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Must-Ask Questions When Choosing a Revenue Management Solution

Posted by Thai Pham on

The demand for next-generation revenue management solutions has increased with the proliferation of online travel agencies (OTAs) with differing pricing and commission structures, shrinking booking windows, ever-more intense hotel competition in high-demand destinations and ever-increasing pressure to drive profitable growth.

By asking the right questions, decision makers can determine which revenue management solution on the market best fits their needs and is most likely to deliver the benefits they seek, with minimal risk and expense. 

What do revenue managers want?

The hotel’s revenue manager(s) — people who know the nuts and bolts of inventory management and length of stay control and who understand, for example, how to calculate group rates and apply rate fences — should be included in the evaluation process.

Most revenue managers want solutions that provide visibility. They want to be able to look under the hood and dive into price sensitivity data and observe at a detailed level what inputs are behind the system outputs that are being made and how adjustments to the decision model would change revenue outcomes.

They do not want to wait for actual booking numbers to come in to understand the impact of their strategies and determine whether they made the right decisions. In short, revenue managers need to be comfortable that the new solution will enable them to do their jobs with maximum effectiveness.

Read more: Key Concepts in Next-Generation Revenue Management

Questions you should ask when choosing a revenue management system

The following are just a few of the questions that decision makers and influencers may wish to explore with solution providers to ensure that, once implemented, the revenue management solution will enable them to achieve their desired business outcomes. 

1. Will the solution provide the answers we need to our pricing questions?

To be effective, revenue managers require tools that will enable them to answer all of their day-to-day pricing questions. These questions may be voluminous, and some may be difficult to always know in advance.

Such questions might include: By how much should we increase or decrease our rates for a given type of room? How many groups, and what size groups, should we accept on a given day? How much should we charge walk-in guests? What should be the floor and ceiling for our rate range? Are the changes in demand and bookings likely to represent a short-term or long-term pattern – and, if the latter, what actions should we take in response? To what extent should we discount negotiated rates? What should our best available rates be for the coming year? What discounts and promotions, and to what target customer segments, are likely to perform well right now and in the near-future? What discounts would likely dilute profits and should we therefore avoid? To what extent should we mark up our premium rooms, based on the current and near-term demand patterns? What competitors’ price moves would likely affect these demand patterns and how should we respond if those moves become reality? How can we counteract cancellations and no-shows, group wash, extensions and early departures to capture optimal profitability?

Tip: Compile a comprehensive list of pricing questions and verify that the solution will be able to address these questions in a straight-forward manner. 

Must-Ask Questions When a Next-Generation Revenue Management Solution

2. To what extent does the solution offer depth and flexibility in data analysis and reporting?

Delving into the data, testing different if/then scenarios, and collating actual results requires a high degree of flexibility. Not all data queries can be anticipated. A significant percentage of pricing questions may, in fact, need to be investigated on an ad hoc basis.

Out-of-the-box functionality may satisfy the needs of novice users or small properties with relatively simple needs. But it is likely to be insufficient for more sophisticated revenue managers and larger properties with multiple room types, customer segments and ancillary revenue streams.

A solution should provide for flexibility, which is important when it comes to setting pricing, noting special events, adjusting segmentation schemes, etc. A solution should make it easy to accommodate virtually any need, including the need to monitor and measure individual property, portfolio, and departmental performance, the need to create customizable hierarchies for different geo-markets, channels, room types, time periods and loyalty programs.

Read more: 5 Features to Look For in an Automated Revenue Management System

Tip: Verify that the solution is flexible in terms of keys areas of functionality, including custom reporting, and validate all of the vendors’ claims. If customized reporting is possible, find out what is involved in the process of filtering and sorting data according to a specified set of parameters.

3. What is the solution provider’s track record of success?

As with any technology solution purchase, reputation and customer satisfaction are important factors in the decision-making process. No input may be more important to the buying decision than that which can be gleaned from existing clients, preferably lodging properties that share some commonalities in terms of size, typography and existing technology infrastructure.

Tip: Find out what performance issues may arise by talking to existing clients, preferable ones that are similar in size and existing technology infrastructure. Ask about the product roadmap to understand the plan for future features and functionality. 

Read more: Revenue Management at the Touch of a Button: the Success Story of Vienna House

4. How long will it take for problems to be resolved?

Decision makers should have clear expectations around customer support and problem resolution as well as the training that may be needed to get front desk employees and other staff up to speed on the new system. Almost three-quarters (73%) of hotel operators agree that user training ranks as a key success factor in ensuring that a revenue management solution is utilized as effectively as possible.

Does the solution provider (or a certified subcontractor) offer adequate training? Does it offer online troubleshooting and diagnosis should technical issues arise? Is local in-person service and support a possibility?

Tip: Make sure that problems will get resolved in a timely manner. Some solution providers will go so far as to guarantee response and case resolution times. 

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