Is revenue management stuck in a rut?
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Recently the question has been asked at events, in social media posts and industry articles if revenue management is stuck in a rut. The authors assert that revenue management has not really advanced in the last 10 years and revenue managers are not doing anything differently than in the past. What is your opinion of the state of revenue management in 2020?
It is stuck in a rut! For sure! Revenue management has been around for decades, started by companies such as IDEAS, Rainmaker and EZRMS. In a research report from Skift published in April 2019, by Wouter Geerts, statistics show that only 16.9% of the hotels globally use revenue management technologies. The question is why? Is the quality of today's RMS systems really good, do they actually increase revenue for hotels? Can RMS systems show the advantage and revenue gain to potential customers? Is an RMS system really needed? A hotel may have many rate/room combinations but usually had has only a few rooms, between 50 and 200.
Hard questions to answer. In my opinion, it comes down to being able to prove to hotels that RMS and sophisticated AI can actually make much better pricing decisions than a human being can, especially in high demand regions and cities. In more rural areas, pricing algorithms will find it harder to determine the best pricing. Looking at today's available systems I do not see enough focus on the probability of success, the methods they use are doubtful at best, and not convincing enough for the hotels to switch, at least in my opinion. They all do the same thing, none of them is unique and showing a clear path to the future. IDEAS initially showed a lot of progress but now appears to be at a plateau as well.
Stuck in a Rut, for sure!