hotel revenue management software

hotel revenue management software

The Evolution and Impact of Hotel Revenue Management Software

1. Introduction to Hotel Revenue Management

The economic impact of applied RM and inaccurately RM decisions affect the bottom line. RM has been gaining interest since the 70s day by day. In business and economics literature, pricing, capacity management, queue management, blocking, and chartering are some items showing similarities in RM. RM has been implemented in some sectors like amusement parks or airlines where they are looking for a way to allocate their available capacities to potential guests or to sell their perishable products effectively and where products are offered at different prices to different market segments. With the need for allocating already available capacity or packaging, RM is started to be used in the hospital industry. But somehow relatively poor RM, especially the existence of the practice of offering different rates to different clients for the same product, followed by the fragmented non-chain hotel industry, earned RM a poor reputation in the hospitality. With research, this situation appears to be more complex than it seems. On the other hand, the right and overall implementation of the Mass Customization paradigm in the design of hotel products and services can be seen as a part of the RM problem. This study is conceptual. It discusses the general RM systems and technologies and focuses on the specific application of RM practice, which is embodied in hotel RM systems. The article concentrates on RM mature and pioneering organizations in the field of the hospitality industry, such as hotel chains, integrated resorts, and casinos. The focus is on both the software and the services delivered by specialized vendors under supplier partnerships. The organizations are the hotel chains and the technology suppliers that support hotel RM practice. The exploiting and learning requirements of the RM discipline are exceeded in the primary research instrument — the RM software, with internet capabilities. It is responsible for the achievements of the technology in the hospitality industry and therefore its successful applications. The chapter after this one will provide the needed background details to assess the business environment and the industry and lead the larger study.

This introductory chapter aims to provide a historical background of hotel revenue management (RM), define and take a closer look at innovations and technologies from a corporate point of view, highlight the impact of these technologies on the hospitality industry, bring up the issue concerning practice, and give information about the content of the book. To survive in today’s fiercely competitive and rapidly changing business environment with a dramatic increase in the ratio of both seasonal and perishable products, companies need to charge different prices to different customers for their given goods and services to boost their revenues according to their willingness to pay. An organization can’t change its quick customers’ demand and can’t control the number of units sold in advance. Instead of this, they can control their supply according to the demand.

2. Key Features and Benefits of Revenue Management Software

Hotel management software that provides a revenue management function has four areas of capability. The first area is concerned with the hotel’s capacity, revenue data, and forecasts. The second provides a strategic analysis of demand, establishing a dynamic, closed-loop form of revenue management. The third area integrates local sales data with the revenue forecasts. The fourth is an alert and action function, which makes it possible to detect potential sales opportunities within the forecast. These features help hotel management structure an integrated revenue management process and make sense of the deluge of data that flows through its property management system. Some of the more advanced RMS programs also provide a function to recommend a best available room rate or blend of rates. When deciding on an RMS program, consider how these capabilities serve revenue management within your hotel organization.

One of the key functions of revenue management software (RMS) is to determine room rates and forecast demand. Most RMS programs, however, provide a wider range of benefits. Many hotel management programs now include a revenue management component, and InterContinental Hotels and Resorts has recently introduced one for its property management software. RMS programs help hotel managers set prices for rooms so that they reach optimal levels of occupancy and revenue. Yet the more advanced programs provide functions such as integrating data from different hospitality systems to present a detailed view of a hotel’s capacity and allow a more accurate analysis of sales opportunities. They can assist in the hotel’s strategic planning by analyzing historical and room forecasting data. With the importance of strategic revenue management in the current hospitality environment, these advanced functions are of considerable value to hotel managers.

3. Implementation Strategies and Best Practices

After the new system has been selected, a second opportunity is realized. The implementation stage is the most critical time for hotel staff and vendors to strengthen their relationship and work as a synergistic team. Post-implementation of such cost-enhancing systems as property management software, we estimate that 60 percent of companies find it necessary to assume total pricing responsibilities instead of retaining a systems consultant’s assistance. Post-revisioning of these systems becomes crucial to the accurate and timely updating of guest histories. Only with up-to-date current photos can companies hope to make recognition of their repeat guests up to 95 percent accurate. With the resources available from the role modeling and other data mining tools, the focus will be on long-term personal relationships while corporate policy establishments and partnerships are strengthened with an objective-oriented and seamless traveling service strategy.

Best practices in hotel property management will require a planning phase for successful systems implementations. Decisions must first be made in three main areas. The hotel company must decide what blend of property management system and central reservation system technology is right for each hotel, what resources are available and reasonable to invest in these systems and their implementation, and a property’s technology mix of client-server, server-based, and mainframe systems. Implementing the wrong systems blend in a trial and error approach has been costly to many hotels and could cost an untold number their industry leadership roles. To avoid this plight, hotel staff are encouraged to maximize their current systems knowledge through the completion of refresher training sessions made regularly available by their system vendors. Only then can they make informed decisions about the best systems blend for their properties.

4. Case Studies and Success Stories

Each year, the students in the course are given complete use of the revenue management system as part of their course requirements. In 2002, more time and information were supplied to the students to test the capabilities of the Phoenix Lodging RMS in the form of a special independent study project. In this study, the University provided the use of its copy of the Phoenix Lodging Systems RM software to its students, trips to Delaware and other sites to assist or observe students in their testing of the application.

The University of Delaware has been both a forerunner and a pioneer in the development and incorporation of revenue management into the hospitality curriculum. The University of Delaware uses the Phoenix Lodging Systems software and has progressed to an advanced level of application of this RM tool. While instruction in revenue management applications appears in several classes, the primary area where RM is addressed is in the revenue management course. In this senior course, students are not only taught the fundamentals in RM theory, but are also given extensive practical experience in using revenue management software as a “hands-on” learning tool. Additionally, the University conducts the major part of the validation, improvements, and demonstrations of the Phoenix Lodging RM system this paper.

5. Future Trends and Innovations in Revenue Management Software

In the hotel section of the Revenue Management and Pricing Journal’s most important articles reviewing the state-of-art research in the various revenue management sectors, only a small portion of the articles in the hotel section presented innovative revenue management software tools, yet the vast majority of these articles focused on actual cases or simple problem statements. This fact suggests the hotel revenue management software market presents a significant empirical opportunity for future opportunities that increase the conceptual and theoretical understanding of revenue management while also providing timely tools used by the practitioners in the hotel industry.

This evolution has created an extensive amount of research and development for the entire travel and tourism industry. Revenue management research has been applied to various sectors in the industry, such as the airline industry, the car rental industry, the cruise industry, the theater industry, and the railway industry. It has been an interesting learning experience that carries valuable concepts and methods to share, but what is more interesting is that the hotel revenue management business is still evolving, and new software tools are required to meet the industry’s actual needs.

In addition, two major customer segments in the hotel business, groups and meetings, have attracted much attention from practitioners and researchers over the last decade. The revenue management task within the industry has become much more sophisticated and has developed from applying simple decision rules to using mathematical models that estimate hotel demand and customers’ price sensitivity, forecast occupancy, and optimize pricing strategies to increase the owners’ share of customer wallets.

Revenue management has evolved into a comprehensive strategic field that encompasses many tasks and requires various tools. Hotels are no longer just adjusting room rates and engaging in overbooking to manage revenue. Nowadays, revenue management has a broader meaning that applies to the entire hotel business, including price elasticity of demand represented by consumer value, forecasting, strategic planning at different time horizons, competitor analysis, customer management, distribution channel optimization, and maximizing revenue by also considering the opportunity cost of capital.