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The Importance of the Human Element in Revenue Management

by Ed Watkins, Contributing Editor |

While technology is a wonderful and sometimes magical tool in the application of revenue management, practioners need to be careful not to use it as a crutch or as a way to avoid making decisions that require judgment, experience and sometimes gut instinct.

In short, when it comes to revenue management technology, the policy shouldn’t be “set it and forget it.”

Hotel owners understand the importance of balancing technology with human involvements. In a recent blog in Hotels magazine, Chad Crandell, managing director and CEO of asset management firm CHMWarnick, questioned whether overreliance on technology is hindering the industry’s ability to raise rates, even during the current environment of high occupancies.

He wrote: “Are automated brand revenue management systems taking the decision-making power out of the hand of the experts, undermining their confidence to push rates by requiring an override of system recommendations?”

Of course, the reverse is also true: Revenue strategists shouldn’t spend too much of their precious time performing mindless tasks better handled by an automated system. In fact, hoteliers’ distrust of technology in general and revenue management specifically could account in part for the general lack of rate growth throughout the industry.

GMs and revenue managers need to be prudent in how they manage their rate-setting and distribution systems. Left to do its job, a state-of-the-art revenue management system can assist not hinder a hotel’s ability to raise rates.

Left to do its job, a state-of-the-art revenue management system can assist not hinder a hotel’s… Click To Tweet

A good rule of thumb, as practiced by NH Hotels and other companies, is “managing by exception;” that is, spending the majority of efforts on revenue managing certain and specific dates—need periods and high-demand dates—rather than spending time yielding every day.

Revenue management technology can help managers zero in on strategy as opposed to day-to-day execution. The right RM system performs a number of important functions to assist strategists in creating the right rates for the right rooms on the right dates.

In addition, the concepts of Open Pricing and pricing rules are best implemented through a robust revenue management system.

Open Pricing is a unique and flexible way to set rates that allows hoteliers to price all room types, channels and dates independently of each other 365 days a year and never say “no” to a customer. While Open Pricing might sound complicated, the right technology can make it easy to manage by significantly reducing the time spent doing manual calculations and data entry.

Pricing rules identify specific actions before a rate is recommended. One example would be setting a rule on a discounted rate to take from 0% to 10% off BAR rates, depending on occupancy. Also, room-type rates in an RM system can help set pricing independently so it’s possible to charge more for king rooms during a convention and more for doubles during family-heavy weekends.

The ultimate goal is instead of managing everything manually, you manage only the important things and then spend time focusing on understanding the booking patterns for key dates.

Integration is crucial: The right revenue management system seamlessly interfaced with the CRS and PMS can automate these tasks and push approved rates in real time.

Seasoned revenue managers have too much education, experience and day-to-day know-how to waste those resources on what amounts to clerical work. At the same time, revenue management is an art as much as a science so the human element must constantly work in harmony with technology, not in conflict.

Thanks to members of Duetto Research’s Customer Success team for input on this topic.

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Ed Watkins, Contributing Editor

Ed Watkins, Contributing Editor

Contributing editor at Duetto
Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.
Ed Watkins, Contributing Editor

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Ed Watkins, Contributing Editor

Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.