The world of hospitality revenue management is comprised of technology solutions predicated on two different approaches to pricing decisions, where some solutions address pricing and others address overall automated revenue management and revenue strategy. The first relies on adjusting changes retroactively. This approach requires that revenue managers input business rules. For example: “When occupancy for Room Type B reaches X percent, then lower the rate by Y percent.” Those who champion these rules-based decision making solutions are generally those who are confident in their own expertise and prefer to take a hands-on approach to pricing.
The second approach centers on robust analytics, and AI enabled decision-making, which relies on dynamic decision models and machine learning. With this approach, statistical algorithms are entrusted to make pricing and revenue management decisions. Revenue teams partner with the technology to “manage by exception.” Advanced statistical models have been proven to provide statistically more benefit to a hotel’s bottom-line. They can detect subtle signals in supply and demand better, more effectively and allow revenue managers more time for strategic activities. It’s easy to see why so many hotels are migrating to the AI- powered decision-making approach. It’s agile, dynamic and responsive.
Rules, by contrast, are rigid and fixed and may not be in sync with the ever-changing realities of our world. It’s also easy to see why, according to the research, more than one-quarter (29%) of hoteliers who have not upgraded their revenue management capabilities within the past 3 years plan to do so in the next 12 months.
With different approaches to revenue management and different features, functionalities, and benefits even between AI-powered solutions, it’s important to gain clarity on what to expect. The best way to do that is to ask questions of solution providers. By asking the right questions, hoteliers can determine which
solution will best fits their needs and be best equipped to deliver the benefits they seek, and with minimal risk.
The hotel’s revenue manager(s) should feel comfortable that the new solution will allow them to do their jobs with maximum effectiveness. Also, they need to understand how their role might change with the deployment of a next-generation solution. In terms of actual interaction with the solution, they also need to look under the hood and understand how, for example, to spot trends and anomalies and how to respond accordingly. The following are just a few questions buyers may wish to explore with solution providers to ensure that, once implemented, the new solution will do what they want it to do.
Looking to make a change in your RMS? Download our guide for a list of questions you should ask before making your final decisions. Click below to download!