This Tech Firm Is Using The Pandemic Pause to Help Hotels Be Smarter About Setting Room Rates

The coronavirus pandemic prompted many hotel companies to smarten up how they set their room rates — a practice called revenue management. Several hotels turned to software to help with this, and one company that benefited from the trend is IDeaS, the Minnesota-based unit of analytics firm SAS.

A case in point is Scandic Hotels Group. Scandic CEO Jens Mathiesen last week told analysts that hotel groups have become better at setting room rates.

“I’m old enough to have been part of many crises before, and if you look back to the financial downturn we had in ’08, ’09, and even in [2000] crisis we had before that, that market has changed quite a lot,” Mathiesen said during an earnings call. “Today, all hotel chains do work with revenue management. We have a lot of support from international systems like IDeaS, et cetera, which we all use.”

IDeaS (formerly called Integrated Decisions and Systems) is one of the largest revenue management software makers for hotels. When the pandemic struck, it decimated hotel revenue.

“It could have been very bad for us in 2020,” said Sanjay Nagalia, co-founder and chief operating officer. “We could have been singing a very different song. But fortunately for us, all the metrics went up.”

IDeaS grew its revenue in 2020, year-over-year, executives said, though they declined to disclose specifics because parent company SAS is private. The brand increased its profit while it increased its investment in technology and sales in 2020, too, compared with the previous years, executives said.

“We didn’t lay off or reduce the salaries or hours of any of our employees,” Nagalia said.

IDeaS is one of the only travel technology companies to enjoy growth in 2020. That said, many of its rivals in the revenue management sector could also benefit from the expected rising hotel interest in revenue management tools in 2021.

New Tool for Hotel Revenue Management

To stay competitive, IDeaS launched on Wednesday Optix, software that gives a multi-property roll-up of performance data. Until now, IDeaS’ revenue management system, G3, didn’t give larger hospitality ownership companies — which have multiple brands, franchises, or asset ownership groups — an automated way to roll up higher-level data.

The Sokos Hotel Kimmel in Finland. The Sokos hotel group uses IDeaS new Optix revenue management solution. Source: Sokos

“The majority of installations are in the upper-upscale — or three-start and above — categories who need room-type pricing and forecasting,” said Mike Chuma, vice president, global marketing, enablement, and engagement.

One hotel company that beta-tested Optix is Sokos in Finland.

“We have always known we have a huge amount of valuable information sitting hidden in our systems,” said Veli-Petteri Korpi, business manager, SOK travel industry chain management for Sokos Hotels. “[The new software] provides a completely new perspective on our business.”

Many hotel organizations have faced furloughs and layoffs, so a cluster revenue manager who was previously managing ten properties may now be handling a few dozen.

Pause and Effect

The Optix product attempts to digitize a set of tasks that often involve manual or time-consuming work. Today, revenue managers compile and organize data from past bookings and upcoming reservation activity. But merging spreadsheets, creating charts, and emailing results can take days or weeks. The delays could cost money if they held up hotel leaders from spotting problems at properties or in customer segments.

To avoid delays, some larger hotel companies instead pulled all of the data into a warehouse, building a custom user interface to manage it. But this bespoke approach could be costly and time-consuming.

Optix aims to automate much of the work for users of IDeaS’ G3 revenue management system, executives said.

New software from IDeaS and other software makers could help these managers understand where they should be investing their time for the greatest revenue impact on their portfolio.

“The software will show you, as a hotelier, your business mix and how your mix is changing,” Chuma said. “We can show what your ‘length of stay’ looks like across properties, competitor sets, and hotel groups within regions as broad as, say, Florida.”

Once a domestic recovery begins in earnest, hotels will also want to spot which markets, properties, and customer segments are rebounding first.

“Optix can aggregate the data on the velocity of demand returning across markets, properties, and brands,” said James Echert, product marketing manager.

“We can answer questions like, ‘What’s my leisure segment looking like, compared to my group and contract segments?” Chuma said. “The insights can let a commercial team make different types of promotional and rate-type decisions.”

To build Optix, IDeaS had to do a fair amount of new engineering. The company made what’s basically a new integration interface that can more easily bring data from a customer data platform at a higher volume. The new streaming data architecture helps pick up the pace of the analysis.

“Imagine a hotel group’s commercial team is in a meeting, and someone says, ‘I feel like our operational costs are high, and we don’t see an increase in our length of stay,'” said Chuma. “A revenue manager in the meeting could now, in near real-time, verify if a statement like that is true.”

Crowded Field

HotelTechReport’s top rated brands for revenue management, besides IDeaS, are Gamechanger by Duetto and Atomize. Unlike IDeaS, Duetto and Atomize were born in the cloud. In contrast, IDeaS, founded three decades ago, has been re-factoring in stages its applications for the cloud era.

Changes in company fortunes vary constantly. Duetto, backed by Warburg Pincus, remains committed to the whole hospitality sector, including hotels and casino resorts. Meanwhile, in December Atomize brought on Michael McCartan as its chief growth officer after he had left Duetto around the time Duetto’s founders moved into advisory and board roles.

Atomize is currently integrating market insight data on what travelers are searching for and where they are arriving in different markets, powered by data firm OTA Insight. The data includes top-of-funnel search and pricing from sources such as online travel agencies and global distribution systems along with insights about alternative lodging inventory and hotel meta-review platforms.

For its part earlier this month, IDeaS signed a deal with RateGain Technologies, tapping its real-time rate intelligence for more than 100,000 hotels worldwide. The goal is to give revenue managers insights into their market positioning, how a market is reacting to events, Airbnb supply, and competitive promotional plans.

Dozens of players crowd the field. Names include Accor’s D-Edge, BeOnPrice, Cendyn’s Rainmaker RMS, Infor’s EZRMS, LodgIQ, Pace Revenue, Rateboard, RevControl, RoomPriceGenie, and RMS.

Representatives from many of these companies and hotel groups will be discussing hotel revenue management issues at online events on achieving commercial successs and the convergence of data at events adjacent to the ITB Berlin travel trade conference in early March.

Doing More With Less

One of the rare silver linings to come out of the pandemic is that many hotel operations professionals have learned how to become profitable with fewer heads in guest beds.

A year ago, many hotel leaders would say they needed, say, at least 50 percent occupancy to breakeven in a given month. But now, some hotels have learned how to be profitable with as little as 10 percent occupancy.

“Our focus is on help decision-makers on the commercial side of hotel operations do more with less,” Nagalia said.

A caveat is that industry-wide demand for hotels isn’t predicted to regain 2019 levels for years. In the U.S., for instance, room rates may not recover lost ground until 2023 or 2024, said a forecast by CoStar’s STR and Tourism Economics.

“Definitely, it will take [the hotel industry] some time,” said Mathiesen of Stockholm-based Scandic Hotels. “We will not be able to deliver the same average room rates, as you saw in ’19. It will take years to bring back those occupancy levels.”