The Evolution of Hotel Revenue Management

In the ever-evolving landscape of the hospitality industry, the concept of hotel revenue management has emerged as a pivotal strategy for optimising financial performance. At its core, revenue management involves the strategic manipulation of pricing, distribution, and availability of hotel rooms to maximise revenue and profitability. This chapter delves into the origins of revenue management, traces its historical development, and underscores the imperative for adaptation in response to the sweeping wave of technological advancements.

Introduction to the Concept of Hotel Revenue Management

Hotel revenue management represents the convergence of strategic thinking, data analysis, and pricing psychology. This multifaceted approach acknowledges that not all guests are created equal and that the value of a hotel room can fluctuate drastically based on factors such as demand, seasonality, and market conditions. By recognising this dynamic nature of pricing, revenue management seeks to strike a delicate balance between occupancy rates and rates charged, ultimately aiming to maximise revenue and enhance the guest experience simultaneously.

Historical Perspective on Traditional Revenue Management Practices

Before the digital era, revenue management predominantly relied on manual processes and rule-of-thumb strategies. Hoteliers would often adjust room rates based on fixed schedules, seasons, or intuition, often leading to suboptimal revenue outcomes. The lack of real-time data and comprehensive analytical tools meant that opportunities to maximise revenue were often missed.

Early attempts at revenue optimisation primarily focused on filling rooms rather than maximising overall profitability. However, as the industry evolved and competition intensified, it became evident that a more sophisticated and dynamic approach was necessary to stay competitive.

The Need for Adaptation Due to Technological Advancements

The emergence of technology has been a game-changer for the hospitality industry, reshaping the way hoteliers approach revenue management. With the advent of advanced data analytics, automation, and artificial intelligence (AI), the potential to analyse vast amounts of data and make data-driven decisions has become a reality.

Today, revenue management goes beyond adjusting rates based on fixed schedules; it involves the meticulous analysis of historical data, market trends, competitor pricing, and even external factors like weather events and local events that could impact demand. Technological solutions have enabled hoteliers to forecast demand more accurately, dynamically adjust pricing in real-time, and even personalise offers based on individual guest preferences.

As the digital era ushers in a new age of customer expectations and competition, the hotel industry faces the imperative to adapt or be left behind. Technological advancements have not only made revenue management more precise and efficient but have also paved the way for a strategic shift toward proactive and dynamic pricing strategies.

Technological Innovations in Revenue Management

The relentless march of technology has permeated every facet of the hotel industry, redefining the way revenue management is approached. This chapter delves into the transformative impact of technological advancements on revenue management practices, emphasising the crucial roles played by data analytics, automation, and AI-driven solutions in reshaping the landscape of revenue optimisation.

Overview of Key Technological Advancements Impacting the Hotel Industry

The hotel industry has undergone a seismic shift with the advent of technologies that have fundamentally altered how hotels engage with their guests and manage their operations. From online booking platforms to mobile check-ins, the entire guest experience has been enhanced and streamlined through digital interfaces. These advancements have generated a wealth of data, unlocking opportunities for hoteliers to make more informed decisions regarding revenue management.

Introduction of Data Analytics and Its Role in Revenue Optimisation

Data analytics has emerged as the cornerstone of modern revenue management. The ability to collect, process, and analyse vast amounts of data provides hoteliers with unparalleled insights into guest behaviour, preferences, and market trends. By harnessing historical booking patterns, seasonal variations, and demographic trends, hotels can create accurate demand forecasts, allowing them to adjust pricing strategies proactively.

With data-driven insights, revenue managers can identify periods of high demand, optimising rates to maximise revenue during peak times. Similarly, during periods of lower demand, pricing adjustments can be made to attract price-sensitive guests while still maintaining profitability. The result is a more precise and adaptable approach to revenue optimisation.

Automation and AI-Driven Solutions Transforming Revenue Management Processes

The integration of automation and artificial intelligence (AI) has revolutionised revenue management processes. Automation streamlines routine tasks such as rate adjustments, inventory control, and distribution across various online platforms. This efficiency not only reduces the margin of error but also frees up valuable time for revenue managers to focus on strategic decision-making.

AI-driven solutions take revenue management to the next level by employing complex algorithms to analyse historical data and predict future demand patterns. These predictive models allow for proactive pricing adjustments, ensuring that hotels are poised to capture the maximum revenue potential. Moreover, AI can dynamically assess competitor pricing, enabling rapid responses to changes in the market landscape.

Personalisation is another facet of AI’s impact on revenue management. By analysing guest data, AI systems can tailor offers and pricing to individual preferences, enhancing the overall guest experience and increasing the likelihood of conversion.

As the interplay between data analytics, automation, and AI becomes increasingly sophisticated, the role of the revenue manager evolves from a reactive position to that of a proactive strategist. The combination of these technologies empowers revenue managers to make well-informed decisions in real-time, optimising revenue while ensuring a seamless guest experience.

Data-Driven Insights for Revenue Optimisation

In the digital age, data has emerged as the lifeblood of effective revenue management strategies. This chapter delves into the pivotal role of data collection, analysis, and utilisation in modern revenue management practices. We explore how the treasure trove of guest data not only fuels personalised pricing strategies but also powers predictive analytics, enabling demand forecasting and real-time pricing adjustments.

Importance of Data Collection and Analysis in Modern Revenue Management

Data collection has transformed from a supplementary practice to a fundamental necessity in revenue management. As guests interact with various touchpoints, from booking engines to loyalty programs, a wealth of information is generated. This data encompasses booking patterns, stay preferences, length of stay, past purchases, and more.

By meticulously analysing this data, hotels can uncover hidden patterns and trends that guide strategic decisions. This enables revenue managers to understand the ebb and flow of demand, identify seasonal variations, and make informed choices about rate adjustments and inventory allocation.

Utilising Guest Data for Personalised Pricing Strategies

One of the most remarkable outcomes of data-driven revenue management is the ability to create personalised pricing strategies. By leveraging guest data, hotels can tailor pricing based on individual preferences and behaviours. This not only enhances the guest experience but also maximises the likelihood of conversion.

For instance, if a guest consistently books suites with ocean views, the hotel can offer personalised packages or discounts for such rooms. By aligning pricing with the guest’s preferences, hotels can drive higher guest satisfaction and capture additional revenue that might have been left untapped using traditional pricing models.

Predictive Analytics for Demand Forecasting and Pricing Adjustments

Predictive analytics stands as a game-changer in revenue management, offering the power to anticipate demand fluctuations and optimise pricing strategies accordingly. By analysing historical data and identifying patterns, predictive models can forecast future demand with impressive accuracy. These models allow revenue managers to take a proactive stance, adjusting rates and availability in anticipation of high-demand periods. Whether it’s a major local event or a seasonal trend, predictive analytics empowers hotels to capitalise on revenue opportunities while minimising the risk of overpricing during lulls in demand.

Moreover, predictive analytics enables dynamic pricing adjustments in real-time. If booking trends deviate from expectations, the system can swiftly adapt rates to maintain optimal occupancy and revenue levels. This agility ensures that hotels remain competitive and adaptable in an ever-changing market.

As the synergy between data-driven insights, personalised pricing, and predictive analytics continues to evolve, revenue management evolves from a reactive practice to a strategic discipline. By harnessing the power of data, hotels can confidently navigate the complexities of revenue optimisation and deliver superior value to both guests and stakeholders.

Dynamic Pricing Strategies

In an era of unprecedented connectivity and real-time data availability, dynamic pricing has emerged as a pivotal strategy in modern hotel revenue management. In this chapter we look at the concept of dynamic pricing, explore its significance in the hospitality industry, and highlight how real-time market analysis and competitor pricing tracking drive its implementation to maximise revenue.

Exploration of Dynamic Pricing and Its Significance

Dynamic pricing, often referred to as demand-based pricing, represents a departure from traditional fixed-rate models. It involves adjusting prices dynamically in response to fluctuations in demand, supply, and market conditions. By embracing this fluid approach, hotels can align pricing with the ever-shifting landscape of guest preferences, events, and economic influences.

The significance of dynamic pricing lies in its ability to optimise revenue. It goes beyond simply filling rooms; it focuses on extracting the highest possible value from each booking. This strategy ensures that hotels capture the full potential of revenue even during high-demand periods while still attracting bookings during low-demand times.

Real-time Market Analysis and Competitor Pricing Tracking

Real-time market analysis and competitor pricing tracking are essential components of successful dynamic pricing strategies. With the advent of technology, hotels now have access to a wealth of up-to-the-minute data, including competitor rates, local events, and online sentiment analysis. This enables revenue managers to make well-informed decisions in the midst of changing market dynamics.

By monitoring competitors’ pricing strategies and market trends in real-time, hotels can adjust their rates swiftly and intelligently. For instance, if a nearby hotel suddenly reduces its rates due to excess inventory, a hotel equipped with real-time data can respond promptly to remain competitive without sacrificing revenue potential.

Implementing Dynamic Pricing Models to Maximise Revenue

Implementing dynamic pricing models involves a comprehensive understanding of market dynamics and the creation of pricing rules that adjust rates automatically based on predefined triggers. These triggers could be factors such as occupancy rates, booking lead times, demand forecasting, or even external events like local festivals or conferences. A successful implementation requires a robust revenue management system that integrates real-time data, demand forecasting, and competitor pricing analysis. By leveraging AI-driven algorithms, revenue managers can create intricate pricing strategies that align with the hotel’s revenue goals and market positioning. These models ensure that the hotel is well-equipped to capture maximum revenue without overpricing or under-pricing its offerings.

Moreover, dynamic pricing extends beyond room rates. It can encompass ancillary services like spa treatments, room upgrades, and dining experiences. This holistic approach further enhances the revenue potential of a hotel’s offerings.

As the sophistication of dynamic pricing strategies deepens, hotels stand to gain not only increased revenue but also improved guest satisfaction. By offering tailored pricing that resonates with guest preferences and market trends, hotels can establish a stronger competitive edge and create lasting guest relationships.

The Future Landscape of Hotel Revenue Management

The horizon of hotel revenue management is undergoing a profound transformation as emerging technologies redefine industry norms. This chapter explores the promising potential of technologies like the Internet of Things (IoT), blockchain, and others, while highlighting the shift towards real-time decision-making, automation, and the ethical considerations that accompany tech-driven revenue management.

Emerging Technologies on the Horizon

The convergence of technology and hospitality is giving rise to a host of innovations that hold immense promise for revenue management. The Internet of Things (IoT), for instance, is introducing a new dimension of connectivity, allowing hotels to collect real-time data from smart devices in guest rooms. This data could offer insights into guest behaviour, preferences, and even energy consumption patterns, enabling more accurate demand forecasting and personalised pricing strategies.

Blockchain, known for its transparency and security, could revolutionise the distribution of hotel inventory. By providing a tamper-proof ledger of transactions, blockchain technology can enhance the integrity of distribution channels, eliminate intermediary fees, and streamline transactions between hotels and online travel agencies.

Augmented reality (AR) and virtual reality (VR) have the potential to redefine the guest experience and impact revenue management. Hotels could leverage these technologies to offer immersive previews of rooms and facilities, helping guests make more informed booking decisions. Such enhanced experiences could warrant premium pricing and improve conversion rates.

Shift Towards Real-time Decision-Making and Automation

The pace of technology has accelerated the need for real-time decision-making. Revenue managers are transitioning from hindsight-based adjustments to proactive, forward-looking strategies driven by instant data feeds. Real-time data analysis empowers revenue managers to respond to demand shifts swiftly, ensuring optimal pricing and occupancy rates.

Automation, fuelled by AI and machine learning, is reshaping revenue management workflows. Routine tasks like rate adjustments, inventory management, and distribution are automated, freeing revenue managers to focus on strategic planning. AI-powered algorithms can optimise pricing and occupancy by dynamically responding to market changes and competitor actions.

Potential Challenges and Ethical Considerations

Amid the promising landscape of tech-driven revenue management, challenges and ethical considerations loom. The dependence on AI and automation raises concerns about job displacement and the erosion of the human touch in guest interactions. Striking the right balance between technology and human interaction will be crucial for maintaining guest satisfaction and loyalty.

Ethical considerations arise around the use of guest data. While personalised pricing and services enhance guest experiences, there’s a fine line between customisation and intrusion. Hotels must navigate privacy concerns and ensure that guest data is collected, stored, and used responsibly and transparently.

The rapid pace of technological change also demands ongoing training and upskilling for revenue management professionals. Staying abreast of evolving technologies and their implications is essential to harnessing their full potential effectively.

Conclusion

As technology continues to reshape the hospitality landscape, revenue management stands at the forefront of this transformation. With emerging technologies, real-time decision-making, and automation driving the evolution, hotels must navigate the challenges and opportunities that accompany this journey. By embracing technology responsibly and thoughtfully, the future of revenue management holds the promise of elevated guest experiences, optimised revenue streams, and a dynamic, tech-driven industry landscape.

With the conclusion of this chapter, we wrap up our exploration of how technology is shaping hotel revenue management. The journey continues as the hospitality industry ventures into new territories, guided by innovation and driven by the pursuit of excellence.

Introduction

In the bustling realm of the hospitality industry, where guest experiences and profit margins intertwine, the art of setting the optimal room rate takes centre stage. Figuring the right balance between profits and guest satisfaction is a crucial aspect and optimal pricing can make or break a hotel’s fortunes. In this article we delve into the heart of revenue optimisation: how to determine the optimal room rate for your hotel, a practice that goes beyond mere arithmetic and takes a deep dive into the psychology of consumer behaviour.

Revenue and Room Rates:

In an era where travellers seek experiences that resonate with their desires, the stakes are higher than ever for hotels to strike the balance between attracting guests and maximising revenue. This pursuit hinges on a hotel’s room rates, a dynamic element that wields the power to shape the very foundation of a business’s financial success. A well-calibrated room rate can draw in a stream of delighted guests, while simultaneously fortifying the hotel’s bottom line.

Dynamic Pricing:

Step into the realm of dynamic pricing, where the science of supply and demand meets with the art of anticipation. Hotels have transcended static, one-size-fits-all pricing models, venturing into a world of real-time adaptation that responds to shifting market conditions. Dynamic pricing strategies empower revenue managers to be agile, setting rates that harmonise with customer preferences, external events, and competitive pressures.

Profitability:

Gone are the days when room rates were etched in stone. Today, the rhythm of room rates oscillates with the cadence of market fluctuations. Strategic pricing decisions, guided by data insights and foresight, have the potential to orchestrate a symphony of profitability. Yet, just as a maestro must delicately balance the various instruments to craft a harmonious composition, revenue managers must deftly weigh factors like demand, competition, and seasonality to craft the optimal room rate – one that resonates with guests and resonates through the financial ledger.

Revenue optimisation is more than crunching numbers; it’s about deciphering and anticipating customer behaviour, adapting to the ever-changing market conditions, and conducting the ultimate performance of financial success. In the following chapters, we will look into the factors that influence room rates, unravel the complexities of demand forecasting, and explore the innovative strategies that position your hotel at the frontline of profitability.

Understanding the Factors

At the core of revenue optimisation, the composition of room rates is a delicate interplay of various factors, each attributing in its own unique way to profitability. Hotel revenue managers must attune themselves to these factors to craft harmonious pricing strategies that resonate with both guests and financial goals. In this chapter, we discuss the intricacies of three pivotal factors: Demand, Competition, and Seasonality.

Demand

Demand shapes the landscape of the hospitality industry. Akin to predicting the weather, forecasting demand is both an art and a science. Revenue managers are called to set room rates, drawing on data analytics, historical trends, and market insights to predict future guest bookings. By understanding patterns, they anticipate periods of high demand and scarcity, and accordingly fine-tune room rates to maximise revenue without deterring potential guests.

Demand forecasting involves understanding not just overall market trends but also segment-specific preferences. Business travellers, leisure guests, and event attendees each has its own unique characteristics and booking patterns. Strategic pricing strategies align these patterns, ensuring that the room rate resonates with each segment’s willingness to pay, ultimately aligning with the hotel’s revenue goals.

Competition

In a bustling market, hotels don’t operate in isolation; they’re part of a dynamic ecosystem where competitors strive for the attention of the same audience. Thus, the second factor that finds its way into the revenue manager’s score is competition. Analysing the competitive landscape provides insight into the value proposition of your hotel relative to others. It’s a game of balance – pricing too high might deter potential guests, while pricing too low could undervalue your offerings.

Revenue managers must understand the strengths and weaknesses of their competitors, examining their amenities, location, and guest reviews. Through this lens, they determine the competitive positioning of their own establishment. By offering a compelling combination of value and experience, hotels can set room rates that not only attract guests but also contribute to revenue growth.

Seasonality

The third factor, seasonality, dictates the rise and fall of demand, presenting both opportunities and challenges. As demand fluctuates, revenue managers must navigate these shifts to optimize room rates.

From high-demand peak seasons to quieter troughs, hotels must tailor pricing strategies accordingly. The strategies of revenue management embrace the concept of yield optimisation, wherein rates are adjusted to capture maximum revenue during peak times while ensuring guest retention during off-peak periods. Dynamic pricing strategies become particularly relevant here, allowing revenue managers to adapt in real-time to capitalise on the seasonal pace.

Demand Forecasting and Analysis

In the art of revenue optimisation, demand forecasting takes centre stage as the guiding element. Hotel revenue managers rely on the art and science of demand forecasting to set room rates that resonate with both guests and financial objectives. In this chapter, we look into the intricacies of demand forecasting techniques, historical data analysis, and the art of segmenting demand to create harmonious pricing strategies.

Demand Forecasting Techniques

Demand forecasting requires a blend of historical insights, present observations, and an understanding of the broader context. Hoteliers employ various forecasting techniques, from simple linear regression to advanced machine learning algorithms. These tools analyse past booking data, market trends, economic indicators, and even social events to discern patterns and predict future demand. Sophisticated revenue management systems leverage big data and real-time analytics to provide revenue managers with a clearer view of the horizon. This enables them to make informed pricing decisions that reflect the anticipated peaks and valleys in guest bookings, thus ensuring that room rates are attuned to demand.

Decoding Patterns: Historical Data Analysis

The past holds valuable insights for the future. Historical data analysis unveils booking patterns, helping revenue managers identify recurring trends, seasonal shifts, and factors that influence guest decisions. By examining historical data, they can identify the ebb and flow of demand, including which periods are traditionally high-demand and which segments of guests are most likely to book. Through historical data, revenue managers can also identify any gaps in pricing strategies. Were there instances where room rates were set too high, leading to a decrease in bookings? Conversely, were there periods when rates were set too low, resulting in missed revenue opportunities? By deciphering these patterns, revenue managers can refine their pricing strategies for optimal performance.

Segmentation: Targeting Specific Customer Groups

Revenue managers understand that one size doesn’t fit all – business travellers have different preferences from leisure seekers, and families have distinct needs compared to solo adventurers. Herein lies the art of demand segmentation.

By segmenting the demand, revenue managers can create tailored pricing strategies that cater to the unique preferences and behaviours of each group. Value-based pricing comes into play, where rates are determined not just by market forces but also by the perceived value of the offerings to each segment. Through this, hotels can ensure that their room rates are aligned with what guests are willing to pay, thus amplifying revenue and guest satisfaction simultaneously.

As we continue our exploration of revenue optimisation, remember that demand forecasting is the compass that guides the journey. By diving into historical data, decoding patterns, and segmenting demand, revenue managers craft room rates that are not only in tune with market trends but also personalized to the individual preferences of their diverse audience.

Competitor Analysis and Benchmarking

Understanding the moves of your competitors is a crucial aspect of revenue optimisation. Hotel revenue managers must keenly observe competitors’ pricing strategies and room rates. This chapter unfurls the importance of competitor analysis, the art of benchmarking, and the role of market positioning in the orchestration of optimal room rates.

Unveiling the Rivalry: The Importance of Competitor Analysis

In a market bustling with options, a hotel’s room rates don’t exist in a vacuum. The pricing landscape is influenced by the rates set by competitors, making competitor analysis an indispensable practice. By keeping a vigilant eye on how other establishments are pricing their rooms, revenue managers gain valuable insights into the market’s pulse. Are competitors offering lower rates to attract more bookings? Are there any premium offerings that justify higher prices? Competitor analysis is a beacon of knowledge, guiding revenue managers toward informed pricing decisions. It reveals the strengths and weaknesses of both your hotel and your rivals, providing a benchmark against which to measure your pricing strategies.

The Art of Benchmarking: Striking the Balance

In the realm of revenue optimization, benchmarking is the compass that ensures you’re on the right course. By comparing your hotel’s offerings and rates with those of competitors, benchmarking safeguards against undervaluing your product or overpricing it. The key lies in striking a delicate balance – offering rates that align with the value your establishment provides while remaining competitive in the market. Benchmarking isn’t just about setting rates; it’s about gauging the entire guest experience. By analysing the broader context of amenities, services, and overall guest satisfaction, revenue managers ascertain where their hotel stands in the grand performance. This empowers them to set room rates that resonate with both their unique offerings and the competitive market landscape.

Market Positioning and Unique Selling Points

Beyond mere price tags, revenue managers understand the influence of market positioning and unique selling points (USPs). As hotels differentiate themselves through their unique offerings, this differentiation plays a pivotal role in pricing decisions.

Market positioning involves identifying where your hotel fits in the market hierarchy – are you a luxury boutique, a budget-friendly gem, or a business traveller’s haven? Revenue managers leverage this understanding to craft pricing strategies that reflect the perceived value of your offerings within your niche. Furthermore, USPs, be they stunning views, world-class amenities, or exceptional service, serve as the characteristic that sets your hotel apart. Revenue managers know that such distinctive elements provide room to command premium rates. These unique offerings weave into the fabric of pricing decisions, ensuring that room rates align with the extraordinary experiences your hotel promises.

Remember that competitor analysis and benchmarking aren’t about imitation; they’re about inspiration. By understanding how your competitors pricing strategies and embracing the power of market positioning and unique selling points, revenue managers deploy pricing strategies that both stand out in the market and resonate harmoniously with your establishment’s value proposition.

Navigating Seasonal Variations

Navigating the tides of seasonal demand fluctuations is an art revenue managers master to set optimal room rates that resonate with both guests and profitability. In this chapter we look at the challenges of seasonality, the concept of yield management, and the deployment of promotional strategies that harmonize revenue throughout the year.

Demand and the Challenges of Seasonal Fluctuations

From bustling summers to quiet winters, and from busy corporate days to leisure weekends, hotels must adapt to these variations in order to thrive. Seasonal fluctuations pose a unique challenge – how to set room rates that capture maximum revenue during high-demand periods while sustaining occupancy during lulls.

Navigating these fluctuations requires the acumen to forecast demand accurately and adjust pricing strategies accordingly. While setting higher rates during peak seasons seems intuitive, it’s a delicate balance to strike. Overpricing can deter potential guests, while under-pricing can lead to missed revenue opportunities. This is where the art of yield management enters the stage.

Yield Management

Yield management involves setting room rates based on anticipated demand and availability for a specific period. It’s the art of capturing the most revenue from available rooms while ensuring guest satisfaction and occupancy levels. During high-demand periods, yield management may dictate premium pricing to maximize profit. Conversely, during low-demand periods, the focus shifts to maintaining occupancy by offering attractive deals. Yield management ensures that room rates ebb and flow with the rhythm of demand, maintaining a harmonious balance between revenue and guest experience throughout the seasons.

Promotional Tactics to Captivate Off-Peak Audiences

Off-peak seasons aren’t a time for hotels to fall silent; they’re an opportunity to captivate new audiences. To ensure that occupancy remains steady during quieter periods, hotels weave promotional strategies into their plans. Special packages, limited-time offers, and exclusive deals entice travellers who might otherwise stay away due to seasonal perception. These promotions are more than mere discounts; they’re carefully crafted invitations that showcase the hotel’s unique offerings. From spa retreats to culinary experiences, hotels infuse their promotions with value that transcends the reduced room rate. By attracting guests during off-peak times, hotels harmonize occupancy rates throughout the year, yielding a balanced revenue composition.

Seasonal variations are not hurdles to overcome but challenges to master. By embracing the challenges, wielding yield management, and orchestrating promotional strategies, revenue managers elevate their establishment’s performance beyond mere seasonal changes.

Geographic Information Systems (GIS) are a game-changer for hotel revenue management. By integrating geographic data into forecasting and decision-making processes, GIS provides a visual layer of insight that goes beyond traditional data analysis methods. Hotels can identify patterns, trends, and relationships that would be difficult to discern otherwise, ultimately leading to more accurate forecasts, better distribution strategies, and enhanced communication across departments.

At its core, GIS enables hotels to overlay various data sets onto geographic maps, creating a visual representation of information that would otherwise be difficult to grasp through spreadsheets and charts alone. This spatial perspective offers decision-makers an unparalleled view of the relationships between different variables, such as location, demographics, events, and more. This enriches revenue management strategies by revealing hidden patterns and insights that might be missed by conventional methods.

Forecasting is a critical aspect of revenue management, and GIS plays a pivotal role in improving its accuracy. By incorporating geographic data, hotels can factor in local events, attractions, and trends that impact demand. For instance, a hotel situated near a popular convention centre could use GIS to analyse the schedules of upcoming events and adjust pricing and inventory accordingly. This proactive approach ensures that revenue managers are well-prepared to capitalize on opportunities and mitigate potential losses.

Moreover, GIS empowers hotels to optimize their distribution strategies. By analysing data, such as the locations of competitors, nearby businesses, and transportation hubs, hotels can strategically position themselves to attract a specific target market. This fine-tuned targeting enhances revenue potential and customer satisfaction.

The visual nature of GIS also simplifies communication among different departments within a hotel. Revenue managers can collaborate effectively with marketing, sales, and operations teams by sharing maps and visualizations that clearly illustrate the projected demand patterns and market segments. This leads to more informed decisions, cohesive strategies, and ultimately, improved revenue performance.

In the ever-evolving landscape of the hospitality industry, the art of revenue management has emerged as a pivotal force driving the success and profitability of hotels. With each passing day, hoteliers are presented with new challenges and opportunities, making the mastery of revenue management a crucial skill. At the heart of this transformation lies a dynamic interplay between traditional expertise and the cutting-edge capabilities of technology.

In recent years, the hospitality sector has witnessed a significant shift in the way it operates. As travellers become increasingly discerning and the market more competitive, the importance of effective revenue management has become evident. Gone are the days when room rates were set without a second thought. Today, strategic pricing decisions can make or break a property’s financial performance. This shift in perspective has given rise to a new era of revenue optimisation, powered by the fusion of human insight and technological prowess. It has become abundantly clear that technology has stepped into the limelight, offering a helping hand to hoteliers seeking to maximise their profits. The traditional tools of the trade, while effective in their time, have been outpaced by the complexities of the modern hospitality landscape. This is where the growing role of technology and sophisticated software comes into play. Hotel revenue managers are finding themselves in the midst of a transformative revolution, as they harness the power of advanced algorithms, real-time data analytics, and predictive modelling to decode market trends and consumer behaviour.

Sophisticated software in revenue management is a game-changer that empowers hotels to navigate the intricate dance of supply, demand, and pricing. These software solutions, armed with the latest advancements in artificial intelligence and machine learning, provide revenue managers with a powerful arsenal of tools to fine-tune their strategies. By dynamically adjusting room rates, forecasting demand fluctuations, and optimising inventory allocations, these sophisticated programs introduce a level of precision that was once inconceivable.

The Foundation of Hotel Revenue Management

At the heart of every successful hotel lies a well-executed revenue management strategy that goes beyond the surface of room rates and occupancy numbers.

Understanding Demand, Pricing, and Inventory Management

Revenue management, in its essence, revolves around the orchestration of three fundamental elements: demand, pricing, and inventory management. A comprehensive understanding of these elements is the bedrock upon which effective revenue management strategies are built.

Demand: The ebb and flow of demand are as unpredictable as they are pivotal. The ability to anticipate and respond to shifts in demand is a skill that sets exceptional revenue managers apart. This involves analysing historical booking patterns, monitoring market trends, and utilising data-driven insights to forecast fluctuations in demand accurately.

Pricing: Pricing decisions are no longer static. Room rates are adjusted in real-time based on a multitude of factors such as time of booking, length of stay, seasonal trends, and competitor rates. Sophisticated software provides the means to dynamically set prices that align with market conditions, maximising revenue potential without compromising on guest satisfaction.

Inventory Management: The art of inventory management lies in striking a balance between availability and scarcity. By strategically allocating room inventory across various distribution channels, hotels can optimise revenue potential while minimising the risk of overbooking or underselling. This delicate equilibrium is what revenue managers strive to achieve, and advanced software solutions play a pivotal role in this endeavour.

Challenges Faced by Hotel Revenue Managers in Manual Processes

Historically, revenue managers relied on manual processes and intuition to make critical decisions. However, as the hospitality landscape evolved, so did the complexity of managing revenue streams. Manual methods that once sufficed have given way to a host of challenges:

Data Overload: The influx of data from various sources, including online travel agencies, direct bookings, and social media, overwhelms traditional manual systems, making it increasingly difficult to derive meaningful insights.

Real-Time Responsiveness: The pace of modern travel demands real-time adjustments to pricing and inventory. Manual processes struggle to keep up with the dynamic nature of the market.

Competitive Pressure: As guests are presented with a plethora of options, hotels face intense competition. Manual processes often fall short in efficiently gauging and countering the strategies of competitors.

Forecasting Accuracy: Anticipating demand accurately is a cornerstone of revenue management. Manual forecasting methods are susceptible to human error and lack the predictive power of data-driven algorithms.

Resource Drain: The labour-intensive nature of manual revenue management diverts valuable resources away from strategic planning and decision-making.

In response to these challenges, the evolution of revenue management practices has given rise to the need to balance human expertise and advanced software solutions.

The Evolving Role of Revenue Management Software

In the ever-shifting landscape of the hospitality industry, the evolution of revenue management practices has been nothing short of remarkable. From the days of manual calculations and educated guesswork, we now find ourselves at the threshold of a new era, where sophisticated software solutions wield a profound influence on how hotels optimise their revenue streams.

Historical Perspective on Revenue Management Tools and Technology

Rewind a few decades, and the concept of revenue management was in its infancy. Hoteliers primarily relied on instinct, experience, and manual calculations to determine room rates and allocate inventory. These methods, while effective to a certain extent, were limited by their inability to comprehensively analyse data and respond to rapidly changing market conditions.

Transition from Manual Calculations to Basic Software Tools

The first wave of transformation came with the advent of basic software tools designed to streamline the revenue management process. Spreadsheets and rudimentary systems allowed revenue managers to organise data and perform calculations more efficiently. These tools marked a significant leap forward, offering a glimpse into the potential of technology to enhance revenue management practices.

Emergence of Sophisticated Software Solutions to Handle Complex Tasks

As the hospitality industry became increasingly complex, so did the challenges faced by revenue managers. The emergence of sophisticated software solutions was the natural response to these challenges. Leveraging the power of advanced algorithms, machine learning, and real-time data analytics, these software solutions have revolutionised the way revenue management is approached.

The modern revenue management software of today is not merely a tool but a comprehensive ecosystem. It’s capable of processing vast amounts of data from diverse sources, identifying patterns, and generating actionable insights. These insights drive decisions that maximise revenue and enhance guest satisfaction. The transition from basic tools to these sophisticated solutions has been akin to moving from a handheld calculator to a supercomputer.

Today’s software can perform tasks that were previously inconceivable. It can predict demand patterns with remarkable accuracy, even in the face of ever-changing market dynamics. It analyses competitor pricing strategies and market trends to inform optimal pricing decisions. It dynamically adjusts room rates in real-time to ensure competitiveness while maximising revenue. It provides revenue managers with the agility to respond swiftly to market fluctuations and capitalise on fleeting opportunities.

Key Features of Sophisticated Revenue Management Software

As hotels continues to embrace the digital age, revenue management software has emerged as a key player in the pursuit of profitability and operational excellence. From predicting future demand patterns to dynamically adjusting pricing strategies, these tools are reshaping the landscape of revenue optimisation.

Overview of Advanced Features Offered by Modern Revenue Management Software

Sophisticated revenue management software goes far beyond basic calculations and static rate adjustments. It represents a convergence of technology, data science, and strategic insight to facilitate decision-making that maximises revenue while adapting to the ever-changing market dynamics.

Demand Forecasting Using Machine Learning Algorithms

At the heart of revenue management software lies the ability to predict future demand with a level of precision that human intuition alone cannot match. Advanced software employs machine learning algorithms that analyse historical booking data, market trends, seasonality, events, and a multitude of other variables. This allows revenue managers to generate accurate demand forecasts, empowering them to make informed decisions on pricing, inventory allocation, and distribution strategies.

Dynamic Pricing Strategies Based on Real-Time Data and Market Trends

Gone are the days of setting room rates and forgetting about them for the season. Modern revenue management software introduces dynamic pricing strategies that respond to real-time data and market trends. By continuously analysing competitor rates, booking pace, and demand fluctuations, these tools automatically adjust prices to reflect the current market conditions. This ensures that hotels remain competitive while optimising revenue potential.

Integration with Other Hotel Systems such as Property Management and Online Booking Platforms

The power of sophisticated revenue management software extends beyond its standalone capabilities. Integration with other hotel systems, such as property management and online booking platforms, point of sale systems, creates a seamless ecosystem that enhances operational efficiency. This integration enables real-time updates on room availability, bookings, and guest preferences, allowing revenue managers to make decisions based on the most up-to-date information.

Moreover, this integration extends to online distribution channels, ensuring that prices and availability are synchronised across various platforms. This consistency not only reduces the risk of overbooking or underselling but also enhances the guest experience by presenting accurate information to potential guests.

Benefits of Implementing Sophisticated Software

In the art of revenue management, where every decision has the potential to impact a hotel’s bottom line, the role of technology has evolved from a supporting act to a spotlight performer. Sophisticated revenue management software has emerged as a game-changer, propelling hotels towards a future of optimised profitability and strategic prowess. Let’s have a look at some of the advantages of integrating advanced software into revenue management practices.

Improved Accuracy in Demand Prediction Leading to Optimised Pricing Decisions

One of the cornerstones of effective revenue management is the ability to accurately forecast demand. Traditional methods often fell short, relying on historical data and gut feelings. Advanced software steps in to bridge this gap with machine learning algorithms that analyse a multitude of variables, producing highly accurate demand predictions. By understanding future demand trends, hotels can adjust their pricing strategies proactively, ensuring that room rates reflect the market’s ever-changing dynamics. The result? Optimised pricing decisions that strike the delicate balance between revenue maximisation and guest value.

Time Savings and Reduced Manual Errors

In the fast-paced realm of hospitality, time is a precious resource. Manual revenue management processes are not only time-consuming but also prone to human errors that can have far-reaching consequences. The implementation of sophisticated software streamlines the decision-making process, automating routine tasks and calculations. This not only frees up valuable time for revenue managers to focus on strategic planning but also minimises the risk of costly mistakes that could impact revenue and guest satisfaction.

Enhanced Decision-Making Through Data-Driven Insights

In an industry where data is the currency of choice, the ability to derive meaningful insights from a sea of information is paramount. Advanced software transforms raw data into actionable insights, empowering revenue managers to make informed decisions based on real-time market trends, competitor analysis, and historical performance. This data-driven approach allows for agility in responding to market fluctuations, identifying emerging opportunities, and crafting strategies that align with a hotel’s unique value proposition.

Strategic Collaboration and Alignment

The benefits of implementing sophisticated software extend beyond the realm of revenue management. Seamless integration with other hotel systems fosters cross-functional collaboration and alignment. From sales and marketing to operations and finance, departments across the organisation can tap into the insights generated by the software, fostering a holistic approach to revenue optimisation. This alignment ensures that the entire team is working towards a common goal—maximising profitability while delivering exceptional guest experiences.

Overcoming Challenges and Implementation

As hotels embrace the transformative potential of sophisticated revenue management software, they embark on a journey that promises increased profitability and strategic advantage. However, this journey is not without its challenges. Below we examine some of the potential roadblocks that can arise during the adoption of advanced software and strategies to overcome them.

Discussion of Potential Challenges in Adopting Sophisticated Software

The adoption of sophisticated revenue management software presents a paradigm shift, challenging existing practices and requiring a shift in mindset. Potential challenges include resistance to change from staff accustomed to traditional methods, concerns about the reliability of algorithms, and apprehension regarding the learning curve associated with new technology.

Training Staff to Effectively Use the Software and Interpret Its Outputs

The transition to advanced software necessitates training to ensure that staff can harness its capabilities to the fullest extent. Revenue managers and other stakeholders must develop a comprehensive understanding of the software’s features, functions, and interpretation of its outputs. Ongoing training is essential to keep up with updates, maintain competency, and adapt to evolving best practices in the field of revenue management.

Integration Challenges with Existing Hotel Systems

In an ecosystem where various systems coexist—property management, online booking platforms, CRM systems, points of sale and more—integration challenges can arise. Compatibility issues, data synchronisation hurdles, and the need for seamless communication between different software components can create complexities during implementation. Overcoming these challenges requires a holistic approach to system integration and strategic planning.

Strategies for Successful Implementation and Change Management

The success of implementing sophisticated software hinges on effective change management strategies. Engaging stakeholders early in the process, communicating the benefits clearly, and fostering a culture of adaptability are crucial. A phased approach to implementation allows for gradual adjustment, mitigating the potential disruptions that change might bring. By involving key team members, creating an open feedback loop, and emphasising the alignment of technology with organisational goals, hotels can navigate the transition smoothly.

In the pursuit of unlocking profit potential through the power of sophisticated revenue management software, it’s imperative to acknowledge the challenges that can arise during the journey. However, these challenges are not impossible to overcome. With a proactive approach to training, integration, and change management, hotels can position themselves for success.

Future Trends in Hotel Revenue Management Software

As the hospitality industry hurtles into the future, propelled by technological advancements, the landscape of revenue management is poised for a major transformation. Let’s have a look on the exciting future trends that promise to reshape the realm of revenue management software.

Integration of Artificial Intelligence, Predictive Analytics, and Big Data in Software Solutions

The future of revenue management software is illuminated by the integration of cutting-edge technologies that are already making waves across industries. Artificial intelligence (AI) is set to take centre stage, enabling software to analyse vast datasets and extract insights beyond human capacity. Predictive analytics, fuelled by AI, will evolve to offer even more accurate demand forecasts, enabling hotels to anticipate market trends with unprecedented precision.

Big data will play a pivotal role as well, offering the raw material for these advanced algorithms to process and decipher. The incorporation of AI, predictive analytics, and big data will result in software solutions that not only provide real-time insights but also anticipate future scenarios, allowing revenue managers to craft strategies that are not merely reactive, but proactive.

Potential Impact of Emerging Technologies on Revenue Optimisation

Emerging technologies such as machine learning, blockchain, and the Internet of Things (IoT) hold the promise of revolutionising revenue management as we know it. Machine learning algorithms will become more sophisticated, analysing complex patterns and nuances to optimise pricing strategies dynamically. Blockchain technology may enhance transparency in transactions, bolstering the trust between hotels and guests while simplifying revenue allocation.

The IoT, with its interconnected devices and sensors, could provide real-time data on guest behaviour, preferences, and usage patterns, enabling highly personalised pricing and service offerings.

Understanding Hotel Analytics

While it is undeniable that there is a tremendous amount of data generated throughout the guest journey, for the vast majority of Hoteliers data analytics still remains an unexplored and overlooked domain.  Most of the time they will find themselves trying to find the right balance between improving guest satisfaction and increasing profits. With both competition and customer requirements growing, they would generally rather focus on guest satisfaction than crunching numbers and data. Analytics often fall way down the daily operations list. Almost every industry is supported by software and if a business doesn’t have a deep understanding of their operations, customers and competitors, it is going to be hard to prosper and even harder to profit.  Within the hospitality industry, competition is fierce with a constant influx of new supply and the continuing increase of optionality from the sharing economy. A hotelier’s willingness to both collect and analyse data can have a massive impact – not just on profitability but on reputation as well.

The aim of this article is not to provide a review of current data analytics and technologies associated with them, but it rather focuses on what data & data analytics is all about, what makes incorporating them so important and the benefits it can offer thought the entire organisation.

The Importance of Data

The significant role of data and data analytics is becoming an extremely important part of hotel management – and that too for a good reason. Incorporating data analytics ensures that you will be able to leverage on the information collected thought the entire customer journey and utilise it in order to improve service, revenues and profit margins. This will eventually lead in creating a culture where decisions are based on facts rather than gut feeling and moves the whole organisation from a reactive, problem solving approach to a more forward thinking and proactive tactics. Finally, this will lead in eliminating the current silos that exist in many hotels and ensure that everyone works from the same set of numbers and that strategies are aligned to serve the business as a whole.

Often viewed as “just information” Hoteliers can overlook that when data is analysed in the right way it can provide the answers to crucial business questions such as how to ensure revenue optimization and increase occupancy.

Hotel operators are beginning to recognize the importance of data and any hotel with a website or some social media presence already has access to significant quantities of data. However, there is a real need, not only to understand data collection but also how-to analyse it.  For example, Google Analytics provide valuable information about how a website is performing and analysing customer feedback data can increase return on investment.

Like all businesses, hotels, too, are constantly generating data – important data that can be leveraged to not only improve the customer experience, but also bring about a significant impact in the revenue and profits of the business. Whether or not your hotel has the resources of a five-star international chain, it is essential for you to start collecting and analysing the data gathered on a daily basis. Using the latest software and systems will allow you to collect important and high quality data in a timely manner, and enable you to use this data to your advantage before it becomes obsolete.

Data analytics technologies will also allow you to make informed and data driven decisions that will prove to be beneficial for your hotel business instead of making decisions on a whim that may or may not be in the best interest of your business. Equipping your operations with the right technologies will also reduce the possibility of errors since all of the decisions that you make for will be based on insights of previous experiences instead of being based on what you feel or results that you expect without any real basis.

One of the biggest challenges faced today in trying to create and implement the right data culture is the reliance on legacy, stand-alone systems which handcuffs their ability of Hoteliers to aggregated and analyse information.

System integration is crucial to ensure that cross departmental data processing necessities are met and total spend can be accurately mapped. A seamless system will ensure constant communication between all outlets and provide with accurate, timely and complete information. Some of the internal systems in any hotel today include: Property Management System, Revenue Management system, Customer Relationship Management, Sales and Catering systems etc., while some of the external sources of data include: STR data, Social media, Rate shopping, Reputation management system etc.

It is all about Data!

 

Big Vs. Small Data

At the core of it, big data is a large set of data that, through analysis can reveal trends whereas small data exists on a more manageable scale, generated from sources such as a website or a hotel Property Management System.

Big data is a term that is often misunderstood but with big data the word “big” actually means large, thousands or millions of data points in common and almost always coming from external sources to the hotel.  Examples of big data are weather, traffic or social media data – giant pools of information that can be sorted to find the relevant information required. Combined with internal data, they can provide a holistic picture and help improve marketing efforts, make loyalty programs more effective, better guest profiling and accurate personalisation, enhanced pricing strategies, efficient inventory management etc.

Small data, while without the name impact of small data, is just as valuable and when properly structured becomes actionable information that can make a quick, significant difference to operations.

But is it all about size? While a big set of data can provide a more thorough and in-depth view, what is even more important is data quality.

The major pillar behind any accurate and valuable analysis is accurate data. It is, therefore necessary that hotels should keep proper records of past events, trends, guest preferences etc., in order to project accurately into the future. Although the diversity of the data points could make the task even challenging, having a data culture in your hotel will make it easier as the importance of accurate data is easily understood and implemented by everyone.

Ensuring that data stored by hotels is accurate can provide significant business value and can not only improve guest satisfaction but lower operational costs and maximise profits.

Structured Vs. Unstructured Data

 

In addition to the size of data (big and small) there are two ways that data is compiled;

Structured Data – is comprised of data that is clearly organized, labelled or categorized. They provide a streamlined way to easily filter out the data in order to create fast and actionable insights.  For example, when a new reservation is added to your property booking system, the information entered on the guest such as arrival and departure dates, room type etc., can be easily filtered to better understand booking tends due to the data being sorted or structured.

Unstructured Data – is data that is presented in a disorganised way that makes filtering and searching difficult, but still have the potential to provide valuable insights to a hotel. In most cases, unstructured data come from external sources. An example of this type of data is Review and ranking info from OTA’s or TripAdvisor, although they are data that cannot be collected, stored and sorted easily, they are nevertheless an extremely valuable aid to decision making.

Types of Data Analytics

While we spoke enough about data and their different forms let’s have a look at the different types of data analytics and what differentiates them.

Descriptive Analytics – is the most straightforward and traditional form of analytics for generating insights. They can be used to describe past events and trends or provide with a picture of how business is performing for the future. Descriptive analytics is used in everyday hotel operations for tasks like populating pick-up reports, performance reports, occupancy statistics etc.

Predictive Analytics – go a step further, they are a form of advanced analytics which is used to make predictions about unknown future events. Predictive data uses large groups of past data to analyse parts trends and predict what may happen in the future.  An example of this is Forecasting. Past performance data are used on a very detailed level, usually by day of the week, by segment to provide a guide in producing an accurate estimation of how a specific month, day or segment will perform in the future.

Prescriptive Analytics – go even further than predictive analytics. While Descriptive analytics show what happened and Predictive analytics indicate what could happen, Prescriptive analytics try to guide the process of what should be done in a specific occasion. With the assistance of technologies such as data mining, statistics, machine learning, etc., they analyse current data to make predictions about the future. They are a form of advanced analytics that incorporate algorithms to predict unknown future events.  They include big data, such as weather forecast, airline statistics, review scores, ranking etc., to provide with the best possible course of action.

 

Applications of Hotel Analytics

Data analytics can be a powerful tool for any hotel, from developing customer centred marketing and pricing strategies to increasing ROI.

Personalized marketing and loyalty analytics – by tracking and processing guest behaviour hotels can provide them with personalised offers that can be more effective. An example of this application would be sending an email to a frequent guest to give them a coupon for a free drink on their next visit.

Revenue Management – is the application of disciplined analytics that predict guest behaviour at the micro-market level i.e. selling the right product to the right guest at the right time and the right price. The essence of this application is the understanding of a guest’s perception of value.

Operations Analytics – Energy consumption accounts for a big chunk of the utility costs for a typical hotel.  Data can help hoteliers to keep costs controllable without sacrificing guest comfort by using energy more efficiently. Statistics in operations can also be used to better schedule and manage human resources. This will lead not only to saving in payroll but also in increased customer service by efficient staffing

Operations Analytics – Energy consumption accounts for a big chunk of the utility costs for a typical hotel.  Data can help hoteliers to keep costs controllable without sacrificing guest comfort by using energy more efficiently.

Investment Management – Another way to use analytics for the hotel industry is for financial performance.  An example of this would be refurbishing the lobby and some of the rooms and then monitoring the difference (if any) in booking rates and customer satisfaction to make a data driven decision on future investment.

Today’s digital environment had brought about a new generation of hoteliers looking to monetise their data by acquiring actionable insights.  Hotels now have an abundance of new data than previously seen with paper transactions and manual processes and hotel professionals can now gather information through purchased or leased resources.

Data analytics are now much more manageable and distributed analytics can be implemented to increase performance, guest loyalty, reduce waste and improve sustainability. The key to effectively enhancing a guest’s experience through analytics is to collect the data in a non- invasive way, using information from past bookings, third parties and various forms of feedback. Hotel data and analytics are key contributors to building stronger relationships with guests and ultimately driving better guest loyalty, revenue and profitability.

While writing extensively on Total Revenue Management over the last months, there is one subject that always felt germane and inseparable from the efforts of any Revenue Management professional to levitate their roles and acquire the commercial status that is the natural progression for this key business focused position. That subject is Emotional Intelligence and it provides the means to balance personal and social skills and bridges the gap to attaining the desired leadership status.

As we’ve discussed by now, today’s revenue managers have to deal with a lot more than just systems, rate management and reporting. More than analytical skills, revenue managers need to possess communication skills, leadership skills, and they also have to strive to be influential and motivational.

This is where emotional intelligence plays a central role in the career of a revenue manager. If a person in such a position is incapable of being empathic about the challenges of others, and if they’re unable to convey how valuable they are & the importance of their contribution, then they’re at risk of failing to help others unleash their full potential, which directly affects their success and the performance of the hotel business as a whole.

To understand Emotional Quotient or Emotional Intelligence, let’s dive deeper into the subject and see why it’s so vital for revenue managers to develop this essential skill.

What Exactly Is Emotional Quotient/Intelligence?

Emotional Quotient, most commonly known as Emotional Intelligence, also referred to as Emotional Intelligence Quotient, in its simplest terms, is the ability that individuals have to both recognise their own emotions and those of others.

It’s also the ability to differentiate and label feelings correctly, to use this emotional information to guide both thinking and behaviour, and to manage emotions so they don’t become a hindrance in achieving our goals.

Emotional Intelligence and empathy are terms that are often used interchangeably, and even though empathy is a big part of EI, EI is a lot more than just being able to relate to other human beings or to connect one’s own personal experiences to those of others to understand their position at any given time.

Emotional Intelligence encompasses self-awareness, self-regulation, motivation, empathy, and social skills. These five essential pillars of emotional intelligence are what make it so vital for people in positions of leadership.

Studies have shown that people with greater EI enjoy better mental health, they often show high job performance, and they possess great leadership skills.

Daniel Goleman, author and science journalist, gave EI its popularity in 1995 by writing a book about it, and it’s him who indicates that Emotional Intelligence as a whole accounts for 67% of the abilities that are considered to be necessary for leaders, which in fact matters more than technical expertise and even IQ.

 

Characteristics of A Leader with High Emotional Intelligence

The emotionally intelligent Revenue Manager will stand out among others because they practice the five pillars of EI that I mentioned above, so let’s look at each of them in turn and explore other important characteristics.

Self-awareness is one of the most important characteristics of the intelligent leader and it involves being aware of one’s own strengths and weaknesses, and understanding one’s own journey. This will allow them to shape their path while guiding others along the way.

Self-regulation goes hand in hand with self-awareness and it’s all about weighing your words before speaking. A good leader is always able to do this because he recognizes the impact he has on others. Because of this, they recognise the importance and the impact of words, which allows them to use them in a positive way.

Emotionally intelligent leaders also seem unable to lose motivation. They always strive and work towards their goals in a consistent and resilient way. This sort of behaviour has a contagious effect on others, which is why this kind of leader is often so successful at leading by example. This is a crucial element when we consider the competiveness of the hotel industry. Strategies and tactics need thorough and constant evaluation to reflect changes and any deviations need to be seen as a motivating factor and an opportunity to adapt and evolve, rather than failure.

Empathy is yet another essential trait, and it’s the ability of putting oneself in someone else’s shoes, which is what a successful leader should always be able to do. This leads to healthy social skills, which allow leaders to build a rapport with others and to communicate efficiently. The daily operations in Revenue Management can impact and influence decisions in other departments such as Sales, Marketing etc. A highly emotionally intelligent Revenue leader needs to comprehend the effect their decisions have in order to communicate them effectively while anticipating resistance will enable them in proactively resolving possible conflicts.
Another vital characteristic of the emotionally intelligent leader is that they are able to balance their work and their personal life. They recognize the importance of taking care of themselves, and they also encourage employees and colleagues to do the same.
This type of leader is also capable of putting setbacks into perspective in order to deal with them accordingly and appropriately. Emotionally intelligent leaders recognize the learning and improvement opportunities that lie within failures and disappointments. They engage with constructive criticism in order to learn from the experience and then move on to the next task.

Leaders with high EI are better at being fair, both to themselves and to others. They recognize value in others, and they judge employees objectively, which prevents an unbalanced workplace morale.
Assertiveness is another of the main traits of emotionally intelligent leaders. They can balance the need for respect with the need to voice their opinions and points of view in such a way that they share what they deem important without feeling embarrassed or attacked if they’re met with opposition.

Leaders with low Emotional Intelligence can be easily overwhelmed by trivial matters and they are not the best managers of time and personal energy, as they tend to devote it all to small battles.

An emotionally intelligent leader effectively recognizes that micromanaging is a big distraction and that there are better ways of achieving long-term business goals.

These are only a few of the most important characteristics that usually define the emotional intelligent leader. Much more can be said about the great qualities of emotionally intelligent individuals in general, but these are the most notable and essential traits from which we can learn quite a bit.

Why Is Emotional Intelligence Relevant to a Revenue Manager?

If we consider the characteristics of emotionally intelligent leaders, every single one of them is relevant to revenue managers because each one represents a strength that can help them do their job better and generate higher revenues.

Managers who are emotionally intelligent really do make a difference in both outcome and attitude of every employee under their leadership. This, in turn, makes employee profit performance grow exponentially.

This is due to the fact that emotional intelligence allows revenue managers to solve conflicts in a constructive manner, and to establish a relationship of cooperation and trust among team members.

What’s more, such leaders use communication so effectively, that the team runs like a well-oiled machine; motivated and energised to perform their tasks to the best of their ability.

Employees under this kind of constructive and effective leadership often feel like their contributions matter and that their work is valued, which leads them to go above and beyond their duties.

The combination of all these factors has an incredibly positive effect on a company’s performance and success because it creates a workplace environment where everyone works together and is collectively motivated to achieve the same goals.

 

Ways to Increase Emotional Intelligence

Now that we have established how important EQ is for everyone in a leadership position, let’s see how we can increase our emotional intelligence and become better, more assertive people.

Being capable of understanding one’s own emotions is essential because this is what makes it possible for us to manage them accordingly. This may seem difficult, but the only thing you need to do to start understanding your feelings is to be aware of them. Take a moment to think about how you’re feeling at any given moment and try to trace the feeling to its roots.

We often tend to dismiss our feelings too quickly because sometimes they seem to be in the way, but the truth is that they’re more of a tool than a hindrance.

Understanding our emotions leads us to managing them. One of the great qualities of emotionally intelligent leaders is that they are able to pause whenever they’re feeling an intense emotion, whether positive or negative, and think before acting on it.

Of course, managing emotions can be particularly challenging for certain people, but the trick is to learn how to take a moment by shifting your emotional state whenever necessary. To do that, you can take a walk, do breathing exercises, vent to someone, listen to music, or anything else that can help you regain composure.

Managing emotions is also about correcting, so the goal is to learn how to give your feelings their place so that they don’t get in the way of your decision-making process. That’s why introspection is so important and it serves to ask questions to yourself in order to clarify and understand your emotions.

Last but not least, empathy is an essential part of EQ, so it’s important that we strive to make it stronger within ourselves. Understanding your own feelings makes it possible for you to put yourself in someone else’s shoes whenever you need to, but that’s not all it takes. You must also be open to interact with others and you must work on both your listening skills and your communication skills because they will guarantee honest exchanges that will help you grow as a person and a leader.

These are just a few of the exercises that you should integrate into your daily life to start maximizing your emotional intelligence. Practice conscious self-awareness and introspection, and you will see that your ability to manage your emotions and put them into use will increase exponentially.

 

 

In this series of articles on Total Revenue Management (TRM) we started by identifying five core elements namely, Revenue Culture, Market segmentation, Seamless technology, Forecasting by Revenue stream and Optimisation by Revenue stream, that consist the fundamentals for efficiently and effectively embracing such a business practice.

While the first three pave the way for successfully adopting and implementing TRM as a commercial philosophy, the last two involve the day-to-day ongoing operational activities for managing revenues and profits. This article will focus on Optimisation as a necessary tool for a successful total revenue management plan.

What is Optimisation?

Optimisation, a cornerstone of Revenue Management operations, is the action of making the best or most effective use of a hotel’s inventory while guiding the simultaneous action of revenue and profit growth. It ensures the best and most effective use of strategies and tactics in order to balance supply and demand and deliver the optimal business mix. Optimisation relies on intelligence gathered during forecasting, a process that indicates changes or variations in booking pace of a segment or segments, in order to deliver an updated action plan. It then moves on to investigate external factors that influence demand providing thus with a complete view and understanding of all dynamics.

Optimisation drives the ongoing process of controlling product availability and price to ensure revenue and profit growth. In a constantly changing market place, having a thorough understanding of booking patterns, lead times and cost of distribution will enable managing demand not only by price but also by cost of acquisition & contribution by revenue stream or centre.

With demand fluctuating, optimisation aims to highlight deviations from the strategies in place and suggests corrective measures. It takes into consideration the profit elements that influence performance in all revenue streams in order to decide potential reformulation of adopted strategies. Having the right revenue culture makes optimization easier to implement as there will be times where a sacrifice in price will need to be made for a product in one department in order to secure a piece of business that has significant profit value in another.

Fundamentals of the Optimisation process

There are five major elements in the Optimisation process: Pricing, dynamic price adjustment of product and services; Availability, management of inventory and product or services supply; Group evaluation, determining the implications of accepting a large piece of business; Ancillary Revenues, combination of strategies for all revenue streams; Tracking performance, measuring and understanding of successful strategies or failed actions.

1. Pricing

A coherent pricing strategy starts with the knowledge of your market segments as the process of constructing them has already taken into account the buying power and spending willingness of each, booking patterns along with the cost of acquisition for each segment. This provides a detailed view and understanding of who the customers are, when they book and via what channels and last but not least support the calculation of the profitability of each segment through a better understanding of net rates.

When applying pricing, consideration needs to be given to the impact it has to each of the market segments and how that influence booking behaviour and patterns. A successful pricing approach will determine key decisions on strategies to adopt for revenue maximisation throughout the organisation, while the ability to anticipate demand patterns and preference requirements will facilitate the design and availability of services and products.

Pricing strategies are a consideration of how the business is currently trading in combination with the targets that need to be achieved. Moreover, knowledge of the market and the forces that drive competition is necessary as pricing decisions should not only be based upon what is happening in the hotel, but need to include external factors that influence demand. When it comes to pricing an often misunderstood concept is the notion of dynamic pricing being valuable only when demand is high. Pricing should also be used to stipulate demand as successful marketing activities that target the right segment at its optimal booking window can help create the required “base” business. The amount of required “base” business will vary according to the period of the year and despite popular believe it doesn’t necessary need to be built out of public discount or promotional rates but also from segments such as Groups (leisure and business), Wholesale etc., that have longer booking window.

Finally, it is important to keep in mind the perceived value for money and have a thorough view of the value the market places on the product or service. To achieve this, it is essential to incorporate ranking and review scores from different sources as it can be a critical decision factor for potential customers. To proactively RM your hotel not only by price point but also by cost of acquisition & contribution by revenue source, it is essential to understand the unconstrained market demand. That can be achieved via a detailed forecast which allows the view of how business is likely to perform in the future and it determines the fine-tuning of long term strategies and the deployment of short term tactics.

 

2. Availability

As we already discussed, to increase the benefits from a TRM system, it is vital to optimise the buying process and measure total spend while considering different type of customers, their purchasing power, needs and habits.

Availability focuses in optimising and controlling inventory with the purpose of achieving the optimum business mix. By optimum business mix we mean the number of rooms allocated for each market segment, for a specific period, that lead to the best possible revenue and profit though-out the hotel. Moreover, these controls need to be implemented in food and beverage outlets, meeting rooms, spa facilities and any other revenue generating stream. A thorough understanding of profitability by segment and booking channel is imperative for successfully implementing availability controls. The purpose of such controls is to ensure enough inventory is available to the segments that are willing to pay the most when demand is high – traditionally these segments tend to have short lead times.

Some of the most common availability controls for rooms or meeting space are: Minimum Length of Stay (MLOS), requires booking to be made to a minimum predefined number of nights and is used to avoid uneven occupancy patterns that can block longer stays or restrict availability during high demand; Maximum Length of Stay (MaxLOS), requires booking to be made to a maximum predefined number of nights and is used to control discounted or promotional rates; Closed to Arrival (CTA), prevents bookings to be made with arrival on a specific day, CTA is used to avoid blocking days with weaker booking demand. Other controls can include allocating a specific number of rooms to promotional and discounted rates, limiting bookings for specific room types for particular rates etc. Above controls should be applied to all functions and not only rooms. For example, the use of such controls to meeting rooms is of particular interest due to lower fixed costs that can lead to higher returns and profits.

3. Group evaluation

Looking at business displacement plays an important part in the optimisation process when deciding which pieces of business to consider or decline. The process of calculating displacement will need to include cost of sale, overall revenue contribution, contribution margins for different revenue centres, past performance over considered dates as well as forecast for the booking period.

Displacement analysis is usually required when considering groups, a large number of rooms booking together, or when coming across requests for extended stays. Every piece of business we accept limits the possibility for other business to book. It is therefore important to understand the impact every decision has and how essential displacement is in planning and driving revenues and profit. While there is a tendency to judge such bids only by rate, special consideration needs to be given in factors such as Total spend in all outlets and the value of the bookings the hotel will not be able to accept in the future. As Groups tend to have a long lead time, the necessary availability controls will need to be implemented in order to allow reaching the target for the optimal mix.

 

4. Ancillary revenues

Ancillary revenues are an often over-looked area for revenue increase. With growing competition and over supply limiting or making achieving significant growth in room sales more challenging, ancillary revenues represent an opportunity for growth from streams that have not traditionally being the focus of attention but can nevertheless provide with significant returns. This has made the effort of maximising all revenue streams to their fullest potential an important factor in the operational process.

Ancillary revenues can be generated throughout the entire customer journey, from placing a booking to checking-in, from throughout the duration of their stay to keeping in contact after the have left the hotel. During the booking process and before arrival, hotels have the opportunity to assist the planning process by providing additional services, options to upgrade to higher room types, promote traditionally no busy periods for dinner, spa or other facilities. During the stay every point of contact becomes an opportunity to sell or upsell. From a room upsell during check-in and in-room amenities to all services offered. After the guest has left asking for feedback becomes the starting point for increasing communication and loyalty.

Beyond generating additional income, optimisation of ancillary revenue streams should aim to combine booking and transactional data. The insights from this analysis will lead to providing customised promotions, offers and service.

 

5. Tracking performance

Tracking and measuring the performance of the optimisation process is a crucial function with countless benefits. The intent of this practice is to take a thorough look into strategy and procedure execution and offer clues on how to enhance their future performance. Combining and analysing the information gathered through the deployment of various strategies and the insights gained through examining their outcome, booking history and trend data will allow you to make better and more informed decisions that will prove to be advantageous for your hotel business overall. Furthermore, it can provide insights in underlying inadequacies in strategy setting which can lead to more efficient ways to utilise marketing and sales resources. Identifying areas of improvement will can lead to more precise results by improved methodologies and capacity utilisation, increased return on investment by enhanced promotional efficiency and better customer satisfaction.

Although a considerable amount of time is spent in drawing and deploying strategies, not enough effort is put into trying to understand if these reached their intended target or what can be done to improve future performance. Tracking and measuring the impact of the process can increase the effectiveness of demand optimisation and lead to more accurate and operationally valid actions.

 

Even though the components emphasised in this series of articles are by no means a definitive list for a TRM system they highlight some key focus areas. And while there are still challenges in the adoption of such a business practice it is an exciting time for Revenue management. Technological advances have led to systems with enormous potential for handling the complexities of managing revenue streams due to their abilities in advanced problem solving, reasoning and perception. This will elevate the role of RM and empower it to reach its full potential whilst allowing the whole organisation to benefit from its concepts.

Today’s hospitality landscape is characterized by increasing room supply and high cost margins. And while there is enough space for everyone to excel at delivering optimum performance & results, the stiff competition makes it imperative for hotel revenue managers to constantly adjust in order for their strategies to remain relevant. This is even more sensitive when the seasonality of the business is considered.

Accurate demand forecasting is extremely important for a business as it drives strategic planning aimed at optimising sales, increasing operational efficiency, improving customer service and maximising profit. Predicting what the customer wants, anticipating the sales of products and services helps managers understand revenue opportunities and make informed decisions about pricing and business growth strategies.

With a holistic revenue management plan, a hotel can be confident it is still running with the most profitable business mix while all revenue streams are optimized and designed to improve customer service.  Much has already been discussed about the components that are vital for an effective Total Revenue Management process (TRM) in earlier installments in this series. This article will focus on forecasting by revenue stream as a necessary tool for a successful total revenue management plan.

What is forecasting?

In simple terms, forecasting is the process of predicting future developments in any hotel by using past and present data. It involves attempting to gain an insight into the future while relying solely on past trends and present events. Forecasting is the scientific version of crystal gazing and while future events may deviate from past trends, the intelligent insights obtained from forecasting, provide a reliable platform to build upon.

Forecasting hotel demand and revenue accurately can prove difficult. Though the seasonality lends some much-desired predictability to the task, factors such as changes in the market, consumer behavior etc., still make it seem like trying to hit a moving target. But it must be done and done right if a hotel is to maximize revenue & profitability. Vital business decisions bordering around pricing, advertising, distribution etc. are all made based on the conclusions drawn from a forecast.

The importance of forecasting to TRM

As hinted earlier, many management decisions rest on the quality of forecasts making it even more germane to total revenue management. Total revenue management focuses on increasing revenue across all revenue streams, rather than simply relying on revenue generated from rooms. Forecasting helps to generate relevant strategies to achieve this. A good forecast would not only predict when clients would be coming into a hotel. It would also give an insight into associated data like where they would be coming from, how they book, the duration and purpose of their stay, trends on spend in other revenue streams etc.

A hotel located in a leisure area, for example, would naturally expect a spike in demand during the tourist seasons. Traditional revenue management systems would only move to manipulate the rental prices of rooms during this period. There is only so much revenue that can be generated with this approach if the hotel management doesn’t want the strategy to backfire. TRM on the other hand would employ data to come up with additional services that would increase patronage and revenue. In a previous article we talked about Seamless technology. Data gathered from various sources are a key component in deciding services to introduce, improve or replace in an effort to anticipate changes in consumer behaviour.

Forecasting becomes all the more important when we consider the key matrices that can be improved upon during different demand seasons. Forecasting takes all these into considerations and provides reliable data from which informed decisions can be made.

Forecasting models

There are numerous models of forecasting but they all stem from two major models. Every method that is used to make a forecast is based on these two models which are qualitative and quantitative models

Qualitative models: the scope of this forecast is limited and is utilised in making short-term predictions. It is used in making a short-term success of the hotel organization and enhances the quality of the services rendered. It is expert driven and does not involve historical data.

Quantitative model: this involves the use of statistics to discern the trends and progress of the organization. It is used for long-term predictions. This type of forecasting is accurate as it based on the utilization of a large amount of data. It takes into account data such as market segment profitability by revenue stream, cost of sale, statistics on channel and boking source, booking pace, geographic origin of business etc.

Forecasting process & tips

As mentioned earlier, accurate forecasting could prove a daunting task for even the most experienced revenue manager. So how do we accurately forecast demand? Forecasting is both a science and an art as it requires statistical analysis of historical data and trends as well as flexibility of mind to make assumptions on elements that have no trend or are new to the business and therefore have a high level of uncertainty.   But, it is far from impossible.

There are 3 steps that need to be considered before establishing forecasting requirements:

• Define the elements that need to be forecasted in line with targets and how detailed your forecast needs to be
• Define the timescale of forecasting in line with business needs
• Continuously monitor forecast evolution & accuracy

1)Define the elements that need to be forecasted in line with targets and how detailed your forecast needs to be

A business should decide which elements need to be forecasted by looking at business activities that drive profit and Key Performance Indicators that, if met, will ensure achievement of targets. In hotels, the most common KPIs are occupancy, ADR, RevPAR. Exceeding last year occupancy level and rate whilst maintaining cost at a similar level of prior years, should lead to certain profit. A good forecast should also look at market segmentation as each segmented customer has different purchase intentions and therefore purchasing requirements, preferences, expectations, booking trends, etc.

A family going on a holiday break will have different requirement than a business traveller attending a conference. Forecasting each of these customer requirements and spend will not just allow the organisation to plan operations around meeting these requirements but also decide which of these customers is more valuable for the organisation and therefore which one to take and which one to turn down. When forecasting demand by segment, an organisation should not just look at the base rate but also consider ancillaries and cost of sale as the total revenue generators may be different than the single value of selling a room.

Each organisation needs to find the right balance between detailed and aggregated forecast. Forecasting by revenue stream does not entail performing a thorough forecast for each revenue source, rather keeping in mind contribution and cost. An optimum contribution should have high enough returns to aid strategic planning and enough details to produce a robust forecast (the higher the number, the more accurate the forecast).

2) Define the timescale of forecasting in line with business needs

It is crucial to define the period to forecast, how far in advance an organisation should forecast and how often/the re-occurrence (next 3 months, 1 month out, weekly forecast, etc.).

When deciding timescale’s for forecasting we should consider the business requirements and the lead time the hotel needs to react to changes in the forecast. Depending on the market a hotel is based in, forecasting needs to be done as far in advance to match booking pace patterns in-line with demand.

 

3) Continuously monitor forecast evolution & accuracy

Forecasting is an ongoing process as it reflects the constant changes in BOB, (Business on the Books), and booking pace while it reflects on strategies in place and the impact they have on how business materialises.

Measuring and evaluating forecast accuracy is as important as forecasting itself. It allows a view in common errors in how a forecast is constructed while in can highlight previously missed patterns.  As forecast deviations are inevitable, extra effort is required in keeping track of accuracy to facilitate reducing errors to a minimum.

One of the best metric to use when measuring forecast accuracy is the Mean Absolute Percent Error (MAPE), as it represents the forecast error in percentage and absolute terms.

MAPE = (Absolute Value (Actual – Forecast) / Actual) x 100

Calculating the square root of the variance in error (Standard deviation) can also help improving the forecast as it will identify not just the average difference between actual results and forecast, but also the spread of accuracies.

It is a good practice to predict first the “unconstrained” demand, the “real” consumer demand not affected by managerial decisions, yielding actions or supply constraint.  In order to do so it is important to analyse historical data taking into consideration not just the business accepted/booked but the amount left on the table (turndown, rejected bookings, etc.).

Once unconstrained consumer demand has been established, RM can calculate the segment that will bring the most total revenue and profit. The unconstrained forecast becomes “constrained” and this will be the “plan” to distribute to relevant stakeholders that if successfully executed will bring the highest revenue and profit for the organisation.

Below are some tips that could aid forecasting efforts.

• Proper documentation – focus on quality

The major pillar behind any accurate forecast is accurate data. It is, therefore necessary that hotels should keep proper records of past events and trends in order to project accurately into the future. The diversity of the records could make the task even more difficult. Having a revenue culture in your hotel will make it easier as the importance of accurate data is easily understood and implemented by everyone.

• Collection of historical data & analysis of past trends

The seasonality of the hotel business makes historical data the best forecasting tool around. Although the projections obtained thereof may not be completely accurate, it still provides a good idea of when to expect spikes in demand and provide a detailed road-map of booking pace and patterns.

A thorough rooms forecast should involve analysis by market segment, by day. When forecasting by day it is imperative to compare like to like and therefore analysis should be done by Day of the Week and not by date. It is also important to have an indication of pace and how current trading variances from the average booking patterns for the specific day / segment.

• Identify and analyse special events separately

It is imperative to monitor special events and holidays alongside the historical data. This will provide with a solid understanding of seasonality trends and any pattern that happens often enough to predict their repetition. It will also be easier to highlight deviations for past patterns which may signal reviewing or changes to current strategies. As above analysis needs to be made on Day of the Week basis to ensure like to like comparison. Lastly it can help identify changes in consumer behaviour (booking window, customer requirements, etc.) and decide which elements to include or exclude (anomalies) from future forecast

• Be aware of what the competition is doing right

It is true your hotel should have its own unique methods and strategies, but the competition in the hospitality industry is such that you wouldn’t want to be left behind. Keep tabs on the competition’s pricing strategies, advertising techniques, get to know if a hotel recently opened in your area or if a hotel just embarked on extensive renovations. Then do what you can to stay on top of your game.

• Pay attention to global trends

This is particularly important to a hotel that enjoys a lot of international business. Follow the general trends in the hospitality industry. Has there been a recent decrease in the industry’s viability? Is the economic situation in a particular country having a negative or positive impact on the industry overall? Monitoring these trends would give you a fair idea of what needs to be adjusted and where you need to focus your efforts.

• Collaborate with the marketing department Your forecast data should factor and guide the efforts of the marketing and sales department of your hotel. You should know how your hotel is being projected to the people and where your demand is coming from. Forecast data can also help channel marketing efforts. If forecast data shows a lack of interest from a particular market segment, marketing efforts may be steered towards attracting that segment.

Forecasting is germane to total revenue management in the hospitality industry. An accurate forecast gives the much-needed peek into the future and affords revenue managers a strong platform on which projections can be made. Remember, the idea behind the concept of total revenue management is to increase the revenue generated across the board and not simply focus on the revenue generated from room rentals. A comprehensive forecast data would, therefore, not only focus on demand but also on the origins of the demand and related information and details on how revenue is spend throughout all outlets. Having an insight into such associated information informs decisions that would aid total revenue management efforts.

Total Revenue management is becoming an extremely important part of hotel management in recent times – and that too for good reason. Incorporating revenue management in your strategy ensures that you will be able to leverage the maximum number of components of the entire customer journey to improve sales figures. The entire operation of a business is taken into account for a total revenue management system regardless of the industry that the said business is based in.

Needless to say, it is practically impossible to make the most of a revenue management system without the right technologies by your side. Below, we’re talking all about how technology is incorporated in a total revenue management system and why it’s so important for successful implementation and execution of the system.

As important as total revenue management process may be for your hotel business, the fact of the matter is that incorporating and implementing the right strategies won’t quite be as effective unless you know how to use and leverage the technologies associated with it. Additionally, having access to the technologies that are affiliated with creating a total revenue management approach but not knowing how exactly they can be leveraged to your advantage, too, is problematic.

Like all businesses, hotels, too, are constantly generating data – important data that can be leveraged to not only improve the customer experience, but also bring about a significant impact in the revenue of the business. Whether or not your hotel has the resources of a five star international chain, it is essential for you to start using the latest technologies to make the most of your total revenue management system. Using the latest software and systems will allow you to collect important and high quality data in a timely manner, and enable you to use this data to your advantage before it becomes obsolete.

Using the right technologies will also allow you to make informed and data driven decisions that will prove to be beneficial for your hotel business instead of making decisions on a whim that may or may not be in the best interest of your business. Equipping your operations with the right technologies will also reduce the possibility of errors since all of the decisions that you make for your business will be based on insights of previous experiences instead of being based on what you feel or results that you expect without any real basis.

Since you will be able to gain a lot of useful information by using the right technologies with a total revenue management system for your business, it will also be far more easy and convenient for you to optimize different components of the buying process. The latest technology for a total revenue management system for your hotel business will also help you analyze the market and view booking patterns in order to leverage different factors, operations and activities in order for you to make the most of your hotel business.

Which Type of Technology Should You Use for Your Hotel Business?

To facilitate the above a seamless system that enables cross-departmental sharing of data will be a key element. While the benefits of technology are undeniable, the variety of systems used in different departments may present a challenge for implementing a TRM process. System integration is required to ensure that cross departmental data processing necessities are met and total spend can be accurately mapped. A seamless system will ensure constant communication between all outlets and provide with accurate, timely and complete information for successful optimisation while enabling and supporting better management forecasts. Some of the internal systems in hotel today include: Property Management System, Revenue Management system, Customer Relationship Management, Sales and Catering systems etc., while some of the external sources of data include: STR data, Social media, Rate shopping, Reputation management system etc.

A seamless flow of information will enable hotel operations to streamline their efforts leading to enhanced guest experience and business performance. A well-constructed and integrated system will allow reaping the benefits of gathering and optimizing the continuous flow of information, produced by all different departments. It will act as a central hub for storing and processing real time and past data. Key benefits of an integrated network of systems are:

• Creation of a central database. Data produced in different departments and outlets can be stored in a central pool of data. This will enable hotels to effectively combine and analyse information. Data quality is of outmost importance as the quality of decision making will be as good the information it is based on. It is therefore imperative to have enough controls and checks in place to guarantee data quality and integrity
• Understanding of customer behaviour. Data gathered and analysed from all different sources will enable hotel operations to better understand their customer behaviour and offer enhanced guest experience by providing personlised service. It will also permit them to predict trends in spending patterns and improve guest experience by better designing products and services
• Streamline internal processes. A total revenue management culture will eliminate departmental silos and lead to improved internal communication and sharing of information. Furthermore, it will create improve efficiency in the daily operational tasks which in return will reduce operational costs
• Improve business intelligence and decision making. Combining data from different sources will provide with a holistic view of the business and how it performs. Better business intelligence will advance commercial performance through enhanced information-based strategic decision making. This will not only benefit your Revenue management strategies but also your operations by providing insights on booking patterns, product and services utilization, markets & customers to target etc.
• Competitive advantage. Seamless technology will not only help improve business performance but it will provide a competitive advantage by creating a seamless guest experience. Better understanding of customer wants and needs will pave the way to offering personilased service. Finally, this will lead to increased loyalty and customer retention

When it comes to designing a total revenue management process, one of the most common problems that people face is that they are uncertain about the type of technology that they should opt for. Contrary to popular belief, relying on a generic technology or revenue management system won’t do much well just like the same strategy won’t offer the same results for every type of hotel business. In other words, the cookie cutter approach isn’t of much use when it comes to selecting the right technology or revenue management system for your hotel.

Small hotel businesses will obviously need technologies and systems that are different from those that are needed or required by international chains of hotels. A small-scale hotel business will, therefore, need only a few technologies in addition to a dashboard that helps them keep track of basic information and manage inventories. This is particularly important because small hotels often face problems of overselling because of minor human errors or manual entry of data.  Automating the system will help you better understand the areas where your hotel business was suffering due to easily avoidable problems and mistakes and with the right insights and data to back your decisions, you’ll be able to take well informed and calculated steps to rise to success one booking at a time.

The needs and requirements of a more established and recognized hotel business will be different than those of a hotel brand that only has a single franchise or two. Seamless technology becomes a necessity more than a privilege in cases like these. It is important for a mid-scale hotel business to have a proper reporting system; it is also essential for a hotel business like that to tweak their revenue model at regular intervals, based on the data that is being collected to ensure that the revenue management system is always up-to-date, leverages data, analytics, and insights for all the right reasons.

With access to the right systems and technologies, mid and high level hotel businesses will also be able to apply forecasting which can provide in-depth information about the market and what needs to be done to succeed. Hotel businesses that are competitive will also be able to leverage big data with the help of the latest technologies that will allow them to understand the needs and requirements of customers in a more personalized manner, allowing them to optimize the customer journey and buyer’s process in a way that will be guaranteed to drive conversions and improve revenue figures.

Some of the factors to consider when deciding on any system are: technology and data integration, cloud hosting, mobile access, flexibility and customisation & user experience.

While technology is important for the successful implementation of a total revenue management system for a hotel business, it is essential for people to understand the type and nature of technologies that they can leverage to maximize improvements and an increase in the overall revenue of the business. This is exactly why research about the different options available is crucial and must be done thoroughly to ensure that you’re making the right choices that will prove to be beneficial in the long run.

To increase the benefits from a Total Revenue Management system (TRM), it is vital to optimise the buying process and measure total spend, consider different type of customers, their purchasing power, needs and habits. For optimum results the process of segmenting customers will need to take into account the contribution of each segment in all revenue streams as well as the cost of sale. This will provide a detailed view and understanding of who the customers are while having the knowledge of which segment is more profitable, will offer a clear insight and enable the development of the Optimum Business mix. In fact, while examining only rooms may classify a segment secondary due to less booked revenue, the contribution in ancillary services and products combined with how they book can make it more profitable.

Market segmentation is of particular importance in the complex and competitive world of today because it does not only help put things in perspective, but also ensures that you won’t have to waste money and efforts in areas that won’t bring any positive results.

Cost of acquisition and contribution by revenue source are extremely important factors that need to be taken into consideration when managing a business in the highly competitive and ambiguous hotel management industry of today, which is another reason why market segmentation needs to be leveraged. Doing so will not only help you understand where your customers are coming from, but it will also be easier for you to figure out which areas need improvement and which customer groups you should focus on more for greater revenues.

Still not convinced? Below, we’re talking all about why market segmentation is so important, how it’s done, and how market segmentation can prove to be beneficial for any hotel.

Benefits of Effective Market Segmentation

• Leads to better customer understanding – Lays the foundation of understanding customer behaviour, booking patterns and spending habits. This can lead to improved and personalised service
• Leads to superior insights – Segmentation is the cornerstone of Revenue management and guides efficient and accurate forecasting combined with insights such as booking pace, channel and geographic origin of business statistics etc.
• Leads to enhanced pricing and optimization strategies – Strategies take into consideration spend by revenue stream and therefore lead to more effective plans
• Leads to effective use of budgets – Effective segmentation provides guidance for better utilization of both marketing and operational budgets. Targeting the right audiences at the right time guarantees better conversion of promotional activities
• Leads to increased profitability – Contribution by segment provides a way to not just increase revenues but also profitability across the entire operation. Optimum Business Mix is now comprised of indicators that highlight the impact of each segment on profit performance

What is Market Segmentation and How Does It Fit into Your Hotel Strategy?

Contrary to popular belief, market segmentation is possible in practically every industry, which is what makes it even more unfortunate that the approach is not being fully leveraged in hotels. However, before letting you in on how hotels can leverage market segmentation, it is essential for you to understand some of the benefits that market segmentation brings. Incorporating this strategy or approach can not only help optimize the revenue and profits of your hotel by creating different groups of customers on the basis of their features, but market segmentation also acts as a great risk management technique.

With market segmentation and categorizing your customers into different groups and subgroups, you will not only be able to distribute the risk involved, but will also be able to try your hand at different techniques and strategies for each of your different customer groups to figure out which of them is most promising and brings you the best results without putting all of your eggs in one basket.

So, how can you go about incorporating market segmentation for your hotel? Read on for the details and some of the greatest tips on how market segmentation can be leveraged.

How Can Market Segmentation be achieved in Hotels?

The first thing that you must do to leverage market segmentation for your hotel is to classify your customers into groups based on certain unique or distinct features. By definition a market segment is a group of customers with similar buying power & willingness to pay for your product or services. To fully benefit from the process of defining your market segments It is important that the following criteria are considered:

• Measurable: the ability to measure the size of the segment along with frequency and volume of booking
• Accessible: segment needs to be accessible by the hotel in order to influence their booking behaviour
• Substantial: the segment needs to be big enough in order to generate adequate revenue
• Differential: segment needs to have different booking patterns, acquisition costs, price sensitivity etc.
• Actionable: the hotel needs to be able to actually sell to the specific segment

A coherent set of market segments will not only guide the process of pricing but also forecasting, setting up the optimum business mix and all promotional & marketing activities. While considering marketing activities, segmentation criteria will also include Geographic, Demographic and Psychographic variables.

In many hotels there is a tendency to mix market segments and booking channels (Segment: who is the client depending on his willingness to pay, booking channel: the channel used to make the booking), it is our opinion that these two should be tracked separately, although a well configured market segmentation will also provide an indication for both.

For example, OTA is a segment we have seen in some of the hotels we have worked with. But is it a segment? Before answering that consider the following: You have one guest who books your Best Available Rate directly on your website and one that books the same rate via an OTA. Are those two guests willing to pay the same price for staying with you? Yes, therefore by definition they belong to the same segment. What changes is the method of booking. If you then consider BAR (Best Available Rate) as the broad market segment group, it could have sub-groups to help better identification and tracking of customers. Potential sub-groups for your BAR segment could be: BAR-direct, BAR-OTA Net, etc.

The uniqueness of your segments and sub-segments will enable better and more accurate tracking of how business is picking up, deviations from your strategy and forecast while enabling you to identify periods that require extra attention.

For example, some of your main market groups can include:

• BAR: Best available unrestricted rate, sub-groups can include BAR-direct, BAR-OTA Net, etc.
• CORPORATE: Rates contracted to specific companies, sub-groups can include segments by volume/rate, Consortia rates etc.
• DISCOUNT: Restricted or fenced rates derived from your BAR, sub-groups can be as per BAR segment above
• PROMOTIONS: Ad-hoc promotions designed to fill in occupancy gaps
• GROUPS: Usually bookings for more than 10 rooms, sub-groups can include Leisure groups, Corporate groups, Residential groups etc.
• WHOLESALE: Opaque rates contracted with various travel agents that they use to resell

This is by no means a definite list of market segments but an indication of what can be included. The appropriate segments for your hotel will need to be determined by examining your product, the market and the competition & they will need to answer to the criteria we listed above (Measurable, Substantial, Accessible, Actionable, Differential)

Once you have your customer groups figured out, it is essential for you to assess and evaluate which ones of them offer the most benefits and contribute to your profits or revenue the most. Next, it is important for you to calculate the amount of money that you are spending on each of these customer groups. As mentioned earlier, the cost of acquisition and the cost of distribution are key factors that need to be taken into consideration when you’re trying to make the most of your market segments and redefine the way in which the process is carried out.

Understanding how much it costs you to get customers from each one of your market segments is crucial in order to evaluate which of the market segments that you have created gives you the best results at the least cost. Additionally, better forecasting will also be possible if you have all of the information needed about each of your customer segments and the cost that is incurred to bring in customers from each of these market segments. If the cost needed to bring in customers from one of the market segments is incredibly higher than the rest, it is essential for you to figure out how these costs can be reduced for optimization and better results.

Forecasting will also help you understand and fine-tune strategies and approaches that you are using for each of your market segments. This will not only prove to be beneficial from a revenue management perspective, but it will also ensure that you’re able to make the most of all of the available and accessible resources in the best possible way. Evaluating the market segment bringing in the most customers and the most beneficial market segment will also help you understand where you need to direct and channel most of your advertisements and energies.

As mentioned earlier, market segmentation will help you get an understanding of what you can and should expect from each of your market segments and how much time, effort, money and energy it would be wise to spend on each of these segments to reach the optimum business mix.

Combining and analyzing the information revealed to you through effective and efficient market segmentation and using it in harmony with other insights gained through booking history and trend data will also allow you to make better and more informed decisions that will prove to be advantageous for your hotel business. These strategies and approaches will prove to be fruitful especially in case of fluctuating demands and complicated market conditions.