By Robin Roberts
If the average hotelier were as passionate about revenue management as Christoph Hütter is, their bottom line could very well be significantly healthier. And Hütter is very passionate.
Prior to moving from Europe to Canada in 2012, Hütter was revenue manager for a large hotel in Brussels when the financial crisis hit in 2008. No sooner had he sighed with relief that Belgium was spared, the calendar flipped to 2009 and so did the country’s fortunes.
“It hit us pretty bad,” says Hütter. “But I realized that if I did a good job and filled those rooms, people would go to work the next day. I understood the responsibility that came with that. That’s what has guided me over the years to generate more revenue for hotels, to help boost their profitability. Revenue doesn’t pay the bills; profitability is what matters at the end of the day.”
Ultimately, Hütter kept his Belgian hotel afloat, but it took hard work. He toiled long, stressful hours creating multiple reports for revenue management, sales, marketing, and operations. He was sure there had to be a better, easier way. So, he taught himself how to computer program, and soon had automated the reams of reports he grappled with every day.
He started with the daily revenue report, which typically took 30 minutes to compile. With automation, he chiseled that down to three minutes. “I saved 33 days in the year just by doing that,” he says. “That’s time I now had to actually read and analyze those reports. I found a lot of opportunities, and was able to implement strategies that others were maybe not able to implement.”
One such strategy he implemented was stay restrictions. If, for example, a hotel’s cycle finds Tuesdays and Wednesdays busier, and if those days sell out, the hotel is blocked from taking a Monday booking that includes multiple days. “The hotel would not accept bookings for one or two nights on Wednesday but also not take bookings for two nights on the Tuesday,” he explains. “Any booking staying over, and not just arriving on, Wednesday would be required to stay for at least three nights. This will decelerate pickup on the peak night and allow increased overall occupancy throughout the period, leading to increased revenue. Restrictions could also be placed in other [areas] such as room types and rate categories.”
He cautions hoteliers to not sell out too early. “They need to forecast demand and occupancy, and when demand peaks, slow down pickup on those peak days. Stay restrictions are a great way to accomplish that, to protect shoulder nights and maximize revenue.”
But, he says, you need the right technology to pull that off. “The system’s rate architecture, rate plans, and so on need to be set up so you can effectively manage that; and it needs to be very fast. If your system cannot handle such restrictions and tactics, it’s probably time to change the system. When the software is older than the user, we have a problem.”
Hütter brought his problem-solving flair to his new home base of Ottawa, where he is a consultant to hotels
big and small, passionately boosting their profitability.
Pricing and forecasting
Gone are the days of the Excel spreadsheet with pricing based on season. A good, automated revenue-management system (RMS) now gathers so much more data: on previous rates, your competitors’ rates, market dynamics, inventory levels, and predicted demand. It shuffles all that together and deals out rate recommendations designed to boost that all-important revenue and profitability.
Professor Wendy Burgess, who teaches RMS at Humber College and also owns revenue-management consulting firm InnPro Solutions in Toronto, says having a good RMS also makes the work of a revenue manager much more efficient. “You could be making pricing and inventory decisions each day, each hour, even, so there’s a lot of [data] processing to go through quickly and accurately, [to] be competitive in the market.”
Burgess, who also trains students in the Certification Hotel Industry Analytics (CHIA) program, a deep dive into analytics, says a good system “can [also] process your internal data, look at what you’re running at, your pacing, as well as external data, competitive data and trends, and [then] forecast by market segment. Some systems will even pull in website activity, and can be set up to change the rates within parameters.
“So, from the standpoint of efficiency, you’re getting data, you’re getting decisions, and you’re going to make more money. Plus, it frees up the revenue managers, [whose job] has really changed to become a much more strategic position rather than entering and reacting to data. A lot of them don’t work for a single hotel anymore; they often manage revenue for several properties.”
But she also warns of the perils of an incorrect rate. If it’s too high, you lose cost-conscious customers; too low and your inventory fills up with those low-paying guests, leaving nothing to offer when the higher-priced customers come calling. “It’s a calculated gamble,” says Burgess.
She also notes that sales and marketing and reservations teams need to be part of such a system, even if they’re not all mathematically inclined. “A lot of these systems have a group-sales module, and that’s really important. But some managers I see through my business are afraid of the numbers. I tell them, and my students, revenue management isn’t all numbers, it’s not accounting. It’s kind of that right brain/left brain discipline. You’ve got the analysis side but you also have the creative side of shifting and stimulating demand. It’s become much more strategic.”
While there are many RMS on the market — Duetto, IDeaS, Atomize and LodgIQ, among them — there is no one-size-fits-all solution. What works for a big brand resort might not benefit the independent boutique. The right choice depends on a property’s particular needs, preferences, budgets, business practices and the strategies it wants to implement.
But whatever system you choose, it needs to play well with your other programs. “The hospitality industry, and hotels especially, are very different when it comes to technology compared to other industries because we have so many different systems that all need to talk to each other,” says Hütter. “The basis being the property-management system (PMS), which is the foundation. Then you have the channel manager that connects with the PMS to manage the online channels, the distribution channels. You may have a whole lot of other systems that are connected to that. A few years ago, I tested two different channel managers at the same time in one hotel set-up. I changed my prices, my inventory, and put restrictions in place. It was updated [with the OTAs] within three hours, while another channel manager was implemented in about three seconds. That’s a huge difference. So yes, they all integrate, they all connect to each other, but how well?”
He cites another example of one large hotel group with a big IT budget that bought one of the fancy RMS. “They tried to install it and realized that although the interface existed between the RMS and PMS, it didn’t work with their accounting software. It comes down to what you have in place to [determine] the best solution for you.”
Hütter says the information coming out of your system is only as good as the information going in. Working with a tech company a few years ago, he analyzed data from hundreds of hotels and found most had pretty good forecasting accuracy. The ones that didn’t were the result of how the information was input. “They entered the data in a way the system couldn’t comprehend,” says Hütter. “Their market segmentation and rate-plan architecture were not optimized. The system was fed poor quality information so was not able to produce good forecasts. You can have the best system in the world, but if the data that you’re generating with it is no good, those systems are not going to help.”
Hütter says that, because the pandemic changed the way people travel, historic patterns are no longer relevant. People have learned to collaborate over distance through video conferencing. Many leisure travellers now combine work/vacation trips. Throw in stormy weather, a suddenly defunct airline, a stock-market crash, or a pandemic and your systems threaten to self-destruct. He says RMS vendors have scrambled to adapt their algorithms to these changing patterns but it again comes down to the humans who input the data.
Burgess says, “You need somebody with know-how to be able to react to that.”
Hütter agrees. “You always need some brain behind it to figure out how to optimize it. There’s a lot of opportunity out there, we just have to uncover it. That’s why it’s important to have revenue managers that drive this, and the technology that supports them to focus on uncovering those opportunities.”