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The World of Revenue Management: Past, Present & Future.
By Jean Francois Mourier, CEO of REVPAR GURU
Thursday, 9th December 2010
 
Looking back on hotel revenue management in 2010 and what the industry is expecting for 2011.

2010--A Look Back

It's been an exciting year for the hotel industry. From emerging technology that allows customers easier access to online booking portals, to a steady increase in hotel occupancy and overall RevPAR (finally!), 2010 showed that the hotel industry worldwide is well on its way to recovery. 

While nightly room rates aren't quite back up to regular industry averages--and probably won't be for a while--hotel revenues continue to increase. In fact, according to a survey conducted by MHRA, there was an overall increase of 10.6% when it came to tourist spending in 2010.

Plus, many of the big hotel companies reported positive statistics when it came to business over the past year, leading to an overall increase in confidence for the year to come. Marriott, for instance, reported a 42% increase from the year prior by the end of the second quarter of 2010.

Meanwhile, Intercontinental Hotel Group reported a 15% jump in profits as early as the end of Q1 of 2010. Hyatt, too, saw its numbers increase. The company reported its occupancy was up to 67% from 62% the year prior by the end of August. And more significantly, Hyatt saw a 7.5% rise in RevPAR in its US sales and a 17% increase in RevPAR internationally.

Technology Emerges and the Industry Adapts

Aside from increased profits and occupancy, the hotel industry also saw many new strategies when it comes to the world of hotel revenue management.  In part due to the astounding take-off of Internet sales, 2010 demonstrated that today's industry requires revenue managers to do more than set prices, manage channels and control inventory in order to be successful. 

Particularly over the past year, it has become evident that hoteliers and revenue managers must be hands-on—identifying customer motivations and buying habits, foreseeing consumer decisions and influencing those decisions by the way they manage their rates. 

In fact, in a recent industry survey, just over 27% of hoteliers reported that most of their business came from OTAs and online channels--a much higher percentage than just a few years ago. Because of this, using a combination of traditional hotel revenue strategies combined with practices that involve sophisticated automated software have become imperative in allowing hotel revenue managers to strategically use up-to-the-minute information to give their property a competitive edge among other hotels and resorts.

Additionally, adopting many stock market principles have enabled hoteliers and their revenue managers to execute more effective strategic pricing, rate discipline, automation and smart computing--all integral parts of a successful hotel revenue management strategy.

The use of algorithms has also proved to be successful in determining crucial—and constantly changing— information like demand for past dates and the average length of stays. Using algorithms, hotel revenue managers can also make forecasts and predictions more easily to ensure they are always selling their hotel rooms at the most profitable rates.  On the other hand, when supply is high and demand is low--which was the case for many hotels in 2010--the use of algorithms allowed hoteliers to reduce the risk of setting prices that were too high and having their rooms go unsold.

As we near the end of 2010 and enter 2011, technology will continue to play a large part in the way hotel bookings are made. In fact, it is safe to say, technology is completely reconfiguring the average hotel booking strategy. Consumers have changed their preferences – value is the new luxury - and how and when they book hotel properties so 2011 will definitely be a year of change for the hotel industry.

2011--Looking to the Future

Many reports have shown that in 2011, occupancy will continue to rise.  A study recently conducted by STR showed that overall hotel occupancy was expected to rise to 58.8% (an increase of approximately 2%) and demand was expected to rise to 4.1%. Additionally, the same study found that daily rates were expected to drop 2.3% to an average of $95.45.

Meanwhile, we can definitely expect new technology developments to continue to increase. 

In 2011, the process for booking hotels will continue to see shifts as well.  The industry will see the booking window continue to shrink as today's consumers not only require more flexibility with their vacation time, but they also tend to wait longer in hopes of finding the best deal.  As well, new developments in technology are making it easier for the everyday consumer to book their hotel room, anytime, anywhere. 

With new and more capable smartphones hitting the market, new mobile booking applications introduced, as well as more and more social media sites expected to add booking widgets that will enable customers to reserve room nights from websites like Facebook, hotel bookings have gone mobile.  In fact, Priceline's research shows that 58% of customers with mobile devices were within 20 miles of their hotel when they made the booking — and 35% were within just a mile.

Additionally, new booking engines will continue to emerge, as will online travel communities with booking capabilities, online tour operators, and even trip building websites that use algorithms, along with inputted information from the user, to create a completely customized day-by-day itinerary for travelers.

When it comes to effective revenue management practices, 2011 will certainly call for strategies that implement quick and effective channel management, strategic pricing and the ability to stay one step ahead of the competitor. As we continue to move into a new era for the travel industry, hoteliers aren't just dealing with making their property seen among more channels, they're also dealing with more well-informed customers—customers that know what they want, where to look for it and how to compare rates to make sure they're getting the best deal.

In 2011, it will become even more essential to have a system that can manage multiple channels, as well as keep track of changing demand. Indeed, as we mentioned earlier, demand in 2011 is expected to increase, while prices are expected to decrease. This prediction alone is a big indicator that hoteliers should be expectant of many changes in trends throughout the next year, making it even more important to have a strategy that will allow revenue managers to have immediate, real-time access to the most up-to-date information so that they can make the best decision when it comes to their revenue management strategies and marketing efforts. 

When it comes to the future of the hotel industry, it's evident that progressive technology and the evolution of consumer behavior will make it even more important to identify, research and address these emerging trends in a way that will work for a given hotel and its targeted demographic. The next year for the hotel industry definitely involves making the hotel stay customized to suit a property's targeted clientele, making an increased effort to identify their travel and booking habits and anticipate their needs and desires. It really becomes less about trying to beat the competitor and more about a personal relationship with consumers.

So in short, although 2011 is all about technology and innovation, 2011 is also a time for a renewed focus on customer service and bringing the hotel back to its roots – a comfortable place for customers to lay their heads for a night. 

About REVPAR GURU

REVPAR GURU provides hotels around the world with an alternative revenue management software solution, designed to deliver maximum bookings and profits. As REVPAR GURU's custom-designed Yield Dynamic Price Engine is the only real-time revenue management software available on the market, it meets the rapidly changing needs of hotels in a very demanding business environment.  REVPAR GURU's  solution offers dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management and GDS sales distribution, to increase a hotel's RevPAR intelligently and effectively, while maintaining rate integrity and automated rate parity. Since 2004, REVPAR GURU's software solution has been used by hotels worldwide to increase occupancy and RevPAR.

www.revparguru.com
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