Revenue management plays an integral role in the financial success of a hotel. Figuring out the optimal pricing of rooms and ancillary services is essential to keeping a property in the black. With a number of revenue management technology platforms and approaches to choose from, how do hoteliers choose what’s best for their hotels?
In the latest Hotel Business Hot Topics session, “Reinvigorating Your Hotel’s Revenue Opportunities,” in partnership with IDeaS, industry leaders discussed revenue management strategies and how to harness the pricing power of your property.
Glenn Haussman, founder/host, No Vacancy Live podcast, moderated the session, and the panel included industry veterans Federica Bresciani, director of revenue, Lefay Resorts; Klaus Kohlmayr, chief evangelist & development officer, IDeaS; and Cesar Wurm, VP, commercial, premium brands, IHG Hotels & Resorts.
In today’s environment, as guests seek more from a stay than just a night’s sleep, hotels have to figure out how to turn guests’ needs and wants into revenue opportunities. One way to do that is to compute the total lifetime value of the guest.
“I think it’s important that we take a holistic approach to ensure we are really taking advantage of all the data points that we have through our systems and our knowledge of our guests,” said Wurm. “We can look at the total lifetime value and the total experience of our guests to not only drive loyalty but also additional revenue.”
Bresciani, who had called revenue management “the heart of the organization,” agreed that hoteliers “need to have a holistic approach to the business and our market,” adding, “It’s not enough to just sell the room. It’s not enough to sell the room plus a fantastic dinner. We need to market to those who are interested in all of our services. We need to have a price that includes everything in order for the guests to choose us because they have a lot to choose from.”
Kohlmayr put it simply, “The essence of revenue management is about understanding the willingness to pay and how you make the right offers at the right price.”
He continued, “Federica made a point about revenue management being at the heart of the organization, and that’s where most of the data sits and that’s where people starting to tap into the capabilities to look at lifetime value, profitability by channels and distribution costs—and layering all that into optimizing the revenue opportunities from all different revenue sources and at all different margin levels.”
Wurm pointed out that, not long ago, revenue management was only about the reservations, but that has changed.
“It’s very hard just to look at revenue management as a single discipline because it really combines the commercial aspect, sales and digital marketing,” he said. “It’s becoming that one very powerful tool that has all the data we need and also has the ability to optimize not only where we start selling the room, but how to drive additional revenue through the booking process, pre-arrival and departure.”
A question came in from the audience about AI and how it will work with existing revenue management platforms.
Kohlmayr pointed out that IDeaS has always used AI in its mathematical models and algorithms, adding, “What’s different now is how you can interact with AI. You can do it directly through an interface or a program like ChatGPT, GeminI or any of the other systems that are out there.”
He said that the big change is going to come when users can start interacting with systems in a conversational style.
“In the future, you should be able to ask questions to your system, and your system should be able to respond or do things for you when you ask it to,” the IDeaS executive said. “Rather than digging through lots of screens to find the answers, you will just ask the system something like, ‘Hey, system, what happens if I change my rate by 5% down or up? What would my impact be on revenues? Where should I sell and what channels?’ So you can have this conversation rather than a physical, tactile interaction.”
Engaging with email
Once the guests depart the hotel, there has to be a concerted effort to reach out to them to entice them to return. Another audience member asked how often email blasts should be sent out to past guests.
“I know you probably won’t love this answer, but it varies,” Wurm responded. “I think what’s important is how we segment the audience. Just ensure that you can tailor email frequency and content based on their preferences and behaviors because the last thing you want is just to send communications where you push customers away.”
He added that hotels should monitor engagement so that the right message gets to the right individual.
“If the hotel is seeing that I have never opened or engaged with the message, that’s a sign to change the messaging,” the IHG executive said. “I think that monitoring and then making sure that you’re providing value, whatever that is, is essential. It doesn’t just have to be an offer, but it can be valuable as far as information, education or whatever your intent is of that communication. So, with that said, I think the timing of emails can vary. It could be biweekly, or monthly, or it can be just transactional emails that are for a specific event or promotion.”
Bresciani said Lefay Resorts handles this type of past guest communication just as Wurm described, adding, “You have the technology, use it. For example, we offer many wellness amenities. There are very specific methods, situations and reasons why guests are coming to our wellness offerings, so we really need to target them in the right way. We are not just sending out, ‘This is our resort, and this is what we do.” We’re going specific, especially when we have a lot of repeat guests.
They are coming to us for a reason. We need to let them know what is new in that specific situation or that specific offer.”
Kohlmayr pointed out that the key word in post-stay communication is relevancy.
“As long as you have a message that is relevant to either the point in time or the message you’re pushing out, that’s what you need,” he said. “It doesn’t matter if I get an email every day as long as it’s relevant to me, and I feel there’s value attached to it. Here’s a funny example: I just bought my first electric car. One of the first emails I got was a special deal on oil change for my new electric car. Somebody forgot to tell the car manufacturer that electric cars don’t have oil. So I’m glad it’s not just the hotel industry that’s getting it wrong.”
Instinct-data balance
Seasoned revenue managers have spent years honing their craft and can change prices using their instincts, but they still use the data tools at their disposal. Haussman asked the panelists how they balance trusting their instincts with utilizing the data.
“Intuition really helps in interpreting the data trends and making decisions because you really need to have one and the other,” said Bresciani. “Because the data is just dry, you need to have a little bit of empathy. Otherwise, it doesn’t really work. So, honestly, we all put both into the basket and that’s what gets really great results.”
Wurm pointed out that “intuition that’s built from experience and understanding of the market or markets adds a qualitative layer that data may miss,” adding, “A great example is if, right now, it starts pouring and you’re in an interstate hotel, your system may not pick that up as of today. You know that you’re going to sell out pretty quickly, so you better override the system right away. So it’s just knowing when to do that. I lean a little bit more on the risk-taking side, trying to push the boundaries and learn.”
Are hotels always looking to put up the “No Vacancy” sign? Kohlmayr was asked if there are times when a hotel should hold off selling all the rooms in an effort to raise the room rate as supply becomes limited.
“When you think about maximizing your revenue opportunity, you need to get as close as possible to the 100% level, and that means, perhaps, taking more risk,” he said. “In some instances, it also means waiting a little bit, like when Taylor Swift comes to town and you have a few rooms left over to sell at the last minute. You know some people will be desperate, and they will pay you a higher amount of money, which I have done personally when I was a revenue manager at a hotel in Paris. I held back some rooms until a week before and everyone was sold out, and I was the only one that had rooms available. I could sell them almost at any price at that point. You absolutely should have the right strategy in place, but you do want to sell out or get close to selling out.”
