MINNEAPOLIS—Technology is rapidly changing the hotel pricing function, but automation doesn’t replace the knowledge and analytical skills revenue managers need to succeed, said a panel of industry executives yesterday during a general session during the Hospitality Sales and Marketing Association International's 10th Revenue Optimization Conference.
As technology becomes more sophisticated, it’s important to reinforce the role revenue-management professionals play in the process, according to the panelists. In the future, the field will attract people with a wider range of skills.
“As we as organizations adopt new technologies, it’s important to communicate to end users that technology will make their lives better and not replace their jobs,” said Sloan Dean, who will join Ashford Hospitality Trust on 15 July as VP of revenue optimization. “In fact, revenue managers have evolved from a culture of strictly being hoteliers. We need to push the limits of the kind of people we bring into the field. We need people with strong skills in critical thinking and analytics.”
Revenue management has changed in recent years as several global hotel chains introduced price-optimization software into their systems. Two companies represented on the panel, InterContinental Hotels Group and Carlson Rezidor Hotel Group, both introduced the technology for transient pricing in 2009.
“We view it as a timesaver for revenue managers,” said Craig Eister, VP of revenue management for IHG. “We told them, ‘Instead of taking the time to pull reports and assimilate data, let us do that for you.’ The biggest benefit has been creating a new mindset at the property level. It got people to think in a different way and to challenge their thought processes.”
Eister said the system has been installed in about 2,000 of IHG’s 4,500-plus hotels, and the firm is now rolling out predictive demand intelligence software to help managers better forecast demand patterns.
Both IHG and Carlson Rezidor are looking at extending the technology to assist in optimizing group and negotiated rate business. Eister said while the software principles are similar to transient rate optimization, customization is required to extend the technology to new business segments.
“One of the mistakes the hotel industry made was taking airline-yield management systems and adapting them to hotels,” he said. “It didn’t work because there are nuances between the two businesses. Likewise, we can’t just take transient price optimization and apply it to groups and negotiated rate business. The principles are there, but you must spend some time to determine what’s different for these segments.”
Toward total revenue optimization
The panelists agreed the ultimate goal is to optimize total revenue from each guest to include room rate as well as spending on food and beverage, and other products and services. Las Vegas casino hotels have been at the forefront of this initiative, and Ruben Sigala, senior VP of enterprise analytics for Caesars Entertainment Corporation, said his firm “spends a lot of energy valuing the guest in broad terms, at first around gaming spend.
“We developed a core competency around that as a way of distinguishing ourselves in the marketplace, but over the last decade gaming revenue has become just one component of the overall value of a customer,” he said. “But it creates a new challenge: We have a good system to monitor gaming spend but a less-impressive system to monitor non-gaming activity.”
He said new advancements in technology are beginning to allow Caesars to gather this data and enable executives to act on the information.
“It also allows us to do very-specific channel tests and institute strategies that can bring out the creativity in revenue-management professionals. In many ways, this broadens the skill sets of revenue managers,” he said.
The hotel executives on the panel believe scarcity of good data will delay hotels in developing total revenue-optimization systems.
“There’s still a lot of work to be done in this field,” Dean said. “We have a lot of competitive information on rooms pricing but not much benchmarking data for other components (of guest spend.) Its’ very fragmented.”
Dean said owners tend to be more concerned with room-rate management because rooms revenues have the highest margins and dominate profit-and-loss statements of hotels. Sigala said it’s important to start the process.
“If you’re waiting for the day you have perfect data, you’ll be waiting for a long time,” he said. “It’s better to figure out what data you do have and go from there.”
Advice for independents
While brand-based technology dominated the conversation, Dean had advice for owners and operators of smaller hotels and non-branded properties on how to improve their ability to manage rate. He recommended acquiring rate-shopping software to get real time pricing information on competitors.
“It’s important to know your competitors’ behavior as it changes. Not yesterday’s rates, but what they’re charging today,” Dean said. “The old-school mentality of setting and forgetting (rates) is a recipe for destruction. We live in an elastic industry, and pricing is an iterative process.”