenue Management.

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

Chapter 3
Must-Ask Questions

Chapter 3: Must-Ask Questions
Research Data Point
Every hotel, resort and other lodging property naturally
Percentages of lodging properties that
wants to ensure that any technology investment that it view each of the following success factors
makes will ultimately drive increased financial success. as “important” or “very important.”
On that basis, the business case for upgrading to next-
generation revenue management capabilities tends to Importing all historic
be one that is easy to make. But which solution is the booking, reservation,
97% competitive and other
right one for the organization? By asking the right
relevant data into the
questions, prospective buyers can quickly rule out solution
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 Creating the right
revenue management
the “must-ask” questions. In fact, even hotels within the 91% culture within the
same category or typology (e.g., single-property luxury organization
beach resorts) often have different customer demand
patterns, different profile mixes, different room
inventory and different ancillary revenue streams. The Integrating revenue
information they will want to ascertain from solution management activities
87% with sales and
providers is therefore also likely to vary amongst them. marketing activities
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 Performing an “audit”
or assessment of
able to identify patterns, forecast demand changes, 82% existing pricing
make rapid and accurate pricing decisions, and so on, activities and practices
resulting in positive revenue outcomes — and leaving
no doubt that the technology investment was money
Research findings are derived from the Q4 2015 survey on
well spent. Hospitality Revenue Management.

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 company’s financial
performance. Such questions might include: By how much should we increase
Compile a
or decrease our rates for a given type of room? How many customer groups, comprehensive
and what size groups, should we accept on a given day? How much should we list of
charge walk-in customers? What should be the floor and ceiling for our rate anticipated
range? Are the changes in demand and bookings likely to represent a short- pricing
term or long-term pattern – and, if the latter, what actions should we take in questions and
response? To what extent should we discount negotiated rates? What should
verify that the
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
solution will be
near-future? What discounts would likely dilute profits and should we
able to address
therefore avoid? To what extent should we mark up our premium rooms, the questions in
based on the current and near-term demand patterns? What, if any, a relatively
competitors’ price moves would likely affect these demand patterns and how rapid and
should we respond should those possible moves become reality? How can we automated
counteract cancellations and no-shows, group wash, extensions and early
manner.
departures to capture optimal profitability? Tip: Compile a comprehensive list of
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 it’s 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).

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
Revenue
requires a high degree of flexibility. Not all data queries can be anticipated. A
management is
significant percentage of pricing questions may, in fact, need to be investigated
a quantitative
on an ad hoc basis. Out-of-the-box functionality may satisfy the needs of
puzzle with an
beginners or small properties with relatively simple needs. But it is likely to be
ever-changing
insufficient for more sophisticated revenue managers and larger properties
palate of
with multiple room types, customer segments and ancillary revenue streams. A
numbers,
solution should make it easy to accommodate virtually any need, including the
patterns and
need to monitor and measure individual property, portfolio, and departmental
results and a
performance, the need to create customizable hierarchies for different geo-
markets, channels, room types, time periods, loyalty programs, and the need to
need for
do manual overrides of the automated rates suggestions for OTA channels.
continuous
Important questions might include: Once problem areas are identified, can the
adjustment and
solution guide users on how to take appropriate action? Can tactical decisions,
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.

What is the solution provider’s track record for stability, reliability and
continuous innovation? As with any technology solution purchase,
reputation and customer satisfaction are important factors in the decision-
making process. Nobody wants to purchase and implement a revenue
management solution that falls short of expectations due to known
No input may
shortcomings in stability, reliability or promised benefits. No input may be be more
more important to the buying decision than that which can be gleaned from important to
existing clients, preferably lodging properties that share some commonalities the buying
in terms of size, typography and existing technology infrastructure. A solution
decision than
provider or consultant may be willing to provide one or more client
references. And some clients, particularly those operating in noncompetitive
that which can
markets, may be willing to share their experiences and perhaps even disclose be gleaned
results in terms of percentage increases in RevPAR, for example. Client from existing
testimonials and success stories can also be valuable sources of information. clients,
Tip: Seek information about what performance issues may arise though
preferably
conversations with existing clients, preferable ones that are similar in size and
existing technology infrastructure. Ask about the product roadmap for the future.
lodging
properties that
What type of customer support is included? It’s important to have a clear share some
set of expectations around customer support and problem resolution as well commonalities.
as the training that may be needed to get up to speed. More than three-
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 in-
person 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.

Chapter 4
Roadmap and
Recommendations

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 Proven ROI and predictable (and
potential substantial) revenue outcomes
Dynamic and flexible approaches

Best-available-rate pricing only
to pricing to optimize profits
Increased room occupancy as the Increased net revenue as the

primary goal primary goal
Manual calculation, or only partial Complete automation of pricing,

automation, of pricing and inventory and all other
inventory recommendations recommendations
Revenue management separate Revenue management integrated

from marketing & sales activities with marketing and sales activities
Manual distribution of rates to Automated channel management

OTAs and other online channels and channel optimization
Revenue management applied to Revenue management applied to

guest rooms only all property revenue streams

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. That’s no small feat, and not
something that can be easily done in Excel. Given the ability to improve Calculating
financial performance by upwards of 10%, it’s no wonder that properties are price sensitivity
looking to take their existing capabilities to the next level. That means not of customer
only implementing the right technology solution and using the right data set demand and
(again, it’s important to be able to demonstrate the value of a data source in deriving an
improving forecast accuracy or pricing decisions), but also creating a revenue- analytical
maximizing culture. Following are a few recommendations for buyers to keep solution to
in mind as they look to upgrade their revenue management capabilities. competitive
price effects is
Hire a revenue manager. The hotel booking ecosystem is complex and no small feat,
optimizing financial results across channels requires specialized skills, no and not
matter that pricing recommendations are becoming increasingly automated. something that
The role of the revenue manager has never been more important. According
can be easily
to estimates, there are currently only about 10,000 hotel revenue managers
done in Excel.
worldwide. Some industry observers contend that revenue managers should
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.

Build a revenue management strategy and culture. What is a revenue
management strategy? Simply put, it’s 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
Thinking in
targeted RevPAR, ARI and other relevant metrics for tracking progress. It should
terms of Total
include a timeline with key milestones and spell out the tactics for achieving Revenue
success. The strategy should be as specific as possible, detailing, for example, Management
how the property approaches pricing – e.g., whether it is dynamically pricing and not just
the best available rate based on forecasted demand (BAR) or on actual revenue
demand. Ideally, the strategy will instill a revenue strategy culture, creating management as
cognitive alignment amongst all employees regarding the value of Hospitality it pertains to
Revenue Management and communicating —and celebrating — the results. guest rooms
can mean
Think in terms of Total Revenue Management. Until recently, most revenue leaving a lot
optimization algorithms managed room price and nothing else. But next- less money on
generation Hospitality Revenue Management means also taking into account 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.

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 To achieve
forecast periods of high demand versus low demand and that reveal which optimal results,
customer segments are planning to book rooms for a certain period, should it’s imperative
inform every campaign. The insights should inform how aggressive to be with that revenue
marketing offers and promotions, toward which customer segments the offers managers work
and promotions should be directed, and when, exactly, to present the offers hand-in-hand
and promotions, and which marketing tactics are most likely to elicit the
with the sales
desired responses. To achieve optimal results, it’s imperative that revenue
and marketing
managers work hand-in-hand with the sales and marketing functions and
functions and
integrate all of their customer acquisition strategies.
integrate all of
their customer
Track and measure progress. A whole alphabet soup of metrics is now
acquisition
available for tracking revenue performance. These metrics , defined in Chapter
strategies.
1, should be used diligently. Many of the metrics have moved beyond RevPAR
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, it’s 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.

Chapter 5
Inside Voices and

Outside Voices

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 A luxury resort like ours has a lot of
management function is combining with different revenue levers. lt’s really
the sales and marketing functions. To be important that we’re able to look at all
truly successful at this game, you have to of these levers in a single dashboard.
eliminate the traditional walls that stand Having a holistic view of all the OTAs
between these different functions. and all the channels and all of the data
Everyone across the organization benefits that feeds into the model is the only
when they work cooperatively to optimize way to optimize revenue performance.
revenue. Using a centralized technology
that everyone can access can help a lot.
Marketing manager, full-service hotel
Revenue manager, full-service hotel

Hotels need to have a standard
It’s hard to know when demand is going to approach to market segmentation.
shift. It’s just as harder to act on that Revenue managers and employees
knowledge in real-time and make the need to adhere to it. Everyone needs
appropriate pricing adjustments. Demand is to use the same rate and channel
in a constant state of flux. It can turn on a codes. Everyone needs to follow the
dime. It takes an advanced revenue same operational procedures.
management solution to detect change and Success requires consistency.
immediately implement pricing decisions.
Senior executive, full-service hotel

Senior executive, mid-size hotel

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 Choosing the right people
management; not just rooms revenue. Don’t allow or partners and tracking,
revenue managers to rely on automated tools so managing and acting on
much that they forget to use their own experiences. data (while staying on top
Adopt new dynamic pricing tactics. Also, determine of all aspects of traditional
whether the collection of big data is worth the cost. revenue management such
Work with the marketing team to streamline how to as managing rates, yielding,
test and measure the data, then evaluate whether forecasting, visibility etc)
what’s being collected is actually being used. remains crucial in today’s
hotel environment.
Bob Gilbert, President, The Hospitality Sales and Pamela Whitby, editor, EyeforTravel.com
Marketing Association International
Hotels can better manage As the market evolves, capabilities that were once
their revenue by taking cutting edge become default and new
advantage of various functionality becomes differentiating. Customer
technologies that make it segmentation and rate fencing have become
easy to monitor the current Table Stakes capabilities and should no longer be
state of the economy, the used to differentiate solutions. Instead focus on
hotel industry itself and the seamless integration with other systems to build a
historical performance of the guest profitability view in order to get the best fit
hotel. for your requirements.
Ahmed Mahmoud, founder, Vendor Landscape: Revenue Management Systems,

RevenueYourHotel.com Info-Tech Research Group

Appendix
Research Notes and

Underwriters

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 47% 35% 16%
Staff Managers Senior executives
Size / category of
survey respondents’
hotel (or other lodging 14% 49% 37%
property) employers
Small hotels Midsize and limited Large and full service

(including motels and service hotels hotels and resorts
bed & breakfasts)
Geographic location
of survey 66% 28% 6%
respondents
North America Europe Other

Appendix: Underwriter
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

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.
Was this Smart Decision Guide helpful? Any suggestions for improvement? We would
like to hear from you. Please send any and all feedback to feedback@starfleetmedia.com.


Smart Decision Guide To Hospitality Revenue Management RateGain

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Smart Decision Guide To Hospitality Revenue Management RateGain

Încărcat de

Drepturi de autor:

Formate disponibile

The 2016 Smart

Everything you need to know about Hospitality Revenue Management –

Underwritten, in part, by:

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

What is Hospitality Revenue Management? It begins with a basic concept that

The 2016 Smart Decision Guide to Hospitality Revenue Management

Managing pricing in a way that dynamically responds to changes in demand

The 2016 Smart Decision Guide to Hospitality Revenue Management

Gain reliable expectations

Research Data Point

Increase hotel revenue and profits 97%

Reduce time and costs associated

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

Revenue management data. Just as a soup is only as good as the

The 2016 Smart Decision Guide to Hospitality Revenue Management

Intelligent pricing. With Hospitality Revenue Management, timing is

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

Technology integration capabilities. Hotels, resorts and other lodging

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

Channel management and optimization. With pricing recommendations

The 2016 Smart Decision Guide to Hospitality Revenue Management

Cloud versus on-premise hosting. Another important decision criteria to

The 2016 Smart Decision Guide to Hospitality Revenue Management

Large and Full-

The 2016 Smart Decision Guide to Hospitality Revenue Management

This Evaluation Checklist offers a framework for conducting an apples-to-apples comparison of

Buying Consideration Weighting Vendor 1 Vendor 2 Vendor 3

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

Legacy Systems Next-generation Systems

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

Manual distribution of rates to Automated channel management

Revenue management applied to Revenue management applied to

The 2016 Smart Decision Guide to Hospitality Revenue Management

Next-generation revenue management solutions harness the power of big

The 2016 Smart Decision Guide to Hospitality Revenue Management

The 2016 Smart Decision Guide to Hospitality Revenue Management

Partner with the sales and marketing departments. The pricing

The 2016 Smart Decision Guide to Hospitality Revenue Management

Inside Voices and

The 2016 Smart Decision Guide to Hospitality Revenue Management

Revenue manager, full-service hotel

Senior executive, full-service hotel

The 2016 Smart Decision Guide to Hospitality Revenue Management

Ahmed Mahmoud, founder, Vendor Landscape: Revenue Management Systems,

The 2016 Smart Decision Guide to Hospitality Revenue Management

Research Notes and

The 2016 Smart Decision Guide to Hospitality Revenue Management