Rate management has always been an evolving discipline, with the price of a room forecast by considering a host of factors — potential demand, local events, seasonality and historical data to name a few. The prevailing tools and technologies of rate and revenue management depend on these factors, as well as advanced algorithms and rate shopping; a decided and dedicated plan of action; and a future that looks to incorporate artificial intelligence (AI) and real-time guest data.
From big brands to independents, what’s clear is that, in addition to RMS (revenue-management software) for revenue optimization, rate-shopping tools have become commonplace.
Michael Bennett is Chief Marketing Officer at Cendyn, a cloud-based software and services provider for the hospitality industry, which recently acquired Rainmaker. Within the Rainmaker suite is guestrev, a revenue- and profit-optimization tool. “Rainmaker [guestrev specifically] pulls in competitor rate data and includes it in its pricing algorithm alongside a segment-, room-category and length-of-stay-level demand forecast,” explains Bennett. “A sophisticated optimization process evaluates all demand against the remaining available supply of rooms and determines the most profitable business mix for the hotel.”
This competitor data is called ‘rate shopping’ and it’s extremely valuable information, as knowing the competition’s room rates means hoteliers across all segments can stay competitive. “Competitor rates can be used to influence the final price recommendation so hotels don’t leave money on the table by pricing too far below competitors and ensuring pricing is as competitive as possible when the hotel needs to capture more market share to boost occupancy,” says Bennett.
Toronto-based Sunray Group of Hotels has a dedicated revenue-management team that works closely with the company’s more than 50 owned and managed hotels. “Our hotels subscribe to daily rate shops, which show our competitors’ rates so we can price accordingly based on the hotel’s occupancy levels, the competitors’ rates and the demand in the market,” explains Sandeep Gupta, the company’s vice-president.
Though rate shopping seems to have become standard across the board, the level of automation depends on the hotel. Gregory Pohlod, director of Revenue at Accent Inns — a private chain that owns five Accent Inns and two Hotel Zeds in western Canada — says his company uses a variety of systems for rate shopping and reservations, along with products from TravelClick’s suite of hospitality software. Once the data is gathered, Pohlod manually updates the central-reservation system to push rates out to channel platforms on a daily basis.
Even when the rate and revenue products have the power to automatically dictate rates, there’s still a human element overseeing and approving rates before they hit the channels. Lisa McCaul, director of Revenue at The Inn at Laurel Point in Victoria (an independent hotel) also uses TravelClick for rate shopping, along with a forecasting system that decides on a rate for each day, which is sent to the PMS and the channel manager. “I can check and see if I agree with it and, if I don’t agree, I’ll change it,” McCaul says.
THE IMPORTANCE OF STRATEGY
Although a sophisticated system can recommend an ideal rate, the human element is still crucial, especially when it comes to a hotel’s overarching rate-and-revenue strategy.
Bennett asserts the importance of a clearly defined pricing strategy, whether or not there’s an automated RMS. “Pricing strategy dictates how a hotel positions itself against its competitors given different situations,” he says, offering the example of constrained/peak nights compared to unconstrained/soft dates. “The strategy should also address how different room types are priced relative to one another and how different rate plans may be made available to customers with certain qualifications or restrictions.” Here Bennett gives examples of advance-purchase or non-refundable rates, AAA discounts and packages.
He adds a pricing strategy should reflect whether a hotel considers itself to be a leader or follower with regard to its competitive-pricing actions within the market. “Rates should be managed in accordance with forecast occupancy, with the general goal of closing out lower-yielding options as occupancy increases. If an automated RMS is being used, the hotel should ensure the RMS is configured to be in alignment with its pricing strategy,” he says.
Gupta is on the same page about pricing. “The aim of a revenue-management strategy is selling the right product to the right guest at the right time for the right price,” he says. “We focus on knowing our markets and knowing what the right business mix is for each hotel.”
Gupta notes the key is to analyze historical data, how the hotel is pacing in the future and the demands and trends in the market. “The majority of our hotels have weekly revenue-strategy calls with their brands and continue to work closely with our regional sales teams.”
Though a solid strategy, not all strategies revolve so closely around pricing. Pohlod’s approach at Accent Inns focuses on sending customers to its website for direct booking. This not only eliminates the middle man (and commissions paid to external platforms) but also provides an opportunity for improved guest experience. “A big part of our strategy is making guests aware that the best rates can be found on our site, through us directly,” says Pohlod.
“For the longest time there was a perception that the cheaper rates were elsewhere, but as technology has evolved, we can push rates out more quickly and dynamically, including on our own websites.”
THE FUTURE IS PERSONALIZED
Across the board, it’s predicted advanced algorithms, AI and machine learning will continue to improve for better forecasting, but additionally, acute personalization and the ability to provide offers to guests in real-time is anticipated.
On the horizon for software is the capability to deploy multiple forecasting models simultaneously. “guestrev will be able to automatically choose among [the models] to arrive at the most accurate possible forecast,” explains Bennett. “Rich customer data, coupled with machine-learning algorithms, will help hotels curate highly personalized bundles of products and discounts at a rate that is geared towards optimizing profit.”
Curation is at the heart of where rate optimization is headed. Pohlod points out that hotels are already offering personalized rates in the form of on-demand discounts. “The advancement of tech has allowed us to roll out things such as direct-booking offers, members-only rates or unlocked rates, where if you provide your email, we’ll provide a discount off of what’s publicly available.”
Coupled with location data, cookies and browsing history, the next wave of tools will include the ability to target potential guests in real-time based on their personal preferences and activity.
McCaul says the technology will keep changing and evolving. “It’s interesting now with digital marketing and targeting, along with cookies and tracking, and seeing how long visitors have been on our site.” She notes it’s a game-changer for independent hotels to have the same complex systems as big brands, which, in turn, means smaller businesses can stay competitive.
Written by Andrea Victory