We’re out of the rut. Now what?
— 11 experts shared their view
By the end of 2019, many of the thought leaders in revenue management had begun echoing a common theme, basically that the Revenue Management discipline was stuck in a rut. Industry-wide, Total Hotel Revenue Management was starting the become a joke. There was the longstanding complaint about the OTAs, but little being done about it. And the more recent debate about whether AI was on track to replace the Revenue Manager, despite only 15% of all hotels globally even having a revenue management system. Some openly warned that without evolving, the discipline risked losing relevance, and the influence and opportunities that go along it.
Then COVID-19 came out of nowhere to occupy the top of everyone's mind… overnight. Short term crisis management became the only job requirement. But these concerns did not go away, and if anything, the opportunity (and responsibility) that organizations possess to challenge every existing norm as they rebuild has only shortened the timeline.
The question to the Revenue Management community is: As we move out of the crisis management phase and towards the "next normal", how have your organization and responsibilities changed? What tools, technology, and processes have earned a permanent place in your routine going forward?
While COVID-19 has affected every sector across the globe, the hotel industry was among the hardest hit. As we transition into the next normal, one thing is clear: for the foreseeable future, revenue management as we know it has changed. Here are the 5 ways we are seeing revenue management shift, evolve and adapt as we move toward the next normal:
- Revenue management has hit the 'reset' button. The historical data that we've relied on for years is now much less relevant. Instead, hoteliers need innovative solutions that can better forecast during these times of volatile demand. This process requires a bottom-up approach - looking at inputs and insights to help guide and gauge early indicators of demand. This can be done by looking at pre-booking data (which helps more accurately pinpoint traveler return).
- It's time to create a dynamic compset. With COVID-19, the “static” compset is now only partly open or competing for the same limited demand — regardless of chain scale or star rating. Instead, what's needed now is adaptation in the form of a dynamic compset: one that empowers revenue managers to compare the right hotels at the right time, at all times. Advanced technology (such as AI) now suggests compsets based on market shifts, demand, relevance and events that are unpredictable (to a degree), providing hoteliers the capability to compare to their true competition — which should also include alternative accommodations.
- Forward-looking data should be weighed more heavily than historical data. While we don't know exactly when travel will return to pre-crisis levels, there are signs that we may interpret as signals to recovery. As travel does return, it will be different. COVID-19 has rendered year-over-year comparisons and OTB data much less reliable as indicators of demand. What's needed now? New sources of data that allow for monitoring of longer lead-times and decision making that's driven by data. In times of uncertainty, forward-looking data can help hoteliers better predict market shifts and align their pricing so that they can be agile and make necessary changes in the present to increase demand in the future.
- Top of funnel data will change the industry as we know it. I believe top-of-funnel data will revolutionize the industry - giving hoteliers the capability to better predict true demand — before a decision has been made and before it is on the books (as intent to travel, which hotels can work to convert). Understanding these true demand trends can help revenue managers create more realistic forecasts. RM's no longer need to rely solely on historical year-over-year comparisons or on the books as the only indicator of demand. The future of revenue forecasting is no longer just OTB: the future is also the intent to travel, which ultimately anticipates demand to bring an extra variable to factor into your budget and forecast models.
- Cross-functional teamwork is key. In the new normal cross-collaboration and alignment between commercial teams - especially those in Revenue, Marketing and Sales will be essential to achieving business goals. Specifically, these teams will need to be strategically aligned in order to spot short, mid, and long term revenue opportunities.