ROU is the new ROI
- IDeaS calculates a hotel’s ROU with a refined, two-step process to measure the benefits of a fully automated revenue strategy
- What hotels discover is additional revenue opportunity hiding in each of those automated decisions
- The Revenue Opportunity Uplift Calculator lets hotels without IDeaS take advantage of this data to understand how hotels like them are performing
“What’s my ROI?” We’ve all heard it. We’ve probably all been guilty of asking it. Anytime you ask for money, advocating for a purchase, it inevitably comes up. Return on Investment (ROI) has been a measurement long used in the hotel industry whether for property investment, advertising spend or capital expenditures. And when it comes to new or improved technology, potential buyers consider ROI measurement to determine when the technology will pay for itself.
To ascertain ROI, many often look to their performance over the previous year. But that number always has an asterisk next to it, or if it doesn’t, it should. The skepticism with this practice is that it attributes any and all positive growth back to the new technology. Market conditions, changes in business practice, economic climates, convention calendars and more have an impact on revenue, despite any new technology put in place.
This is where Revenue Opportunity Uplift (ROU) provides a more authentic picture. ROU is a bit more “science-y” than year-over-year revenue growth, but much like our technology, IDeaS does all that math for you. IDeaS calculates a hotel’s ROU with a refined, two-step process to measure the benefits of a fully automated revenue strategy.
The first step involves monitoring a hotel’s performance over a typical 90-day window, once their IDeaS technology has been implemented. Simultaneously, over this same 90-day period, a carbon copy of the hotel is made, except this clone does not have IDeaS’ system. When you remove automated pricing, inventory controls and overbooking strategies, a comparative analysis measures the hotel’s actual performance against the simulated performance of the hotel working in a manual environment. This means, on days of high demand, the manual-environment property is more inclined to accept business on a first come, first served basis, lacking the flexibility of automated controls to manage demand.
What hotels discover is additional revenue opportunity hiding in each of those automated decisions, both in pricing and inventory controls. It also illuminates how pricing controls, built from rules that dictate rate increases in lockstep with occupancy growth, miss significant revenue opportunity because they are reacting to demand, not anticipating it.
ROU also removes the year-over-year increase that is experienced from improved market conditions because that’s now represented in both scenarios, providing the true incremental benefit of the technology.
Fortunately, since IDeaS powers the most widely-adopted revenue technology platform in the industry, these results are aggregated and anonymized from all over the world, for all different types of properties. Our handy new Revenue Opportunity Uplift Calculator lets hotels without IDeaS take advantage of this data to understand how hotels like them are performing, by simply answering six easy questions.
Blake Madril joined IDeaS in 2014 with over 10 years of experience in hospitality operations, marketing, sales, technology and revenue management. In his most recent role with IDeaS Blake is responsible for global initiatives that support the market strategy and messaging for IDeaS’ extensive suite of revenue management solutions and services ultimately aimed at helping hotel executives maximize profitability for their hotels. He is a strong advocate for the discipline of revenue management and the convergence of hotel data solutions and job functions to bring the best experience possible for both hotels and their guests.
Prior to IDeaS Blake held positions at properties and hotel management companies that ranged from front office operations to sales and catering and multi-property revenue management. He has worked with global hotel brands and affiliations such as Hilton Worldwide, Intercontinental Hotels Group, Wyndham Hotels & Resorts, Preferred Hotels & Resorts and Global Hotel Alliance, as well as luxury independent properties and limited service inns.
Blake holds a diploma in Business Administration from California State University, Fullerton and is currently based out of the IDeaS headquarters in Minneapolis, MN where he is a frequent blogger and evangelist for the optimization of total profitability for hotels and resorts.
An avid enthusiast of all things '90s and sitcoms, Blake recently took home 2nd place in a Saved by the Bell trivia contest. Words spoken right after accepting his trophy: "I'm so excited."
Latest posts by Blake Madril (see all)
- I’ll See Your ROI and Raise You an ROU - April 4, 2018
- Can I Get That Revenue Strategy to Go? - February 14, 2018
- Best Available Rate: “Rumors of my death have been greatly exaggerated!” - January 10, 2018