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Pricing Systems 2.0 ­ Part One

November 23, 2013 Corporate, Headline News No Comments Email Email

The end of every year brings a time for everyone to look back on the year prior and make resolutions for how we will live and what we will accomplish in the coming year.

As we near the beginning of 2014, many hoteliers will be doing the same. Before deciding on their action plan for 2014, they will need to first examine the successes and failures of the year prior, in order to improve future performance.

One of the first priorities of a hotel business should be to examine your revenue and distribution strategy from the previous year. Did you earn as much profit as possible from each room, every single day of the year? Or were you leaving money on the table? Did you reach close to 100% occupancy on a regular basis or were you averaging closer to 50% (or even lower)? 250x250 (2)

Chances are, most hoteliers will find that they performed fairly well, but that there was definitely room for improvement. Of course, an important part of earning the most revenue from each room – while increasing occupancy ­ is your revenue management system. In order to help you determine whether your system is up to par, we are happy to provide you with a checklist that breaks down the key features that all revenue management systems should have in today¹s technologically advanced world. (And if you don¹t yet have an RMS at your property, this checklist will help you to figure out which one will provide the most benefits for your property without breaking the bank.)

1 – Does your property analyze and provide rates based on historical data, AS WELL AS real-time market data?

Market data includes star rating, guest reviews, rate averages, trends, region and sub-region, sold-out hotels, page positioning, overall demand, etc. All of these factors can have a big impact on the success or failure of your revenue management strategy.

If your RMS doesn¹t take into consideration market data, you are missing out on a HUGE piece of the pricing puzzle. Historical data is important but on its own, it cannot predict the best possible rate for your property because it only looks backwards (at what happened last year), instead of looking at what is happening today or what will happen tomorrow. With the growth of mobile bookings (and the shrinking booking window), only looking at historical data completely misses last-minute bookings and any cancellations. Make sure you have the full picture so you can make educated decisions when it comes to managing your revenues.

Strangely enough, the majority of revenue management systems don¹t factor market data into the rates that they provide. Of course, that means that a revenue manager is required to make the calculations (to factor in the market data) manually, entirely defeating the purpose of having an automated system!  Be selective and only choose an RMS that gives you this feature.

2 ­ Does your RMS use pricing parameters to ensure that your rates help you achieve your strategic pricing goals?

Many revenue managers and hoteliers shy away from revenue management systems because they are afraid that they will not be able to maintain control over the rates for their property. As such, they are only looking for a system that allows them to approve (or deny) every single suggested rate change ­ no matter whether the suggested rate is an increase or decrease (of rate).

While this makes sense in theory, having to approve/deny every change doesn¹t factor in the globalization of the hotel industry ­ as people are now booking travel 24/7 ­ and most revenue managers only work from Monday to Friday, 9am-5pm. So what happens if your RMS suggested an increased rate at 4am on Saturday? Because no one is there to approve the change, you will lose money on every booking until you come into the office on Monday at 9am and approve the increase. Over time, that could yield a large loss in profits.

That being said, I do agree that it is important for a revenue manager to have control over a RMS¹ rate suggestions – as computers can only analyze data, not factor in a property¹s revenue management strategy (as humans can). So instead of looking for a system with an accept/decline feature, look for an RMS with the ability to incorporate minimum and maximum rate parameters (which specifies the boundaries of flexibility that your pricing strategy can have). In practice, that means that suggested rates that are above your minimum threshold will automatically be updated across all online distribution channels (by your RMS), but if it¹s below, no change will happen. By setting a minimum threshold, you ensure that your rate increases when the market can bear it (according to the RMS¹ analysis) and that you won¹t be selling your rooms for an unacceptable price if demand slows.

3 ­ The cloud is everywhere ­ and so is your data.

In recent years, cloud technology has exploded into our day-to-day technology, allowing us to store everything from documents, to music, to entire hard drives in the cloud, providing access to our files/info from any computer, smartphone or tablet. While most revenue management systems are still desktop-based, which means that you can only make changes to your RMS/pricing when you are sitting in front of your computer at the office, there are a few solutions that are cloud-based. These cloud-based RMS allow you to make changes to your rate from your iPad or iPhone (or any other tablet or smartphone), so that your property¹s revenues won¹t take a hit when you can¹t be physically present in the office.

Check back next week for Part Two of this article, which will reveal the final criteria for the new RMS 2.0 that all hotels should be implementing in 2014.

By Jean Francois Mourier, CEO of REVPAR GURU

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