revenue management software

revenue management software

The Impact and Implementation of Revenue Management Software in Modern Businesses

1. Introduction to Revenue Management Software

RM has its roots in yield management techniques, which were first developed in the airline industry, but it has now spread across all types of industry, including hospitality, tourism, and other service industries. The aim of revenue management is to maximize revenue or asset usage. RM practices and principles have developed over time so that now a comprehensive framework that can support decision processes in these areas of business exists. To effectively execute revenue management practices, a business should have the necessary infrastructure that allows quick, reliable, and accurate decision making in place. This underlines the need for revenue management systems, including both revenue management software and revenue management systems. Most recent RM applications are, of course, implemented using IT tools to support the manual cleaning of data and control tasks that have to be completed in a revenue management process.

Modern businesses operate in a dynamic environment that requires constant updates and rapid response to the always changing market conditions. Adapting to these changes can often be quite demanding but is of key importance if a company wants to stay at the same level of competitiveness over time. To satisfy these needs, corresponding information technology (IT) tools should be in place as they can guide and support the companies’ operations and help them achieve their business goals. One of the core decision-support technologies that have gained increased attention in these fields recently is revenue management (RM).

2. Key Features and Benefits of Revenue Management Software

The first applications of revenue management tools were in the airline industry where studies showed that manual revenue management decisions lead to a decrease in profits by as much as 5%. This business sector was also characterized by a uniquely strong relationship with economic conditions requiring companies to provide quick reactions that could secure higher revenues. Consequently, the implementation of RMS’s and yield management practices was almost immediate. This relationship continued even when the first revenue management software was developed (mostly as property management systems or as decision support tools) and successfully tested in the hotel sector. Despite these early success stories, the hotel industry in particular has taken a rather slow adoption approach to more modern, real-time enabled revenue management software that employ state-of-the-art decision-support systems (DSS) technologies. Also, the revenue management systems in use have not been widely seen as standalone systems similar as they have in other industries. The potential impact of contemporary systems has not been studied thoroughly for today’s current conditions, since revenue management has become an established, industry-wide practice.

Most revenue management systems aim to improve businesses’ core functions, namely analyzing historical data, predicting customer behavior, setting prices, distributing products, and further analyzing the effectiveness of these activities. These steps were often completed manually or through the use of decision-support tools contained within property management systems (PMS) or global distribution channels in the era prior to a large-scale application of these newer technologies. The idea for using revenue management software, therefore, as a fully functional decision-aid rather than individual technology bits embedded here and there within existing systems, was born. The introduction of revenue management software was a revolution that has lasted for over a decade. The first models in particular were technology-focused and had limitations; however, in general, by following an interdisciplinary approach, they have proven to be able to solve specific business problems effectively.

3. Best Practices for Implementing Revenue Management Software

It is clear that there is no single best way to implement an RMS into a hospitality organization. However, if the guidelines developed through the research findings of the previous section are followed by a hospitality enterprise, we believe the chances of successful RMS implementation will be significantly improved.

In addition, revenue management personnel should: eliminate all manual calculation-based revenue methods, use the RMS system for decision making and routine revenue management activities, and maintain fair and equitable pricing, inventory allocation, and business process integrity and assume full responsibility for RMS performance.

To ensure a successful implementation of revenue management software (RMS), the following best practices are recommended: forming a revenue management steering committee, selecting a robust and flexible RMS, aligning the organization’s culture, policies, and procedures with its RMS-driven business goals, training revenue management personnel on the RMS, obtaining management buy-in and delivering RMS results and benefits against expectations.

4. Case Studies and Success Stories of Revenue Management Software Implementation

As the hotel company revenue management model maturity advanced, using higher levels of data and mathematical sophistication, the innovative capacity to continually evolve these complex control applications suffered from the same paralysis experienced by other QSR concepts not wholly backed by common ownership or joint-venture investment. With the exception of reasonably solid revenue management software providers such as MsExcel and SAS, these various advanced hotel revenue management continuity support efforts are both technically simplistic and generally outdated, both in data collection speed as well as meaningful information garnered from that data. There does not exist an industry-standard model for hotel revenue management adapted from more intelligent industries. Just as a Hotel “K-Mart Tycoon” finds no fulfillment in knowing an airline flies empty scheduled main cabin seats or that a restaurant has a half-price daily special, the ultimate hotel revenue manager’s desire is to offer the least price that will achieve the greatest possible revenue. Why then are these data terminal MTPCS visit insights provided at much higher data-gathering speeds for these other service industries? The principle supply chain management and revenue are essentially the same. Is it not time to develop state-of-the-art tools specifically made to deal with hotel revenue management?

Revenue management principles are widely applicable across industries, products, and market dynamics. To that end, both the original Revenue Management Ninety-Nine No. 1 Hotel Company early adopter and No. 2 Rental Car Company both recognized the potential to develop their own RM systems. Lacking the funding to establish these systems internally, these companies instead funded third-party providers to develop the needed network optimization software. Their foresight led to a revolution in the airline industry’s complex optimization, which in turn remains the primary force driving further executive buy-in for the power and potential of exponential progress-driven artificial intelligence and dynamic control networking technology.

Case studies and success stories of revenue management software implementation: Lessons learned and future opportunities for our industry.

5. Future Trends and Innovations in Revenue Management Software

There are indications that software companies are beginning to seek new ways to strategically differentiate their offerings beyond simply providing software that does the best job of automating. First, several software vendors have been positioning themselves as consultants and business process re-engineering firms with an orientation toward revenue management for some time. These firms provide a strategic blend of consulting, technology implementations, and ongoing revenue management. Software companies that can offer their products in such conjunction with advanced consulting services integrating both business or management strategy and concrete software support can be valuable to practitioners. Furthermore, most of the pioneering software vendors are partnered with a modest number of the most prestigious business or technical consulting firms. These partnerships have been valuable avenues for firms for the application of their technology and strategic consulting expertise.

This chapter briefly reviews some future directions and innovations in revenue management software. We limit our review to innovations in actual software-based revenue management support rather than the broader range of revenue management-related technologies more generally. As mentioned in Chapter II, a number of other areas of software innovation will reshape the practice of revenue management over the upcoming decade. In addition, there are a number of specific needs for new and enhanced tools focusing specifically on the technical modeling of various aspects of revenue management decisions, and these are explored in several other chapters. With these limitations in mind, a number of interesting directions and emerging research areas in revenue management software are summarized in this chapter.