How can a Revenue Management System (RMS) add tangible value and bring defined business benefits to Indonesian hotels in 2020?
Written by – Rachel Grier, Area Vice President, Asia Pacific for IDeaS
As we move into the new year and the new decade, any Indonesian based hotelier without an automated revenue management system is operating at a severe disadvantage. In a competitive operating environment, like Bali, where every pricing decision and booking control counts, all hotels need to ensure that they are maximising their revenue opportunities while minimising operational costs and attracting the right guests at the right rates.
While revenue management is not a new industry practice by any means, it is not always fully understood or appreciated by property owners. So how can a Revenue Management System (RMS) add tangible value and bring defined business benefits to Indonesian hotels in 2020?
Grow your property revenues
In the past, manual-based revenue management approaches have looked at a hotel’s booking history and current activity levels to forecast demand. During periods of high demand, revenue managers would increase rates. When demand is low, they would discount them, thereby generating best-case revenue under both scenarios. However, in 2020, forecasting, inventory controls and pricing decisions will rarely be this simple. The reality is that today, amid heavy reliance on online travel agents (OTAs) and flash sales, it’s almost impossible to look at a hotel’s booking history and identify trends because the booking patterns are changing constantly driven by rapid changes in consumer behaviours. It is therefore incredibly challenging for revenue managers to recognise small changes, which indicate shifts in demand, and then to react in time to leverage the opportunity and drive profit.
In a high-speed environment, manually collecting, evaluating and calculating data via spreadsheets is not only a tedious process, it’s also slow and highly susceptible to mistakes and missed opportunities. This is where an RMS makes a huge difference to both the top and bottom line. Through a series of specialised algorithms and calculations, an RMS automatically assesses hotel performance and market demand and deploys pricing decisions across the distribution ecosystem accordingly. Combined with highly visual user dashboards, an RMS enables team members across the organisation to quickly understand future and current market demand using data at both the market and hotel level – all of which are vital to both deliver and grow hotel profitability.
Attract the right business
Not all business is equal. Hotels in Indonesia need to balance lower-rated, longer lead time business with higher-rated, short lead time bookings (which are often business guests who are more likely to stay again in the future and have a higher total guest value). To help avoid turning away higher-rated business, accurate data that highlights who their most valuable customers are is essential.
To properly understand the value of a guest, a holistic view of a customer’s lifetime contribution must be obtained, not just their room-rate spend. Data from all transaction systems should be integrated to provide a true picture of a guest’s preferred activities and their overall value to also include ancillary value: food service to the day spa usage, guest rooms to gift shop purchases, the cost of the booking channel, etc.
By using an RMS to help identify their most valuable guests, hoteliers can deploy strategies to make those guests feel welcome and recognised, to inspire long-term loyalty (and direct bookings!).
Eliminate pricing errors, make profit focused decisions
In general, a typical hotel will make roughly five million pricing decisions every year. Yes, $5 MILLION. The sheer volume of data that requires consolidation, analysis and action means it is not humanly possible for any revenue manager to get every decision right, every day. Powered by sophisticated revenue science to produce accurate pricing decisions and inventory controls, an automated RMS is critical in the age of big data. Forward-looking, predictive analytics embedded in today’s RMSs help hoteliers uncover emerging trends and identify more profitable opportunities earlier.
An advanced RMS not only generates prices that adapt to market changes, but anticipates these variations in advance. In a competitive hotel market, slight pricing changes can have a significant impact on demand. Therefore, any hotelier operating without systems that can analytically decipher the impacts of a specific price change (i.e., $7 higher or lower) on occupancy and the resulting revenue benefit (or lack thereof) for their property, is operating at a disadvantage.
Reduce operational costs
Maximising the guest experience while minimising operational costs, including labour costs, is perhaps the Holy Grail for most hoteliers. Accurate demand forecasting provided by an RMS can greatly enhance a hotel’s labour scheduling and purchasing decisions. Through integrating forecasts across a hotel’s operations, hoteliers can use the forecast to inform their staffing decisions and account for periods of higher or lower demand. Once demand forecasting data is made available, staffing managers can determine which areas are most affected by the number of guests staying in the hotel. The number of occupants a hotel carries can directly influence housekeeping needs, the number of staff needed on the front desk to check guests in and out, the number of servers required in restaurants and valets to park cars, etc.
Another factor to consider is food and beverage, a large source of potential waste for hotels, especially when it comes to those items with an expiration date. Knowing when there will be periods of high and low demand, as well as from which segments will be the key consumers of these perishable items, will help hoteliers ensure they order the products at the right time and avoid costly spoilage.
Improve the value of your hotel
Increased revenue leads to higher cash flow, from giving the hotel greater day-to-day liquidity, to having money in the bank generating interest and leveraging return on capital. Driving brand value, as well as competitor set performance are both key to asset assessment. The additional revenue delivered by the proper use of an RMS and strategies directly impacts a hotel’s bottom line, making it an essential tool for increasing a hotel’s valuation—a keystone in any owner or asset manager’s lens, in particular at a time of investment, refinancing or sale.
To learn more about how your hotel can benefit from using an advanced, automated RMS in 2020, please visit: www.ideas.com