Revenue management in a networked world

June 11, 2009 | Hospitality Industry

As new technology continues to change the face of the industry it is also dramatically increasing the complexity of implementing and maintaining sound revenue management and pricing strategies.

by Paul Van Meerendonk

As the hospitality industry continues to develop, many hotels are finding it increasingly tough to gain a competitive advantage. Companies are now searching for new areas of business that will set them apart from the competition.

The application of successful revenue management tools and practices is now accepted by most in the industry as a key factor to obtaining a strong market position.

The increased use of internet sites by customers, especially third party booking programs, has dramatically changed the way in which hotels manage room rates and occupancy levels around the clock. In 2008, it is estimated that 40% of all hotel bookings will be generated by internet third party booking sites.

As new technology continues to change the face of the industry it is also dramatically increasing the complexity of implementing and maintaining sound revenue management and pricing strategies.

With the increase in choice of distribution channels for Hotels, it is no longer appropriate to expect a Reservation or Revenue Manager to handle a multitude of manual Extranets to ensure revenue management and pricing integrity. Hoteliers are faced with the choice of having key resources spending hours per day updating these channels manually or create an environment where the implementation of any pricing decisions is largely automated and thereby freeing up these resources to focus on strategically important issues to enhance a Hotels performance.

As the hotel industry continues to move towards a more dynamic and inter-connected environment it is vital that the correct technology infrastructure is in place to meet this need.

Technology must enable a seamless flow of revenue management and pricing decisions between the various systems, thereby reducing the need for human intervention at the tactical level. Revenue Management in a networked world means that revenue decisions are optimized by a Revenue Management System based on internal and external data as well as human input. - The decisions then flow from the Revenue Management System and are implemented across the various internal and external channels in real time.

With the advent of third party booking sites, customers throughout the world are able to book around the clock. The advent of this technology means that an automated and flexible system needs to be in place to meet the ongoing dynamics of demand.

While the option of signing up your hotel with as many third party booking sites as possible may be appealing, it needs to be carefully planned, considered and finally executed with the appropriate systems in place to support it. The appropriate in-house revenue management infrastructure needs to be in place before this is done, or else the time and money being spent will heavily outweigh any financial benefits.

Many hotels find themselves underprepared for the increased workload that comes with having to manually update rates according to information being received from multiple channels.

In light of an increasingly networked operating environment, hotels that still manually alter room rates and various revenue strategies can find themselves lagging behind the competition - both in terms of meeting their revenue potential but also in their ability to deal with different periods of patronage.

Through using a trusted revenue management partner like IDeaS, all the various hotel and third party booking systems and distribution channels are integrated and interfaced so that the information seamlessly flows between all systems in a timely and efficient manner. This provides hotel owners and managers with the confidence that they have the correct systems and strategies in place for whenever potential clients wish to book with them, no matter how they decide to do so.

Paul Van Meerendonk is Senior Consultant at IDeaS