Ineffective manual pricing strategies and low weekend occupancy rates
- 30% RevPAR uplift for summer weekends
- Occupancy rate increased to over 90%
As Canada’s third-largest city, Calgary relies on tourism and business travel to draw millions of travelers to festivals, events and the nearby mountain resorts in Banff and Lake Louise. What was once an oil boomtown has become a beautiful metropolis in a fast-growing region, the Calgary-Edmonton Corridor. A side effect of past oil-driven growth, however, is now an oversupply of hotel rooms and hyper competition for travelers in a dense downtown core, especially in the warmer summer months.
Kyle Strachan, revenue manager at Hotel Arts, knows this challenge first-hand. Strachan is responsible for pricing and forecasting the 185-room independent Hotel Arts property and a smaller sister property—a big challenge, considering that occupancy rates across Alberta have dropped for three consecutive years.
To ensure Hotel Arts can attract visitors and grow occupancy, Strachan and Hotel Arts’ leadership were looking for a way to optimize pricing strategies. They knew an automated, intelligent revenue management tool could help the hotel make more strategic business decisions and optimize revenue throughout the year.
A new system encouraged us to shift our behaviors—fighting the system would only mean that we’d still be pricing the same way we always had. The training and resources from IDeaS during and after implementation were extremely helpful. They taught us how and why to trust in the system’s outputs. Now, we’re strategically distributing lower rates where it will equate to more revenue. Without a tool like IDeaS and the confidence we have in its decisions, our leadership would have never agreed to that strategy.
Tapping into automation
“We were using manual revenue management tools when I started in this role, but we also knew that manually pricing once a week and focusing just on the business traveler segment wasn’t an effective strategy,” said Strachan. “Our leadership, me included, all came from corporate chains and knew the power that automated revenue management could bring to Hotel Arts.”
During an evaluation between two revenue management platforms, Strachan’s team ultimately chose to partner with IDeaS Revenue Solutions. The team deployed IDeaS G3 Revenue Management System (RMS) not only because of its strong forecasting and analytics capabilities, but also because of the support the company offered before, during and after implementation.
“I needed a tool that could forecast accurately and develop pricing scenarios based on the data sources that are the most relevant to my properties. For example, we found that weather doesn’t impact our bookings, so I didn’t want our forecasts clouded by irrelevant data sources,” said Strachan. “Forecasting is so critical to my job. If I can’t forecast demand accurately, it’s impossible to manage my property’s bottom line.”
Support before, during and after implementation
Strachan had experience working with automated revenue management tools in the past, but he knew that deploying any new technology tool can require a cultural shift. Getting employees to embrace the new revenue management system early would help ensure the hotel could take full advantage of the new system. A concerted effort to get everyone on the same page would also create cohesion across sales and revenue management teams.
“A new system encouraged us to shift our behaviors— fighting the system would only mean we’d still be pricing the same way we always had,” said Strachan. “The training and resources from IDeaS during and after implementation were extremely helpful. They taught us how and why to trust in the system’s outputs. Now, we’re strategically distributing lower rates where it will equate to more revenue. Without a tool like IDeaS and the confidence we have in its decisions, our leadership would have never agreed to that strategy.”
Changing a business strategy and guest segment
With features like group pricing evaluations, last room value and minimum stay capabilities, staff members were able to use IDeaS G3 RMS to quickly identify new business opportunities for Hotel Arts, too. Operations, sales and leadership teams all quickly took notice.
With IDeaS’ analytics and forecasting, Strachan’s team started budgeting and evaluating future pricing scenarios. They noticed an intriguing new revenue opportunity for Hotel Arts, but one that required a change in business strategy.
The hotel typically had high occupancy during the weekdays, from business travelers, but low rates on weekends—especially in the summer.
By leveraging the powerful forecasting and analytics in IDeaS G3 RMS, Strachan was able to determine that leisure guests represented an untapped revenue source for Hotel Arts, but that the company would have to shift its thinking to take advantage of the opportunity.
Using IDeaS, the team was able to re-evaluate both its competitive set in the market and its pricing strategy to better target leisure travelers with competitive rates among a different set of similar local hotels. Ultimately, this change resulted in a 30 percent increase in RevPAR for summer weekends.
“IDeaS enabled us to have the conversation about targeting leisure travelers,” said Strachan. “Without the tool, we would have never had the insight to justify moving into this untapped segment. Our educated decision has been so successful; the only question we have is why we didn’t do this sooner.”
Within the first several months of use, Strachan and his colleagues had the data that clearly showed certain group blocks were less profitable than other business and the right strategy was to target more transient guests. The lift on average daily rate was “enormous” according to Strachan and occupancy rates ran over 90 percent in July and August—a huge shift from the old strategy that catered mainly to the weekday business traveler
“We effectively removed an entire segment from our hotel, because we knew the revenue potential was bigger coming from the transient leisure sector,” said Strachan. “In making this change, we believe IDeaS paid for itself in the first two weeks and the tool continues to provide incredible value to our organization. It allows me to spend more time being strategic and coaching our staff on how to leverage the data and analytics from the IDeaS. The results speak for themselves.”