Six questions hotel owners need to ask when investing in a revenue solution

Making financially sound business investments is a critical aspect of any hotel owner’s world. However, sorting through today’s vast sea of revenue technology and analytical capabilities can often leave owners swimming in dark, murky waters.

NB: This is a viewpoint by Jurgen Ortelee, director of enterprise sales for IDeaS Revenue Solutions

Here are the top six questions hotel owners should ask when investing in a revenue solution for their organization.

1) Will the revenue management solution solve my organization’s business problems - and will it be a sufficient return on my investment?

It’s important to work with a revenue partner to determine which solution solves the organization’s business needs.

Most providers will share the average ROI results their customers receive, but look for one that leverages a large database of results from similar properties.

This insight helps estimate benefits and ROI with a very high degree of accuracy. Realistically, owners can see a 3.5-5.5% increase in their room revenue, with some hotels reporting improvements as high as 14%.

2) What does “revenue optimization” mean and why is it important when looking at a revenue management solution?

Optimizing room revenue has two significant components: the price charged for guest rooms and inventory management.These two components work hand-in-hand, and cannot be viewed as independently-functioning aspects of any revenue solution.

A revenue management system that does not set price is categorized as a yield management system; a system without inventory management is categorized as a pricing system. Only solutions with both components are called revenue management systems and fully optimize room revenues.

Solutions providing only one component or the other offer a partial revenue solution.

3) Do I need a revenue management solution? My revenue manager can handle it fine.

The current revenue and distribution environment is becoming exponentially more complex.

The number of distribution channels are consistently increasing, and hotel inventory is widely available in more channels. Inventory and rates have to be updated in many places, taking up a large portion of a revenue manager’s working day. This leaves sparse time to think strategically and make effective decisions that drive long term revenue. A revenue solution that makes and implements tactical decisions to integrated selling systems will free up time and allow them to focus on revenue strategy.

A system that automatically distributes rates and inventory controls also removes concerns over the potential for lost revenue opportunities.

How is my technology selection impacted if my revenue manager has never handled a revenue management system?

The implementation of a revenue solution will change a revenue manager’s day-to-day responsibilities.

This is why selecting a revenue technology partner with an extensive support network is critical in the overall decision making process. Evaluate how a revenue technology provider can support the organization’s team during and after the installation. This helps the revenue manager become more knowledgeable and comfortable with the system - and maximize system capabilities after its installation.

With a large amount of function space, and meetings revenue contributing significantly to overall revenues, how should this be evaluated in a potential solution?

Look for a scalable solution that can provide function space and group business forecasts and evaluations - and analyzes whether business should be accepted or rejected based on its profitability.

Evaluations should consider group and function space requests against the business forecasted in the hotel and its function rooms. Investing in a system that optimizes both function space and hotel rooms ensures the largest revenue streams are optimized with a well-aligned revenue strategy.

How do I know a solution is using the right analytics?

Algorithms are the engine in revenue management systems. They determine the best price and inventory management outputs to optimize revenue. The complexity of the algorithms determine the capabilities of the system: low complexity algorithms will provide descriptive analytics, such as various levels of business intelligence and reporting; more complex algorithms allow for predictive analytics, which is what most pricing and yield management systems use today.

These algorithms allows hotels to forecast at a total hotel level, set selling prices and, in some cases, manage inventory with length of stay and overbooking controls. Industry-leading systems - using a large number of complex algorithms - provide prescriptive analytics. These systems not only provide forecasts at detailed levels and pricing decisions by room type and different lengths of stays, but they will also provide an analysis of the impact of these decisions on business. These sophisticated systems are ‘self-learning,’ and provide the levels of detail needed to truly optimize profits.

Investigating these questions will help hotel owners shine a light on the important issues requiring consideration – making the navigation of today’s revenue waters a much more pleasant voyage.