5 takeaways on the state of revenue management
5 takeaways on the state of revenue management
06 JULY 2017 8:30 AM

Experts shared insights on revenue management at the recent HSMAI Revenue Optimization Conference in Toronto.

TORONTO—Revenue management is as dynamic a field as any in the hotel industry at the moment, as more tools and technologies emerge and more pressure is put on properties to boost the top and bottom line as overall growth numbers shrink.

Experts in the field of revenue management shared some of their top takeaways for the present and future of the discipline during the HSMAI Revenue Optimization Conference.


Hoteliers are still wrapping their heads around data science
In a presentation built around comparing revenue management at hotels to movies from the 1980s, Kelly McGuire, SVP of revenue management for MGM Resorts International*, noted that most hoteliers claim to understand and deploy more advanced data than they truly have a handle on. She said the industry as a whole has some work to do to live up to its tough talk.

“The digital economy has opened up a lot of opportunities,” she said. “But with all the buzz and hype, it’s easy to get lost in that maelstrom of information.”

She noted the industry is still grappling with rate transparency, now in the form of “value transparency” within the latest evolution of revenue management. She said better use of automation, which she compared to droids in “Star Wars,” can help free up revenue managers to spend more time dealing with high-level strategy and coping with these problems.

“We need automation … so our best folks are laser-focused on what they do best, and that’s really using their skills and talents to move the business forward,” McGuire said.


The hotel industry’s data and systems are still quite fragmented
For all the talk of consolidation and innovation, Lennert De Jong, chief commercial officer for CitizenM, noted the hotel industry still has a patchwork of tools and techniques for revenue management.

The industry “is fragmented,” he said. “Each company decides a price in a market, and each has its own systems and levels of sophistication. They have their own tools and make their own mistakes.”


Simplicity matters when it comes to data
In explaining her company’s approach to data analytics, Nancy Pyron, Marriott International’s senior director of operations research and revenue management, said building out data tools needs to start at the point of least resistance as opposed to immediately jumping to the most complicated and robust solution.

“In my experience, it has always worked best to keep it simple,” she said. “Sometimes the simplest models work and are exactly what you need. They may not sound as sexy (as things like neural networks) or be the coolest sounding, but they’re easier to build and maintain.”

Pyron noted there are a variety of factors to consider when analyzing data, including the volume of data on hand and the cost to acquire enough to fuel the models companies create.


There’s room on the ‘edges’ to make more money
Alan Lewis, managing director and partner at LEK Consulting, said the hotel industry lags far behind other industries in its ability to drive ancillary revenue and find opportunities to upsell consumers.

He said hoteliers need not even look outside of the world of travel for prime examples of how to find those areas to capture dollars, which he described as “edges.” Lewis noted that airlines, particularly JetBlue, have been able to rearrange seating to sell some customers space in rows with slightly more leg room, which he said has been a “transformational” change for airlines.

“There is a discipline to this mindset,” Lewis said. “These things might not seem exciting, but they’re highly profitable.”

He noted cruise lines and car rentals are also considerably more adept at driving revenue in this way—in part, by necessity.

“Part of the reason (the hotel industry lags) is we’ve enjoyed a long period of good margins,” he said. “Hotels have been a profitable business and have lacked the motivations that other industries had.”


Operations and experience still matter in revenue optimization
In the first of a set of “Lightning round” presentations during the general session, John Beatty, GM of The Dunhill Hotel and The Asbury, said guest experience is still paramount when it comes to getting more money at an individual hotel.

“Happier guests mean better reputations,” he said. “Guest acquisitions costs are high, and the easiest way (to capture business) is to make sure your reputation is positive and guests are talking positively about us.”

Correction 6 July 2017: A previous version of this story gave an incorrect job title for Kelly McGuire. 

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