Re-imagining Hotel Business intelligence

The skinny on Revenue Management

Hotel Revenue Management is a behind the scenes function executed at every hotel and casino across the globe. Revenue Managers (RMs) are responsible for predicting consumer demand and optimizing inventory and rates in order to maximize revenue for a hotel. While that may seem like a lot to digest, they are simply forecasting supply and demand with the goal to make as much money as possible. Hotels and casinos operate with a perishable product; they have a fixed room inventory and each room has a daily expiration. If a Revenue Manager can anticipate expected demand, for example a large conference or event coming into town, and yield appropriately they can increase the RevPAR (Revenue per Available Room) and performance of a particular property.

What's so hard?

The hotel industry is fraught with antiquated technology systems… One of the reasons why I wanted to get into the hospitality space. It is desperate for innovation. If you've ever checked into a hotel and gotten a glimpse at the screen your front desk agent is working with, you might have noticed that it’s typically a green screen with a command line interface. Their software is old, slow, and held together by spit and sticks if you catch my drift. Hoteliers are bound to multiple systems that are daisy-chained together and extremely fragile. Imagine for a moment that you are a Revenue Manager and you want to change your room rates for a day in the future. Depending on how complex your property is, you may have hundreds of rates to update. Why? Because every rate you have publicly available is tied to a rate code. Different offers like AAA discounts, Corporate discounts, Group business, Contract business, OTA (Online Travel Agents like Booking.com and Expedia, etc...), have different price points. In many brand name hotels (names omitted for their sake), the process to update these rates is manual. I mean one by one, row by row. Some hotels even employ upwards of 50+ employees whose sole job is to key in rate codes on a daily basis - it's crazy!

duetto changes the game

Duetto Cloud (whose name has nothing to do with hotels, but rather a car... no explanation there) pioneered a new revenue strategy called Open Pricing that has revolutionized the ways hoteliers manage their rates. Dying to know more? Okay here we go… Before Open Pricing, hotels used a system called BAR pricing (many still use this today). BAR stands for Best Available Rate. Tip: BAR is usually the worst or highest rate a hotel offers. Don't be fooled. A hotel will set their BAR rate for their standard room type and then apply a static differential, think of a ladder, to price additional options like different room types or lengths of stay. For example, if the hotels BAR = $100 and the differential for a Queen Double = $50, the Queen Double would retail for $150 and so on. If you've made it this far then you're thinking okay that doesn't sound so bad and makes sense. Great! Hotels for decades thought the same thing. It’s a fixed-tier approach that's "easy" to implement and manage. One big problem though… With this fixed system hoteliers are forced to close out certain channels when demand picks up. Here's a real world example. Let's say I want to use my AAA discount when I book a hotel room. If the hotel is using BAR pricing and decides that it does not want to give discounts for a certain day it has to enforce a restriction on the AAA discount. If I attempt to book the hotel for a 3 day stay and 1 of those days is restricted from allowing the AAA discount I am typically shown no availability on their website because the system is not truly dynamic. It’s unable to show different rates for different days. What the hotel really should tell me is that it will honor my AAA discount for 2 out of the 3 days and the 3rd day I will pay full price. Open pricing gives hotels the ability to price all room types, channels and dates independently of each other to maximize revenue. Hotels can price each room across all channels based not on BAR, but on the demand for those specific products and segments.

How does bi come into the mix?

Duetto offers a number of different products that live on our cloud platform. First and foremost is GameChanger, the Revenue Management Solution (RMS) that allows hotels to manage their rates across all channels and segments. With one click of a button we can update pricing in real-time, as many times a day as they would like (or as many as their systems can handle), across any channel. What makes this product particularly unique is our Duetto Recommendations. We have a proprietary algorithm that recommends a price for every segment based on demand, current pace, historical DOW patterns, travel data, and user influence. It is capable of experimenting and testing to find the optimal rate and can be set to auto-publish rates. This tool is extremely valuable, but still requires a business strategy to be most effective. At the end of the day each hotel has a unique mix of business depending on its location and offerings. For example, there are All-Inclusive Resorts, Casinos, Extended-Stay Hotels, Luxury Resorts, Hostels, and new creations like Capsule/Pod Hotels. Each has it's own business goals and different guest behaviors. Hotels need more than just a solution to price their rooms, they need a strategy to maximize the revenue of their entire hotel. In the case of Casinos, they want to factor in player worth (aka money spent on the casino floor) to influence discounts on rooms and bring in high-roller guests. All-Inclusive resorts, like Disney, yield park passes and packages with their room rates to maximize revenue per guest. Luxury Resorts offer services like Spa and Golf with rooms to offer enhanced guest experiences. And lastly to sum it all up, hotels want to know if you are a return guest (think reward/point programs that are not so successful) so they can offer personalized rates and keep you coming back to their property. So, how do you formulate a revenue management strategy for all of these unique businesses? With Business Intelligence powered by Duetto's ScoreBoard application.

Forecasts & Budgets

Why is forecasting important?

Forecasting attempts to predict the future environment in which you may operate. A well crafted forecast or budget provides a clear plan to achieve expected revenue or profit goals. Just like we as product managers are responsible for providing a clear roadmap, Revenue Managers have to set similar targets (their own roadmap) of how they plan to run their hotel strategy. Accurate forecasting is one of the ways a Revenue Manager can make better decisions when unexpected events happen. According to one article I read, a 10% improvement in forecasting accuracy translates into a 3% increase in revenue generated. In summary, forecasting is the most important driver of any revenue management optimization approach.

One critical feature we implemented in our forecasting tool is called Smart-Spreading. It allows a user to enter a value in at the month level and then the system will automatically spread the values down to the day level using historical patterns, current pace information, and day of week trends. It is a massive time saver for our users! This idea stemmed from talking to our users (gasp!) and hearing their frustrations. Living proof that listening to your customers is key.

Advanced Reporting

The key to creating a good forecast is having a deep understanding of how you have performed in the past. Working closely with Revenue Managers, Business Analysts, Owners, and Asset Managers, I was able to survey the landscape of available reporting tools for hoteliers and found that none came truly out-of-the-box with what these teams needed from a Revenue Strategy perspective. Our ScoreBoard solution was designed with a Revenue Manager first perspective. It is easy and flexible to setup, but extremely powerful in the data it provides and unlocks.

Advanced Data Visualization

While some folks love their tabular data, others are visual learners. I found during my customer interviews that executives in this space prefer graphs, charts, and dashboards over detailed reports. I designed Custom Dashboards to help Revenue Managers more quickly and easily generate visuals that they can share with their owners and asset managers. They love this feature! It saves them a ton of time and effort.