Throughout 2022 The Revenue Optimization panel addressed a number of interesting topics including emerging decision making technologies, moving beyond RevPAR to focus on profitability, driving ancillary revenue, the evolving role of the Revenue Manager, and even how to avoid the fine line between data-driven decision making and analysis paralysis.
Few hoteliers would disagree that 2023 has started off strong, presenting a whole new set of opportunities, some of them unique, due to new technologies and the lasting impact of the pandemic, and others bearing a spooky resemblance to what worked over a decade ago, the last time the industry found itself at this point in the cycle. The phrase "old school is the new, new school" seems to come up a lot.
So, we decided to ring in the new year by asking our panel to look ahead.
What is your most unique prophecy and most important professional new year's resolution as you welcome 2023?
I believe that if we don't figure out how to utilize ChatGPT AI in our workflows for revenue and profit optimization in 2023 - we will have wasted a year.
Is travel demand going to continue strong this year? Or, as some industry experts are predicting, consumer savings will run out, inflation will is eat any payroll increases, ongoing layoffs will scare everybody, and rising interest rates will make everything more expensive.
Many industry leaders are concerned that in 2023 fewer people will be traveling, those that do will be traveling less, going on shorter trips and to closer to home destinations, staying at cheaper hotels.
Now that historic data has become mostly irrelevant due to the pandemic and record inflation levels, I believe comp set pricing data has also diminished in value - how sure can you be that your competitors are smart in their revenue management practices?
This year the average hotel has to make roughly five million pricing decisions (IDEAS) and it is simply not humanly possible for any revenue manager to make the right decisions without the help of an automated Revenue Management System (RMS).
So, if I were a revenue manager at an independent hotel, my only 2023 resolution will be to convince management and ownership that only a cloud AI-powered RMS can help the property maximize revenues, and successfully compete in today's super complex marketplace.
The 2023 Revenue Leaders are Curious, Relentless, Intentional and Efficient. Work smarter, not harder while proactively questioning everything to continuously see improvement across all targeted KPIs. Competing against others can be tough, but competing against ourselves is the ultimate challenge.
- Revenue leaders to inspired Commercial Leaders. We will help facilitate building on synergy with our counterparts from Sales and Digital Marketing and providing enhanced training to expand their knowledge and better leverage commercial strategies together.
- Forecast accuracy takes the spotlight again! With the rebound of group and corporate transient providing more consistent base business and booking trends becoming more predictable, longer lead times and recognizable stay patterns, the process gets easier and allows for more accurate projections.
- Revenue Strategy Systems will evolve (or at least get closer) to a much needed, more profit-centered focus. Revenue leaders have been asking for systems to account for channel distribution costs and commissions as well as potential for ancillary spend per booking for years.
- Business Travel: will continue to rebound but will remain hard to track. Pay close attention to day of week trends as well as consumer spending habits. This includes increased mid-week occupancies, breakfast covers and even bar beverage spend.
Making Attribute-based Selling (ABS) and upselling a reality! Is mine and ROOMDEX's 2023 resolution!
Attribute-based Selling (ABS) re-imagines hotel inventory merchandising in order to improve guest satisfaction and generate greater hotel revenue. ABS presents features that more closely match personal interests and give them a greater sense of control over their stay experience.
For the hotelier, ABS offers the promise of improved conversion AND improved cart value. Yes, like any other e-commerce model, hoteliers want to increase the value of the consumer cart. ABS provides an ability to reap more revenue for features that were otherwise "bundled" under a room type name.
You may ask, why would people pay more for the same product just because it's presented in a different way? Consumers do not view goods as economical rational beings but rather as symbols of personal attributes, goals, social patterns, and aspirations (Levy, 1959). With ABS, guests have the opportunity to build their stay based on their preferences – to find the perfect room product, for themselves. Ultimately ABS provides a feature-driven experience where individual guest preferences are the starting point and the hotel stay is framed in terms of personalization vs price.
Challenging to predict given the current VUCA environment, but since "we've come to play" typing here, I would say 2023 will show a more thoughtful European customer, looking more into the rates and offers, and not as splendid as they were in 2022, when they blew the savings of two years of no travelling. Now, many economies - both at household and at national level- are overstretched, and some vacations will be shorther, while others will be to nearer or cheaper destinations.
On the other hand, many Asian customers (particularly Chinese) did not have the chance to travel last year, and the destinations receiving them will benefit from the spending power.
As for the new year resolution, at a personal level it will be to focus on ancillary revenue, creating new ways to generate revenue and keep steering towards total revenue management at our properties.
My prophecy would be not only to "expect the unexpected," but be prepared for it. So much has changed over the past few years as we have collectively watched the travel industry come to a halt, reopen, and welcome demand back at an extremely positive pace. Will this continue for the whole of 2023? It's anyone's guess, but this is where comprehensive forward-looking business intelligence data becomes critical to informing business strategies across the board for hospitality professionals.
A key focus for myself and the teams at Amadeus this year is to provide the tools the industry needs to continuously move forward. Historical data just won't provide the level of insight hoteliers, destination management organizations, tourism boards, and other industry players need to grow their business.
Which is why, through constant innovation, we are able to provide the most comprehensive suite of business intelligence solutions available anywhere in the industry. Going beyond hotels to provide a look at air traffic along with alternative accommodations bookings positions us to have the most comprehensive forward-looking view of the industry. We are committed to expanding on current capabilities and welcoming new partners to remain the most trusted data provider.
The great resurgence continues. Even with the uncertainties plaguing much of our world, our industry continues to see an uptick in business travel, groups, and meetings. Although there will be ups and downs, the long-term trend will continue. At the same time, customer needs and behaviors will get ever more sophisticated, and expectations will continue to evolve. Selling beyond the room. As our world continues to shift and expectations change and morph, attributes abound in the hotel guestroom. Customers are receptive to attribute-based pricing. Even as software companies work to solve the technical challenges of using the attribute model in distribution systems, we are beginning to see advancements that will pave the way to account-based selling. More automation with personalization. Hotels make 5 million pricing decisions a day. In the future, as we expand into total revenue management and profit optimization, the number will exponentially increase making it impossible for a human to do all that manually. Now is the time for operators to think beyond the guestroom to offer true personalization, and technology is the catalyst that will bring our industry closer to providing the type of experiences tomorrow's guests will expect.
This is a great question and one that I presented to my HSMAI Revenue Essentials class just now. This is what they had to say.
Booking windows are beginning to expand out (previously very short term) which is a good indicator of normalizing demand patterns.
Profitability measures are now on the front burner of many revenue teams KPI list. Coupled with that are strong ADR's as hotels realize they need to hit certain key profitability measures. More and more revenue professionals are looking at P&L's for the first time to understand the implications of the strategies they develop.
Finally, I am seeing increased emphasis on taking a more balanced and collaborative approach to analytics and KPI's overall which is further evidence of the de-siloing amongst disciplines.
2023 should be a banner year for many....so there you have it.
The importance of business intelligence tools in revenue management will continue to increase. The data provided by BI systems will be more detailed, more accurate, and more actionable. New tools will emerge, and existing ones will see expansions in integration capabilities and features. Revenue managers can not ignore technological progress and should take full advantage of it. If used correctly, all these tools can help make profitable decisions and generate revenue for the hotel.
On the other hand, they remain just "tools" and should be used as such. Even the most capable RMS still requires correct setup, supervision, and maintenance by the revenue manager. Human intelligence combined with technologies and AI can yield the best results. A balanced approach is critical.
What would be the one crucial professional resolution for the revenue managers? Make technology your friend, but do not expect it to do all the work for you. Some tips:
- Integrate BI tools that provide forward-looking data about the market
- Partner with automatic upsell technology provider
- Make targeted and custom offers on the hotel's website with predictive personalization technologies
- Explore attribute-based selling
- Understand the capabilities of your RMS system
- Never stop learning and stay informed about hotel technology innovations
Unlocking human potential in revenue management is going to take centerstage. For too long we are telling hotels to look at that cool "artificial intelligence (AI)" and how the human is more of a burden than an uplift. I believe this will change. The future of revenue management is human-led, not AI-led, and businesses need to embrace this shift in order to stay ahead of the curve.
I believe that the future of intelligence is the enhancement of human potential. In the past, intelligence was defined as the ability to learn, understand, and apply information. However, with advancements in technology and growing importance of EQ and AQ, it is becoming increasingly clear that there is much more to intelligence than just cognitive abilities.
By optimizing the individual, businesses can improve their overall revenue performance. This leads to increased productivity, creativity, and innovation, which in turn drives growth and creates a culture of excellence to drive long-term growth and success. In the end, it's all about making you a better you.
It's time for companies to recognize that AI can only take them so far. The future of RM is not about replacing humans with AI, but about enhancing human potential.
My two cents: This year is finally the year when we will see the shift from traditional, human-led revenue management in the hospitality industry to a more technology-assisted approach. For years, crazy people like myself (who actually coined the term "post-human hospitality™", LOL) have been discussing AI integration into the industry. And even radical luddists are finally starting to see the benefits of this shift.
Let's face it; when you catch your 70 old year dad asking ChatGPT what bait to use for fishing, it's safe to say that non-vertical AI systems have reached a good level of adoption.
Integrating systems such as ChatGPT into a PMS may be more complex than pressing a button, but it's definitely worth exploring. Of course, the specific steps and requirements will vary depending on the system used, but the benefits are clear. With conversational AI technology, revenue managers can streamline processes, improve efficiency, and drive revenue growth without breaking the bank on pricey RMSs. Basically: no more excuses.
So, let's embrace this shift towards post-human hospitality™!
Predictions are always tricky, especially when they are about the future.
My most unique prophecy is that somehow it will be the year when hoteliers will be battling between legacy technology and significant new innovations. The utopia of an entirely digitally connected operation and seamless customer journey will not yet be achieved.
However, Innovation will accelerate in what we can call narrow areas. For example, upselling will get more and more sophisticated but will still not be part of the whole journey in a smooth way. The RMS's will improve and connect other data points, but it will remain rudimentary as data is still very fragmented.
We will become more customer-centric, but we will lack the data to balance being customer-centric vs. inventory centric. Or BI will become better and better but will only focus on one aspect of the business. For Example, Commercial.
Somehow it could seem like a limbo area where Innovation clashes with hard legacy. But true next-curve Innovation will happen at some point. Just maybe not in 2023. For this to happen, it can come only through collaboration and an open spirit. We need better APIs and tech companies working together.
For both my portfolio and me personally, 2022 couldn’t have ended soon enough and so far 2023, with its 40-70% year-over-year growth, has not disappointed. I am filled with optimism for the coming year.
My professional New Year’s resolution is to dedicate more time to teaching. I HAVE been through a few downturns and recoveries, but most of my sales teams have not. As we staff back up, often our best choice comes from outside the hospitality industry. It’s time to speak a little more slowly, share wisdom, make work fun, and continually reinforce the fact that everyone is a work in progress, and you don’t have to be perfect to be successful.
My prophecy for 2023 is that business travel will return, but not every hotel will benefit equally. First the strong economy, then a two-plus year lockdown, and finally last year’s return of the leisure segment add up to almost a decade when a good digital marketing strategy was enough to get a hotel most if not all of the way to the finish line. But business travel is a different animal, where “old school” direct sales tactics really work and hotels that are good at them are going to be the winners in 2023 (so I guess my second resolution is to make more sales calls).
As the travel industry enters a new phase of growth and reinvention following a challenging period, it's clear that the role of revenue management will continue to evolve. I predict that 2023 will be a turning point for revenue managers, who will need to embrace a more holistic perspective on the competitive landscape. This will mean taking into account not just traditional hotel competitors, but also alternative accommodation options like short-term rentals. The rise and thrive of platforms like Airbnb has challenged the traditional hotel industry and changed the way travelers think about lodging their stays. Revenue managers who can understand this shifting landscape and take a comprehensive approach to market analysis will be best positioned to make informed pricing and revenue decisions that keep their businesses competitive and profitable.
Between the traveler and the bedroom, there are innumerable layers which, either for technical and programming language reasons or for commercial reasons, inevitably create friction in the booking process. A process that starts from the booking source (OTAs, B2B, Open API Marketplace, GDS, Wholesale) moving to payment systems. From the payment we move on to the channel managers > IBE > PMS (with different variants) but between the various steps encounter Switches, Connectors, etc which further lengthen the gap between the two main players.We want to talk about innovation and then we find ourselves, in everyday reality, in situations like this?Let's offer travelers what they (and us) dream, a "non-friction" lifestyle ;).Distribution. I consider this topic increasingly relevant, not only from a commercial stand point but also and in particular from a technical / integrations point of view in regards the various platforms and applications available on the market (and the number of young and promising startups is constantly growing).I speak with hoteliers every day, and they told me about the various chellenges they encounter trying to improve processes and costs, but the dirty truth is that many players find hard to to connect each other making hoteliers life not that fun!
2023 has indeed started strong. And while many markets see strong demand, all of us have encountered strong inflation, strong increase of interest rates and the big question is what will be next.
While central bankers are being criticized for raising interest rates and thus ultimately risking a recession, the discussion oftentimes forgets to mention that the increased interest rates and consequently increased mortgage costs don't just hit homeowners but of course also businesses. And hotels are a prime example here.
Hotels have no choice but to raise prices to offset the increased cost. And that's supposed to fight inflation? I'm not convinced that's going to work as intended...
So what can we as revenue managers do about this?
We have to work smarter and utilize automation and modern technology. We need to shift our focus from room revenue to total revenue and total net revenue to be more precise.
None of that is new. But it's time that the industry finally wakes up and acts.
After all, it's 2023!