Rule Breaker
Revenue Management

Breaking the rules – Exploring the benefits of an automated hospitality revenue management system (RMS) versus a rules-based pricing tool

The limitations of a rules-based hospitality revenue management system (RMS) are abundant. So, why put your money into a rules-based system when there’s a better option on the market?

If we learned anything from the early 2020s, it’s that creating greater flexibility within hospitality organizations is critical to better serving clients. This is why versatile, automated revenue management solutions (RMSs) are taking hold across the hospitality industry like wildfire.

These solutions assist with everything from check-in to marketing and revenue management. Because these solutions take so much work off the plates of revenue managers, this is a time for revenue managers and hospitality professionals to feel emboldened by automation—as long as they have access to the right technology.

But some revenue management tools still rely on a rules-based approach to setting and changing prices.

While perhaps an efficient method for some proficient users, this technology requires consistent manual intervention and will undoubtedly struggle as market conditions shift and staffing changeover occurs.

With historical data rendered unreliable as a result of the pandemic, rules-based revenue management creates a labyrinth of boundary cases that must be considered when making adjustments to pricing strategy. If executed improperly, your hotel’s revenue will be negatively impacted until operators take notice.

Here’s the difference between a rules-based system and a truly automated revenue management system

Truly automated revenue management technology helps hotels create and execute a consistent strategy, informing critical decisions without becoming dependent on individual user expertise. Skilled employees move on, job roles shift, and as a result of the pandemic, many talented workers have either been furloughed or left the industry altogether.

That’s why a good RMS must be equipped to serve all job roles and hotel types, regardless of user background. IDeaS pioneered the manage-by-exception approach to revenue management for this very reason, letting our machine-learning automation handle the bulk of the decisions with the user having the option to step in when they see an opportunity to add value.

While hotels with a decision-based, automated RMS were able to quickly transition to profitability as bookings resumed, hotels using limited systems were forced to reanalyze the reasoning behind their rules—often requiring a seasoned data expert to decipher their complexity—and hope for little turnover.

Here’s the deal

The goal of revenue management today is to remain active in forecasting shifts in the market and identifying new pricing strategies. By comparison, many hoteliers are stuck remaining reactive due to the nature of their subpar RMS.

For example, an advanced, automated RMS will assist with overselling strategies in order to reach peak revenue. An automated system is able to anticipate no-shows and cancelations based on real-time data analysis, allowing operators to overbook in response. Strategies such as these are limited in a rules-based environment and require a great deal of experience and technical finesse to execute properly.

In other hotels, standard rooms are currently selling out faster than deluxe or specialty rooms. These higher-value rooms are then used as overflow options for standard bookings, helping hotels fill rooms in the short term while negatively impacting profitability over time. In this scenario, an automated RMS can assist with narrowing the gap between overselling rooms and pricing higher-tier rooms correctly. An automated, room-type pricing strategy with superior length-of-stay controls and strategic upgrade paths can help optimize your booking mix in a way manual, rules-based pricing cannot replicate.

Here’s what you might be missing

When we introduce new technology at the property level, it’s important to consider how it is integrated into the hotel ecosystem. If your revenue manager is going into the property management system to manage restrictions, what’s the point of even having an RMS? The purpose of technology is to create less work for operators, not more, particularly during difficult or limiting environments such as those we are faced with today. This is necessary for achieving new heights of profitability in the future. While an automated system is able to update itself based on new information, a limited pricing tool can force a hotel’s revenue management team to spend precious time adjusting the system to succeed.

The future of revenue management lies in automation. As the deluge of information revenue managers are forced to wade through continues to reach a new high water mark each month, and finding workers to staff hotels remains a challenge, hoteliers will have to adapt. If revenue managers spend all their time looking at data points and adjusting their tools to react to minor changes in market conditions, they will not have the time to come to meaningful conclusions about the nature of this data. Sophisticated automation overcomes these restrictions.

Despite the challenges of shifting market conditions, hospitality has entered a new era of adaptability thanks to innovative technology. Revenue management has far outgrown the early era of “yield management,” allowing true revenue leaders and commercial strategists to tap into the full potential of each booking, across multiple properties, markets, and segments.

These days, the secret to success in the hospitality sector lies in automated decisions and a willingness to break the rules.

To discover more insights into what an automated RMS can do for you, check out the following resources: 

Related Resources

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