As the Super Bowl approaches, I can’t help but recall an experience I had this holiday season with the same type of hotel-booking-frenzy the properties in Minneapolis must be facing. Having worked in and around hotel revenue management for the better part of two decades, I am very sensitive to hotel pricing when I am traveling for leisure. I always have the voice of our customers and prospective customers in the back of my mind when talking about using automated tools to set pricing. Their words often revolve around one thing: distrust.
Revenue managers fear loss of control. They wonder if the “black box” will actually price their rooms right, and ask “how can it know what we do? Surely, people can optimize revenue better than a computer.” And our message is always clear: systems do not replace people; systems inform and guide people, making them smarter and better. But if people believe they are smarter, and tell the computer the “right” answer all the time, then they are never letting it work to its potential. People actually can wind up doing more harm than good.
My family had decided to go to Los Angeles to attend the Rose Bowl to cheer on the Georgia Bulldogs (Go Dawgs!). I went online to look at hotels and was focused on a particular part of L.A. One particular brand had two properties in the area, comparable in quality and location. One was substantially higher in price, and while its location was a bit more desirable for me, I booked the lower price option since I was booking multiple rooms.
Several weeks later, I happened to go online to check rates and noticed the location I preferred now had a competitive rate. So I cancelled our original booking and rebooked at that location. As the date approached, I happened to check rates yet again. (A quick note on timeframe: I made the first booking in late November, cancelled and rebooked a few weeks later, and was now checking rates again. The Rose Bowl took place on January 1, so this is all happening in a very compressed time window!) To my great delight, the rates had come down significantly!
By this point, I also had several dinner reservations connected to my room, as the concierge had helped me make the bookings. I was concerned that if I cancelled and rebooked at the new, lower rate I might mess this up. I phoned the hotel and presented my situation: I have several rooms booked, the rate is now much lower, and while I don’t want to cancel and rebook I definitely want to take advantage of the cost savings. And to my delight, the agent on the phone happily agreed to adjust my rate to the new, lower one. In aggregate, I saved well over $1,000 across the rooms for the length of my stay; and yet, I was thrilled to book them at the higher rate just a few weeks earlier.
So I began to wonder…. what might have been happening? Had the revenue manager expected the hotel to be more fully occupied than they were and therefore lowered rate to drive more demand?
Ultimately, this indicates that it’s very likely that not only did the strategy of the Revenue Manager NOT drive any new demand, but he or she cannibalized the revenue already on the books….all because they thought they knew better than the “black box” as to what the price should be (and in this case, I know the hotel has a “black box!”)
For my company, as a provider of automated tools, this is one of the biggest challenges: how can we help our customers build enough trust in the system and its recommendations so that they allow it to work as intended, and only make adjustments and overrides when they know something the system does not?
And for those hotels preparing for the Super Bowl rush of guests, don’t fear the “black box!” Systems are put in to place to inform and guide you to make smarter and better revenue management decision.