Revenue Management Predicts Success

Revenue management is the practice of selling the right product to the right customer at the right time and at the right price. By controlling factors such as length-of-stay, availability and overbooking, revenue management practices can increase revenue, profitability and property valuation for hotels by increasing length of stay and monitoring supply and demand to affect offered rates.

Craig Eister, senior director of revenue management and systems planning for Six Continents Hotels, recognizes the benefits of revenue management, and he has made it his goal to provide the Six Continents Hotel group with the latest in revenue management technologies. "I want to develop a global revenue management strategy for all of our hotels, in all of our regions, for all of our brands," says Eister. "We have over 3,000 hotels, and there's not a one-size-fits-all solution. We have to try and find the best options for each of our hotels."

When Six Continents acquired the Inter-Continental brand in 1998, a brand that had no automated revenue management system in place, Eister got an opportunity to start from square one. Following his conviction that each hotel brand needs a unique system to get the most out of revenue management, Eister sought a vendor to customize a solution that suited Inter-Continental's current systems and operational needs.

Eister began his search for a revenue management solution by conducting extensive research into the products that were available. Eister and his team compared the products, looking at everything from the core mathematical algorithms the products used, to the implementation process involved, to the kinds of training and support the hotels would receive.

One of the two vendors Eister narrowed his choice down to was Integrated Decisions and Systems Inc. (IdeaS), and in the Fall of 1999, IdeaS and Six Continents began a pilot of the IDeaS' e-yield system at the Inter-Continental Chicago. The e-yield system works to maximize room revenues and increase revenue per available room (RevPAR) in order to increase a hotel's profitability, making decisions to open and close available rates based on mathematical equations and forecasts. Further, the system automatically updates the property management system, freeing up the manager to work more strategically. The solution includes the following features and components:

• Accepts the most attractive mix of business to sell rooms at optimum prices and to overbook to protect against no shows, cancellations or early departures without the risk of walking a guest;
• Operates 24/7, 365 days a year, with frequent daily optimization to keep current the opportunity cost and overbooking levels based upon the materialized reservation at any point in time;
• Generates forecasts by market segment and length of stay to cultivate complete information on the property's or chain's historical, current and future market behavior;
• Alerts users when bookings materialize greater or less than the allowed variance, as seen in the forecasted booking pace through the Exception Monitoring Module.

Sharing Eister's beliefs about customizing solutions, IDeaS conducted a major review of both the brand and the hotel prior to implementation, which included the brand policies and standards and the specific data at the hotel.

Later, during the first round of training, IDeaS further customized the solution based on manager feedback about the activities and hotelspecific data nuances. Eister says, "Not only does IDeaS take the data and build the system, they also go through an extensive review process with the hotel and the brand. When they build the system, they incorporate all of the personal knowledge they have gained, as well as what the data is telling them. So they're trying to make it as intelligent as they possibly can and taking that extra step to understand what the property is thinking."

The pilot program lasted for approximately six months, and included intensive training of the hotel's management team. And, while there were no problems with the installation itself, Eister does admit that several managers were hesitant to have a computer system control the rates entered into the property management system. "Managers like to have very specific control of their properties," he says. "Revenue management is a tough thing to understand and put in the hands of an automated system." But, when the pilot program was completed, no one could dispute the results of the system.

IDeaS, who promises a four percent increase in transient rooms revenue per available room (RevPAR), nearly doubled their guaranteed increase, bringing the total increase in RevPAR to 7.5 percent for the Inter-Continental Chicago. Following the success of the Chicago pilot, Six Continents eliminated the second vendor they were piloting and began to roll out e-yield in several more Inter-Continental properties throughout the U.S. Currently, Six Continents has implemented the system in 12 hotels, and is in the midst of four additional rollouts. At the six hotels that have been using the program for a suitable length of time to conduct benefit measurements, Six Continents has seen a consistent increase in RevPAR ranging from 4.4 to 9.4 percent.

Eister says, "Everyone is really pleased with all of the information that is provided and the automated decisions that are suggested. In a perfect world, it would be 100 percent accurate, but obviously, that can't happen, so we're still doing some fine-tuning. But the properties are generally very pleased with the results."

And Six Continents has cited a number of benefits to having the e-yield system in place, including the time the system saves the managers and the increased quality of the information the managers receive. Eister says, "Before the e-yield system, managers had to manually go through the PMS and restrict days for the full inventory window in the future. That's very time consuming, so automating the system saves the managers' time. The system also allows them to see different types of information and more information about their business trends, which helps them make better decisions in the big picture of revenue management.

The forecasting component, for example, projects future demand for all the future days in your inventory, giving you a wealth of information about what your business is going to be like." And, of course, having a system that constantly monitors and adjusts to business trends helps the hotel get the most dollars for every room. "Having the automatic implementation of room controls is one of the huge beauties of the system. No one person can be watching their reservation activity 24/7, so by having automation, we can ensure that we capture the business when we need it."

Still in pursuit of his goal to provide each of Six Continent's properties with the most tailored, beneficial revenue management solutions available, Eister says that the company is constantly re- evaluating their strategy and looking at new techniques to get the most business from every hotel.

IDeaS, Eister adds, fits well into his vision: "IDeaS has done a fantastic job of coming up with a customized solution for us. They continue to work on enhancements and support and to earn our business. They've proven that their customer-service focus is an asset to Six Continent's."