RM automation requires human touch
09 NOVEMBER 2015 8:55 AM
Tools now exist that can run revenue management on autopilot. But sources said the need for human oversight (and interaction) will never go away.
REPORT FROM THE U.S.—As revenue management becomes increasingly complex, so too are the tools designed to make the discipline easier to manage.
Many major chains are active in this charge, deploying automated solutions at the property level that eliminate the need for menial number crunching and decision making. But far from advocating revenue management on autopilot, sources agree a certain degree of human interaction always will be needed.
“For the average hotelier that is tasked with managing everything manually, that would be a true statement that (revenue management has) become too complex,” said Patti Halter, director of revenue management for Best Western Hotels & Resorts.
That’s especially true amid a fragmented distribution landscape in which new players emerge seemingly every day and rate parity is still the norm, she added.
Best Western has responded with three solutions for its members. The first is a phone consultation team to answer any questions. The second is revenue management for hire. The third, Halter said, is a training team that helps members better understand the revenue-management process and the tools provided therein.
Halter said the company has spent the past two years on one of those tools: demand forecasting software that runs 1,200 different equations to both predict demand 120 days and forecast performance based on current pricing and recommended pricing.
Wyndham Hotel Group is aggressively rolling out its own automated tool, said Kathy Maher, the company’s senior VP of revenue management. Announced at the group’s annual brand conference in March, the tool was implemented at 22 hotels during an initial trial run. After some tweaks to the coding and other bug fixes, it’s now being rolled out aggressively throughout the entire system, she added.
The tool makes pricing recommendations across platforms and room types each day, Maher said.
Not all-in on autopilot
Although the tools from Wyndham and Best Western both could run on autopilot without any human interaction, sources advised against it.
“I don’t know if I’d ever really advise that,” Maher said when asked about running revenue management on autopilot. “For this system, you can really have minimal interaction. … (But) if you want the system to be automated, you need to teach it the things it can’t learn on its own,” such as high-demand periods surrounding one-time special events like the Super Bowl, she explained.
Halter shared a similar view.
“There are some wins that can automatically take place,” she said. For instance, a hotelier could set the system to automatically increase room rates in $2 increments based on demand forecasts; that dollar amount would not likely affect consumer decisions, Halter said.
“But to automatically accept pricing recommendations without reviewing room types and other various aspects is probably not the best idea,” she added.
As an asset manager with CHMWarnick, Kristie Dickinson advocates for more control of the revenue-management process—not less.
“From an ownership (and asset-management perspective), I wish revenue management was more complicated, meaning consistently applied outside of the rooms department and deployed more widely across operations as a whole,” the company’s senior VP of business development and marketing said via email.
The best of these new tools enabled hoteliers to do just that, she added.
“Automation of data through revenue-management systems should free up time and empower revenue managers to conduct deeper analysis and identify more opportunity for profit enhancement while still remaining as the captain of the ship,” Dickinson said. “Autopilots need not apply.”
As the tools become more sophisticated, so do the requirement for revenue managers, she added.
“With this new age of technology and data comes an increased need for revenue managers who know how to put it to practice,” Dickinson said. “The education, training and experience for revenue managers has increased tenfold, requiring skills in evaluating and utilizing a broader based technology platform (beyond Excel) and shrewd analytical skills to leverage this knowledge in a way that translates into enhanced profits.”
A zero-sum game?
As most automated tools are provided by third-party vendors, one might be concerned that no one hotel company or hotel is getting a leg up.
Put another way: In a landscape where everyone is using the same predictive technology and demand forecasts, has revenue management become a zero-sum game?
Maher downplayed that possibility, likening it to race car drivers. If she and Dale Earnhardt Jr. got in two identical cars, they wouldn’t cross the finish line at the same time, Maher said by way of example.
Any revenue management tool is just that—a tool, she added. It’s how you use that tool that matters.
And it’s not as though each chain has the same tool anyway, Maher added. For instance, Wyndham’s team customized its third-party solution.
Best Western’s team did the same, Halter said.
“We looked at several off-the-shelf models and found them to be ineffective for our hotels,” she said. “They might work for others, but for us we felt that we needed more input into how the system worked.”
That input is important in pushing the envelope further, Dickinson said.
“We remain very optimistic about the future of revenue management and specifically advances in technology and custom designed tools to support these efforts. We have worked with several of the privately developed technology companies specializing in revenue management and are very impressed by the level of sophistication and intuition these tools can provide,” she said.