The Complex Simplicity of Revenue Management Systems

No different than a child, many of us are just digging for the “Why”

  • RMS is your GPS
  • Our time is valuable, and it only takes one positive instance to instill trust in technology
  • A modern RMS needs to be trusted 

At last week’s Revenue by Design conference panel in London, we discussed the evolving simplicity of revenue management systems (RMS). It’s amazing to think that the industry has come so far. We now have critical revenue management information in the palms of our hands, always on, from anywhere and everywhere. We are provided data from an increasing number of sources, automatically feeding algorithms, and for the most sophisticated solutions, we can even ask the system what would happen if there was a price change and get instant simulated outcomes without actually implementing one.

The purpose of a modern RMS is twofold:

1) Autonomously make the best possible pricing decisions using the most relevant data available.

2) Provide the user (and interested parties) a simple way to answer the question of “why?” Why are you (the system) setting this price? Ultimately, we want (and must) trust the decisions being made by the system.

As humans, we tend to be skeptical, often second-guessing our own decisions. But when our general manager, owner, asset manager or director of sales raises questions about the validity or accuracy of the price, we must confidently explain where the rate came from and why it is the best approach. Thankfully, with a sophisticated RMS, you can easily see not just the “what” but also the “why.”

I often compare this to using a GPS. Many of us get into our cars (or on our bikes), turn on the GPS, wait for the turn-by-turn directions and think to ourselves, “Wait, I think I know a faster way to get there,” only to arrive five minutes later than the GPS-recommended route. Our time is valuable, and it only takes one instance like this to instill more trust in the GPS’ technology.

A GPS pulls from more data sources than the user has available and provides optimal route suggestions while validating its decision by showing real-time traffic levels, accident alerts, construction zones and more.

Of course, we all strive for more simplicity. In an ideal world, we want things that “just work” without fail or question. However, to confidently answer the “why,” we need backup; we need concrete reasoning behind our decisions. And that means data. Most revenue managers are analytically focused, which means they look to data for answers. They like to dig, drill, chart and graph, so they can elaborate as to why the price for the deluxe room for two nights is $134.50 and not $145.80 a night. That is true whether using Excel or a sophisticated RMS.

The goal of any software system should be to make life easier, reduce complexity and increase efficiency. Most importantly, a decision-making solution like a modern RMS needs to be trusted. The various data points for an RMS that could at first be considered overwhelming and complex are likely the same points that will ultimately make the worry of revenue management a lot more minimal. Some would say the iPhone is one of the most complex pieces of hardware ever developed. Though your phone can now make life easier by voice-to-text, instant weather forecasts and video messaging, imagine all the hard work and data points being used inside that phone, 24/7. The key is to provide just the right amount of information, at the right time, whenever and wherever it is needed, to make life easier—and overall, make solving a complex problem, like, what price do I charge next Tuesday for two nights, seem simple. From an RMS perspective, while tons of data and fancy science seems complex, the goal of simplification is to take that complexity and convert and display it in a format that instills trust and confidence in the end user. Click to Tweet | IDeaS Twitter 

Klaus Kohlmayr

Klaus Kohlmayr

Chief Evangelist at IDeaS Revenue Solutions

Klaus Kohlmayr challenges strategic processes, stimulates thought-provoking conversations and reinvigorates the future of revenue management and pricing within the hospitality and travel industries.

A natural contrarian, Klaus has challenged the status quo for over 20 years. He re-joined IDeaS from TSA, where he led the company’s global commercial, operations and strategic partnership initiatives. During his previous stint with IDeaS, he started the company’s global consulting division -- leading a team that partnered with top hotel companies. Together they pioneered the industry’s first group price optimization and function space revenue management proof-of-concepts in a real-world environment.

Klaus developed his passion for the hotel industry at the Hotel Management and Catering School in Villach, Austria, where he received a Bachelor of Science in Hotel Management. An advocate of lifelong learning, he has since studied business at Henley Management College, real estate investment and asset management at Cornell University’s School of Hotel Administration; and finance and strategy at the Singapore Management University.

Klaus has been an active participant in various advisory boards, including HSMAI in Asia Pacific and the Americas, and the Cornell-Nanyang Institute of Hospitality Management, Singapore. He not only loves to challenge the status quo, but wholly welcomes being challenged in new ways of thinking.
Klaus Kohlmayr