Revenue management technologies: what is the new normal in forecasting?

If you can predict the unconstrained and the constrained demand per rate class for each day, and how long those guests will want to stay for, then you know precisely how to manage this demand and which rate to apply to whom in order to fully maximize your revenues. In a perfect world maybe, but unfortunately, it doesn't work that way anymore.

Is your Revenue Management strategy the same than 2 years ago? Are you still counting on your historical data and on your on-the-books reservations to base your forecast? We surely hope not, because the train of changes keeps coming at a really fast speed and we suggest you be on it! Now what are those changes and how are they affecting your strategy?

Internet revolution: As we all know, the Internet has, in the last few years, changed radically the way the consumers shop and book hotels. They now have access to a lot of information and have a multitude of hotels to choose from. They love to shop around and look for the best bargain and if you're not it, then your competition will surely be. In a nutshell, everything you thought you knew about your customers' booking behavior, thanks to historical data and previous patterns, is now obsolete. You need to know at all times what your competition is doing and react accordingly to differentiate your product. Yes, it is a war, and it is bloody!

The economic recession: The traditional Revenue Management model wanted the rates to be lower with more restrictions long before arrival, aiming at the very price-sensitive market segment. As we'd get closer to the arrival day, because of a higher expected demand, rates would increase, aiming at the less price-sensitive. What happened with the recession? In order to attract more guests, hotels were dropping their rates as we'd get closer to the arrival day because they needed to fill the rooms and there was not enough demand to be picky about the rates. Competitors were forced to do the same in order to stay in the game. This resulted in a complete change in the customers' beliefs and shopping behavior. Online shoppers are not stupid! They knew how badly hotels needed their business and they knew that if a hotel was not willing to give them what they wanted, well, the hotel next door would. Customers were therefore waiting until the last minute to make their booking, as, chances were that the rates would be lower due to the hotel's despair to sell.

Cancellation Policies: Most hotels today use a cancellation policy that was created a decade ago. Can this be true? Well, look around and you will see that the majority of hotels have a 6pm same day of arrival cancellation policy. What about a 'change' policy? Have you tried to change your airline ticket lately? If you did, you were most likely charged a change fee, unless you booked the full fare of course. But who does? Try that with most hotels, you will find that most do not even have a change policy or an early departure fee! The big question to ask ourselves, does this makes sense anymore? Many consumers are taking advantage of hotels' lenient cancellation and change policies, so what do they do? They book a secured reservation at one of these hotels for peace of mind because they know that at least they have a guaranteed confirmed reservation at a decent hotel. Then, just 1 to 2 days prior to arrival, the online fun begin with shopping for a better hotel, a better location, or a different brand. If the flight arrives early in the morning, then the lucky travelers even have the luxury of visiting any new prospected hotels since they have until 6pm to cancel at no charge! Is that fair to hotels? Are you surprised to see your last minute cancellation report getting larger?

New emerging technologies: Mobile technologies for example are evolving really fast. People can now shop online for a hotel room while being on-the-go, simply from their phone. This means that customers who would normally book their stay in advance now have the luxury to wait until the last minute to book their hotel room, whether from a train or from their car, driving to their destination. And they know that with all those choices available to them, they will always find a hotel they like, with a price they find reasonable, at the last minute. So why bother, right?

Conclusion, if more and more guests start booking at the last minute, what does that say for your forecast? What does that say about your rates, supposedly based on your forecast? With this new behavior, it seems like the future of Revenue Management doesn't include the past and historical data! Now, with all the changes that occurred in the last 2 years, how can you look at the past to predict the future? Did you use the 2008 historical data to forecast your demand for 2009? If yes, how did that work for you? Keep those 3 words in mind as they are the key: real-time searches, online competition, and automated system. Why focus on the past when you can adapt to what is happening right now, in the present? You don't know how customers will book tomorrow. But you do know that they will most likely shop online, and on major OTA websites. You want to sell this room? Then you need to know where the other hotels stand as compared to you on these distribution channels at that very moment.

An automated system will give you the highest rate you can ask for in order to sell this room. Meaning low enough for you to be competitive, appear on the top of the page and book this customer, but high enough to maximize your RevPar and make a profit. It's the perfect balance. You can't be too generous, but you can't be too greedy either and without computer software calculating this perfect price for you, chances are you won't get it right in this automated online world. So next time you look at your 11 day forecast, ask yourself if this is the right way to do it! If the answer is no, it is time for you to acquire an online competitive yield pricing sales and distribution system that optimizes rates and bookings in real-time.

About REVPAR GURU
REVPAR GURU provides hotels around the world with an alternative revenue management software solution, to manage RevPAR intelligently and effectively, and deliver maximum profits. REVPAR GURU's custom-designed Yield Dynamic Price Engine meets the rapidly changing hotel needs in a demanding business environment - dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management, and GDS sales distribution - to increase a hotel's RevPAR while maintaining rate integrity and automated rate parity. It is the only revenue management solution that automatically optimizes and updates hotel rates across all major consumer travel websites, based on all market variables and in real time, and provides a strategic room inventory control. Once deployed, hotels can boost their occupancy rates and cut their distribution costs dramatically. Headquartered in Miami, Florida, additional information can be found at www.revparguru.com or by calling +1.786.478.3500

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