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Revenue management automation; key factors you must consider

Is the accommodation industry ready for revenue management automation? Rooms Online consider the pro’s and con’s, and provide expert tips to help you leverage your revenue opportunity…

As technology continues to evolve, there are now various options for a property to automate revenue management to some degree. Specialised revenue software companies are now more commonly being utilised typically by big hotels to automate a large portion of the revenue management responsibilities. In most cases this software is still accompanying the efforts of the driving force behind the overall strategy – the hotel revenue manager aka the human brain.

For smaller players, more and more software systems are introducing inbuilt pricing features that allow a property to set rates to automatically increase or decrease depending on pre-set rules and algorithms.

These software tools are undoubtedly a great step towards automation and very appealing to any operator that find themselves lacking time or wanting to ensure efficiency; however, accommodation operators need to proceed with caution if they’re considering relying solely on letting their system control their prices and wanting a ‘hands off’ set and forget approach.  Why?

Due to the ever-changing landscape of the field of revenue management, it is widely agreed that a human touch will always be beneficial. We can’t think of a better instance where the age-old adage ‘A system is only as good as the person driving it’ is more relevant.

So, let’s highlight the irreplaceable beauty of the human mind!

Any focused revenue manager would be monitoring software changes and/or suggestions as well as taking into consideration the following important external factors;

  • Event announcements and the need to adjust rates before bookings come in
  • Market intelligence; even if your property has some rooms booked, your competition might not at the time. For example, you might have secured a group booking that is on hold. If your system then automatically increases your rates you then run the risk of pricing your property out of the market – what if the group booking falls through?
  • Lead-time knowledge
  • Historical results; although you may have little to no bookings for a particular future time period, if historical reports and lead-time knowledge indicate that in previous years you have done well for that month, don’t start low with rates (automation could default to low based on current low occupancy). A good revenue manager would instead have confidence with the rate and be patient in their approach
  • Setting minimum night stays and how this impacts price setting
  • Available promotions that might increase visibility during need periods without the need to default to lower rates
  • Promotions that are currently running and how rate changes might impact the nett rate
  • Other property factors; eg. any rooms being held for maintenance reasons would affect your true availability and revenue per available room (RevPar) potential; pricing decisions should be made with this in mind

Before making the decision to go automated, a revenue manager should understand that each software option comes with their own intricacies and it is vital to consider how pricing rules are set as well as fully considering the potential positive or negative impact to your business.

For example, some algorithms depend on the number of sold rooms (and not room types) which can then position a lead-in or lower category room type be more expensive than the higher tier room types.  Other options simply adjust rates based purely on inventory percentage changes as set by the owner/manager of the property (eg. When a hotel reaches 40% occupancy the higher rates set in).

Before taking the plunge to become more hands off and go automated, ask yourself, are you confident you have appointed the right person to monitor all other factors that make up a good revenue management plan, and react in time? Only then, with a focused human driving force can you make automation really work for you.

What do the experts have to say?

“I think common mistakes tend to be when properties think they have implemented dynamic pricing but really they have just updated more seasonal rates or weekend/weekday rates and it doesn’t actually relate to supply and demand.

Revenue management isn’t just about pricing, it’s about all of the components that come together to formulate a business strategy, which makes it a very exciting topic and challenging one at times.”  – Hazel Rigler, Director of Marketing & eCommerce – Grand Chancellor Hotels

“The risk to any accommodation business not giving this area of running the business significant resource is that they can leave money on the table.  

The most common mistake is that the pricing is not relevant to the demand. Misreading the market can be costly. It’s important to keep informed about the industry trends, the general economy and the competition. Guests seek value for money and offers that don’t match price demands will be harshly dealt with by online reviewers.” – Les Morgan, COO – Sudima Hotels

Get more free advice from industry experts in yield management! The following ‘Ask the experts’ full Q&A articles are available on the Rooms Online blog page.

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The Rooms Online team

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