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Revenue Management in 2020: The Golden Age Awaits


Over the past several months, I’ve had countless conversations with well-established, forward-looking hoteliers and revenue leaders about their plans and concerns for the future. Some are worried about a possible economic slowdown. Others are wondering how to meet rapidly evolving consumer expectations.

Many are also curious about the latest advances in hospitality technology. I’ve spoken with technology vendors and start-ups around the globe and seen a number of exciting new ideas currently in the works, all designed to enable the hotel industry to better serve tomorrow’s savvy consumer.

Through all the noise, two major trends have bubbled to the surface. One, the ongoing acceleration of innovation is unstoppable, and two, we are entering what appears to be the golden age of revenue management.

The Acceleration of Innovation

There are three trends associated with the acceleration of innovation today. These include relevancy, multimodality and instant gratification.

Research continues to show consumers have a desire to be sold to in ways more relevant to them. If they can relate an upcoming trip to their own past experience, or read about someone else’s experience, they are more likely to choose the one that speaks to that experience, whether good or bad. In essence, their experiences continue to trump product sales pitches.

The continuation of enabling a better, more seamless customer experience through technology, and the collection and smart use of data to anticipate guest needs while avoiding failures in service, is a definitive trend we’re seeing come to light more quickly than we ever.

What this means to the industry is it’s time for us to think with a multimodal mentality. As with media, where multimodality is used to convey a message across multiple channels such as mobile devices, television and the internet, travelers don’t use just one form of accommodation when making their travel plans today.

Most choose the right accommodation type according to our needs at the time. For instance, I went on a 10-day trip to Austria and Slovenia this past summer. Throughout my journey I stayed in hotels, tented camps, Airbnbs and private accommodations, a mix that was fully dependent on what was most convenient at each location.

This multimodality trend in lodging has been enabled through technology. In the past we selected a hotel recommended by a travel agent or a friend. Today, the convergence of technology in the cloud and the emergence of platforms that enable customers to select multiple accommodation avenues and view others’ experiences, is fast becoming the norm.

Through this convergence, hotels that can turn data into decisions will come out the strong winners. For instance, no matter how developed we have become, there are still “caveman brain” tendencies built into our daily decision-making process. Our brains are wired to prioritize short-term needs over long-term goals, and because of the exposure to technology, the Gen Z population is quickly becoming the generation that craves instant gratification more than ever before.

Over the longer term, hotels are becoming prime targets in the race to satisfy these instant gratification demands. A great example of this is the expansion of the Internet of Things that will be further enabled through 5G starting in 2020. Hotels will become connected hubs with all devices starting to communicate with each other. The end result, if done properly and safely, will reduce waste and increase productivity over time. 

We can already see this happening in the newest rage of providing customers with instant access to satisfy their urges through voice technology. Think about Domino’s Pizza and their “no-click pizza ordering,” or the ability to tell an embedded Google or Amazon bot to turn off the lights or turn on the television, and you get a clear picture of the innovation that’s in progress to accommodate this growing mentality.

Yes, the acceleration of innovation seems to be moving at light speed. Without a crystal ball, the best we can do is keep up on the trends with a watchful eye toward companies delivering ever closer to the ultimate customer experience.

The Golden Age of Revenue Management

In the hospitality industry, we are beginning to see huge amounts of data being accumulated, digested and managed. Today’s revenue leaders must manage the increased responsibility to direct business decisions. In turn, revenue management system and software providers have a responsibility to provide revenue managers with automated pricing decisions they can trust.

Recent multiple investments in group and meeting online distribution have indicated the acceleration of revenue management for group bookings, as well as meeting and event space, will accelerate. Groups360 announced in August that four hospitality companies had invested a combined $50 million in the company to enhance its platform. With hotel giants such as Accor, Hilton, IHG and Marriott International investing to advance a platform designed to make it easier to manage group travel for meeting planners, we can see the industry looking for solutions that leverage technology, business intelligence and industry expertise.

With that movement, we can see revenue leaders will increasingly shift their attention to managing all revenue streams of a hotel, not just guest rooms. Focusing on profitable revenues will be increasingly critical, especially in times of increased economic uncertainty. As technology moves into the cloud, barriers to data sharing are being removed and while it has been talked about for decades, it’s finally becoming possible to look at the optimization of an entire organization.

This means traditional revenue management KPIs such as RevPAR are beginning to lose dominance. Additional KPIs include factoring in cost of channel/sales, revenue per available customer, and profit customer contribution that are becoming increasingly important in the industry. Taking into account not only room revenue, but ancillary spend across the hotel, the management and optimization of existing channels and finally, taking a hard look at servicing costs and optimizing other inventory, will be key to ongoing, long-term success.

Optimizing for the Future

We have all struggled to trust technology, while trying to get a handle on what new technology (likely something that isn’t even invented yet) will change the way we do business. Luckily, these changes don’t happen overnight — albeit, it sometimes feels that way. But the time is now to consider how these advances can and will help us better service not only the customer, but better incorporate the strategies already in place.

It’s time for revenue leaders to step up their game and focus on the overall commercial success of the business for which they are responsible. Optimizing all revenue streams, while balancing profitability, will be the key to revenue success in 2020 and beyond.

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