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Revenue managers have a tough gig.
Being responsible for the pricing decisions of a hotel is not a responsibility many would envy, and of course hoteliers who can’t afford a revenue manager have it even tougher.
Nevertheless, revenue management is essential for any hotel today. Without it, hotels simply forfeit the ability to boost their bookings, revenue and profit; offer competitive rates and promotions; and forecast the upcoming booking season. However, successful revenue management requires full visibility of all revenue streams for a hotel – from the online booking websites where it chooses to advertise its properties, to its marketing and sales – in order to provide meaningful decisions that are based on one of the most fundamental principles of economics: supply and demand.
For support, many hotels turn to a revenue management system (RMS) – and there are some brilliant RMSs out there. SiteMinder is proud to partner with a number of them.
At its most basic level, an RMS uses data to determine, primarily, a hotel’s supply and demand, and recommend the optimal price at which hoteliers should sell their rooms.
An RMS is clean and efficient for business. But to be effective, it first needs to know – with certainty – a hotel’s room supply, as it is impossible to make optimized rate recommendations without it.
The keyword being: certainty. And not many hoteliers have it, leading to such issues as overbookings, increased costs and missed opportunities to offer the most competitive room rates.
Why determining a hotel’s supply isn’t as simple as counting rooms
It would be easy to assume that a 300-room hotel, with 150 confirmed bookings, for example, still has a remaining supply of 150 rooms available. But the truth is, if that hotel has advertised its property on online booking websites, has its own website, has tour operators, deals with walk-in guests and takes direct calls, its supply has changed from the time you started reading this article. In fact, it’s probably changed more than once – and it’s still fluctuating now.
Hence, the importance of dynamic pricing, which Vishwas Bhatia, VP of revenue optimization for Aston Hotels & Resorts, summed up perfectly this year as “time-based pricing” or, in other words, hotel room pricing that meets real-time demand.
As with any business, a hotel’s pricing should be directly linked to live market conditions and availability. Yet, too few hoteliers can accurately determine what their availability is when the point-of-sale comes, making that availability impossible to manage at the same rapid pace that room bookings – and cancellations – occur in today’s dynamic online environment.
When the absence of real-time reservations means uninformed pricing decisions
One of the greatest opportunities for hoteliers today is in the sheer volume of channels available for them to select from in order to achieve their revenue goals. Today these channels not only include online travel agencies, but meta search sites, global distribution systems and wholesalers, as well a hotel’s own website.
However, while the selection offers greater diversity and choice, it also means a greater risk of hotel room reservations not being captured in real-time. In fact, it’s not uncommon for reservations to be received from a channel and then sit with a hotel for days without ever being captured into its property management system (PMS) or central reservation system (CRS), as a result of the dangerous – but very real and prevalent – reliance on manual data capture and entry which continues to exist within the industry today. Too few incumbent distribution systems deliver real-time reservations at an affordable cost and, ultimately, inaccurate data means those hotels never truly know their correct, real-time supply, making it impossible for them to make good and informed business decisions.
Online travel sites generated a record $129 billion in 2013, according to PhoCusWright, with online travel growing at a faster pace than the entire travel market. That’s a lot of bookings – made in real-time, and a hotel’s room supply should reflect that to be truly competitive. The good news is that, using real-time technology, a hotel can – and also help to drive better business.
How real-time reservations can be managed with real-time technology
Best-of-breed (real-time) distribution and revenue management technology have made the instantaneous nature of online bookings easier to manage and optimize for today’s hoteliers, by providing complete automation that further improves the hotel business’ efficiency and speed.
For a low monthly fee, distribution technology like SiteMinder’s Channel Manager are available to offer hotels the opportunity to be connected to a greater number of channels and deliver real-time reservations. Such technology gives hotels an accurate understanding of their supply and enables informed, optimized pricing decisions – whether it’s made by a revenue manager or an RMS.
Similarly, where once only global hotel chains implemented the discipline of revenue management and could afford a sophisticated RMS (or, indeed, a cluster of highly skilled revenue management experts), RMSs and skills in revenue management are today accessible also to small groups and independents and can be one part of a more holistic hotel technology solution; one that is integrated and cloud-based.
The end result? Better results to both the hotel’s bottom and top line revenue.
Best-of-breed solutions not only eliminate the real risks of failed reservations and overbookings; they allow hoteliers to lower costs and take advantage of pricing opportunities, in turn generating greater revenue. As importantly, they also remove the need for manual entry which is never a feasible solution in offering real-time rates and ensuring the right room is selling at the right price.
This content is created collaboratively in partnership with our sponsor SiteMinder, one of the global hotel industry’s leading providers of online distribution and direct booking technology.