Time to take human know-how out of revenue management?
Time to take human know-how out of revenue management?
27 NOVEMBER 2019 8:11 AM

As revenue management software continues to evolve and become more sophisticated, it raises the question of at what point would hoteliers need to remove the human element.

As a hotel owner and manager, I find it’s important to occasionally step away from the intensity of day-to-day business to reflect on the past, try to understand the present and set a path for the future. As a revenue management specialist, I’ve found it both useful and interesting to take the same perspective approach to the evolution of the revenue management discipline itself.

Revenue management, and the skillset required to employ it, have changed at warp speed over the last 15 to 20 years. What began as a primarily human-driven analytical and mathematical talent has transformed into a function that can arguably be better managed by software. Well, maybe.

The revenue management process, of course, uses historical data and proven algorithms to calculate optimum pricing and inventory decisions. To be truly effective, it must be integrated with the actions, and transactions, of other departments such as sales, e-commerce and marketing.

Thus, the need for automation. And revenue management software, in fact, does all that. It uses analytics—mainly supply and demand—to determine the best price for hotel rooms in order to maximize revenue and profitability. This allows for delivery on the hotelier’s primary transactional goal: to sell the right product to the right customer at the right time for the right price on the right channel.

Combining historical market data with projected demand indicators, the software recommends a rate for each segment and room type at the hotel, and it does this for each specific channel through which we sell. Access and usability are improving every day as modern software has migrated from on-premise systems to cloud-based applications, allowing multiple users to login from anywhere they have an internet connection.

The result is mathematically and algorithmically sound with real-time decisions that provide us with far more accurate forecasting, enabling us to ultimately improve revenue per available room, net RevPAR and our net revenue generation index. This helps increase operational efficiencies and, through the channel management, helps lower the cost of customer acquisition. The end result: improved gross operating profit per available room.

So what does it mean for us practicing revenue management types when we’re told the software can do it all? Should we rely solely on the functionality of the brand systems or third-party vendors? If we do, that would certainly free up our teams, and ourselves, to focus more full attention on the guest and the customer experience we’re delivering.

On the other hand, doesn’t it make sense to review the data and software recommendations and tweak them using the human element? How important is it, for example, to incorporate my personal knowledge of a particular piece of business or group booking to determine whether it might swing a different way, based on history?

Should we modify results because of the time of year? Is our judgement sound enough to massage conclusive data and make decisions from there?

The amount of data that exists in our industry, the speed at which it’s multiplying and the ever-expanding capability of computers to process it does not make finding answers any easier.

We’re clear that human revenue managers don’t have the physical and mental bandwidth to manage and manipulate millions of pricing decision variations, particularly when they are based on data from non-integrated CRM or PMS systems.

But our human limitations do not at all eliminate or even reduce the need for real-live people to intervene and account for external forces that may come into play. Our revenue management discipline, it would seem, relies very much on the power of both automation and human intelligence.

What’s certain is that through the evolution of the revenue management discipline we have progressed from relying solely on the metrics of the past for our decision-making to exploring new ways of mining the data. We have, indeed, moved on from RevPAR to GOPPAR. Going forward, revenue management will no longer be enough. Success will be determined by how good we become at revenue generation.

Kurt Furlong, 2019 Chair of the IHG Owners Association, is Chief Revenue Officer and Partner with Genuine Hospitality, LLC. He specializes in hotel asset management, bottom-line enhancement, revenue generation and revenue management. He previously served with other management companies as a partner, overseeing revenue generation and strategies. In his more than 30 years in the industry, Kurt has worked in all phases of hotel and restaurant operations.

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