What does nirvana look like for a hotelier? It is the idea of a revenue manager gazing into a crystal ball in the form of a revenue management dashboard and quickly generating precise demand forecasts for every night of the year across every room type and every guest segment. For a hotel collection with a few thousand rooms, the undertaking would involve generating some fifty million new forecasts on a daily basis. Impossible? The pipe dream is inching to closer reality with the advent of next-generation revenue management solutions that analyze demand forecasts, competitor rates, price sensitivities and various other inputs and factors, including demand drivers like seasonality, day-of-week differences and market dynamics.
These advanced solutions make it possible to manage pricing in a way that dynamically responds to changes in demand for guest rooms and optimizes profitability based on the aforementioned notion of price elasticity. The need for these solutions has become increasingly urgent with the proliferation of online travel agencies (OTAs) with differing pricing and commission structures, shrinking booking windows, ever-more intense hotel competition in high-demand destinations and ever-increasing pressure to drive profitable growth and increased shareholder value. To that point, thanks to continuous technology innovation on the part of leading hospitality solution providers, revenue management has gone from being an undertaking with uncertain financial upside potential to a strategic imperative with highly predictable revenue outcomes.
In a Q4 2016 survey conducted on Hospitality Revenue Management, only about half of midsize and limited service hotels considered their utilization of revenue management to improve financial performance to be successful. The midsize and limited service hotels surveyed reported having used revenue management for 9 years on average, with an increase in RevPAR by 7.5% on average, and only 25% had one or more revenue manager. The percentage of large and full service hotels that considered their hotel's use of revenue management to be successful was slightly higher at 63%, and they reported using revenue management solutions for 10-plus years on average, with an increase of RevPAR by 10% on average, and with 75% having one or more revenue managers.
A growing number of next-generation solutions are engineered to handle these kinds of pricing questions. But which solution is the right solution? How can a hotelier rest assured that the solution they implement will allow them to achieve optimal results? For details on technology integration capabilities, data processing power, channel management and optimization, cloud versus on-premise hosting, customization to user and property needs, and group sales optimization, check out Part II of our Buying Considerations blog post, or download the 2017 Smart Decision Guide to Hospitality Revenue Management!