Manage the data, don’t let it manage you
Manage the data, don’t let it manage you
05 DECEMBER 2016 8:29 AM

Revenue management can incorporate numerous data streams, but managers should make sure it doesn’t overwhelm them. 

By  Paul Wood  and  Aik Hong Tan

A key factor in the growth of revenue management as a central hospitality discipline has been the ever-increasing streams of data and computing power available to us. What might they be, you ask? The list seems endless, but let’s start with: historical occupancy and rates; compression figures and competitive sets; online travel agencies and channel contributions; group sales and convention schedules; brand analysis; business reports; construction schedules; flight delays; highway closures; and weather reports.

Without question, the lists and types of data available have become staggering. As we populate up our spreadsheets and crunch both numbers and industry analyses, the question becomes whether we have too much data, or information, to manage.

Issues abound. They might include over reliance on historical data, looking backward too much and not forward enough, spending too much time and energy working with data that isn’t relevant to the revenue challenges at hand or neglecting key market intelligence.

One useful approach might be to access or work with data according to a strategic process, much like a doctor will rely on basic examination and testing procedures to assess a patient before moving on to more specialized tests.

First, stick to the basics. Key information here might include reservations on the books, reservations potentially coming in, my rates, my competitors’ rates, and events that are coming into the market.

Next, we may look at data that will help in setting our pricing strategy for any given room type and data that supports our prediction of market behavior. Pertinent data here might include the pricing activity of OTAs, pricing and availability of our competitors and, in major markets, non-conventional options like bed & breakfasts, extended-stay alternatives like short-term corporate apartments and Airbnb listings. Finally, it might be valuable to access peripheral data like road construction schedules, flight delays or impending inclement weather, which as we know can tilt demand in both directions—expected arrivals not making it to our property or, conversely, guests extending their stays.

The goal here is to focus on the most important data that will go into our pricing and channel decisions right now, adding other considerations as they become relevant. Examples include “close to last minute” cancellations by a group of guests, say an anniversary party, unusual pricing by a competitor due to reduced inventory when remodeling a property or, as already noted, weather that cancels flights in chain-reaction fashion across a region. Then, it’s time for Plan B, reaching deeper into available information.

Furthermore, timing and corporate strategy are always important. How do we handle overbooking? When do we move on demand, wary of selling too soon in a rising pricing environment? How far should we go in separating guest subsets with respect to core pricing and amenities? Targeted issues imply use of targeted data.

The move to predictive analysis
A strategic look at data highlights one of the most important trends in contemporary revenue management: an emphasis on predictive, as opposed to historical, analysis.

Several factors are in play here. These include:

  • The rapid pace at which markets can change and improved understanding of micro-economics, which may make historical analyses less reliable than in the past;
  • The extended period of strong revenues and profitability for the hospitality sector, which prompts caution in applying historical concepts of industry cycles;
  • New property classes or market forces that might include brand development, think of the new platforms designed to capture millennials; or merger and acquisition activity;
  • Changing demographics, wage rates or levels of consumer debt;
  • Today’s emphasis on total guest spend per room, as opposed to strictly looking at ADR;
  • Continued refinement of our revenue management capabilities, including the ability to recognize, and discount, data sources that prohibit us from generating revenue.

I’m sure each of us can add to this list, based on our entity size, property types, brand affiliations, regions of operations, corporate structures and so on. Overall, focusing on the events that may impact the future will help us select the data that is most relevant to revenue optimization.

The importance of property-wide collaboration
With the continued refinement of revenue management practices, we must also avoid the temptation of getting lost in the algorithms. The best revenue managers know how to “work the front desk.” They are in close communication with the director of sales, the general manager and front desk staff. Team members will usually have a great handle on demand issues like the reason for an upwards blip in no-shows or cancellations, a key employer and user group in the area adding or trimming staff or why a block reservation has cancelled.

Taking advantage of this kind of real-time information is especially important in modern hospitality operations, where revenue managers may not physically be on site. For revenue managers, remember, you are the gatekeeper on pricing and availability, but the rest of the organization must be able to deliver the promise. If we start by focusing on the basics, we can stay clear of “analysis paralysis” and deliver our best results for ownership and management.

Paul Wood serves as a VP of revenue generation for Greenwood Hospitality Group. In this capacity, Wood has the critical responsibility of growing profits for Greenwood’s portfolio of hotels via planning and implementing revenue and profit optimization strategies at each hotel. During his career, Wood has overseen a number of major initiatives including development of mixed-use profit optimization programs, oversight of e-commerce/GDS and revenue management disciplines in the hospitality arena. An industry veteran, Wood has more than 20 years of hospitality experience in revenue management and hotel operations.

Aik Hong Tan serves as a principal of Greenwood Hospitality Group. In this role, Tan is actively engaged in the financial and investment disciplines and growth strategies of the company. During his career, Tan has overseen a number of major initiatives, including development of mixed-use real estate projects, issuance of bonds to international financial institutions, disposition strategies for power related companies, oversight of e-commerce/GDS and purchasing disciplines in the hospitality arena. Tan earned a master of business administration degree and bachelor of accountancy from the National University of Singapore and is a member of the Institute of Certified Public Accountants of Singapore. He currently serves on the Executive Board to the School of Hospitality, Restaurant & Tourism Management at the University of Denver.

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