When was the last time you met a hotelier who was a Ph.D. statistician? To avoid data overload, more hoteliers are taking advantage of revenue management systems to solve their pricing and forecasting problems.
Hotels that apply predictive analytics to their business have better insights about movements in the market and shifts in demand, are more confident about the pricing changes they make, and tend to compete at a higher level, says Brian Sterrett, vice president of sales and marketing for IDeaS Revenue Solutions, a SAS Company.
“For those organizations and properties who effectively deploy price optimization and good systems around forecasting and revenue management, they’ll tend to gain more than their fair share of the available market at the expense of those who don’t,” Sterrett says. “This is one element of an operating strategy. There are a lot of different factors for why hotels are successful and why they’re able to charge premium rates, but certainly one of the predictors would be this type of capability.”
Hotels in the same competitive set who don’t apply analytics end up giving up market share and ultimately revenue, he says. “Their total revenue performance suffers as a result of not having those insights and the disciplines that go with having those tools and processes in place,” Sterrett says.
Over time, companies that deploy analytics develop internal capabilities and gain a greater understanding of the business. “When you have a deeper understanding about what’s actually driving the business over time,” he says, “that’s going to translate into better decision making.”
So what’s the return on investment for hotels that successfully deploy revenue management systems and price optimization? Conservatively, Sterrett says hotels that go from having nothing to deploying an analytic system experience a 5 to 10 percent range of revenue uplift. “There are a lot of factors that affect how an individual property is going to experience that,” he explains, “but those are some numbers that we see regularly.”
If done right, properties may see double-digit revenue gains, Sterrett adds. “The return is clearly there,” he says. “The industry sees that the challenge has been more in the changed management, having the right systems and services, and getting those franchisees and operators—whether they work for a branded company or independent—to adopt those techniques in a way that doesn’t disrupt their operation but delivers the benefits.”