Demonstrating ROI in Revenue Management to Hotel Owners Today : 4Hoteliers - 0 views
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Advanced analytics built into today’s best revenue management systems use hotel and industry data for predictive price-sensitivity demand modelling. When used effectively to drive strategic decisions, data analysis leads to increased profitability and improved risk management that is associated with the uncertainty of demand.
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When applied to its fullest potential, revenue management and technology can additionally positively impact efficiency and improve operational performance across an entire property.
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And when it comes to new or improved technology, many hotel owners tend to view cost rather than undertaking an ROI measurement to determine when the technology will pay for itself.
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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.
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ROU can be ascertained by using advanced revenue management systems and provides much more detail than year-over-year revenue growth.
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The first step involves monitoring a hotel’s performance over a typical 90-day window. Simultaneously, over this same 90-day period, a carbon copy of the hotel is made, except this clone does not have the revenue management system in place
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This is where a better formula, called revenue opportunity uplift (ROU) provides a more authentic picture.
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This means, on days of high demand, the manual-environment property is more inclined to accept business on a first-come, first-served basis,
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Overall, ROU provides a better measurement of the incremental benefit of a hotel’s technology purchase rather than reflecting an improvement from positive market conditions
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Through utilising the ROU measure, hotel executives also have a powerful way to demonstrate the financial benefits of revenue management to owners and show a true ROI.
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Operators focus on cost, and this can prohibit the Operator from realizing the advantages and benefit of utilizing an RMS. When looking at an ROI they will often utilize Pacing data from a year over year perspective which is often, as the author puts it, asterisked. A simple explanation is the number of variables that can lead to impractical or flawed comparison such as mis-segmentation, unique events or otherwise. The author proposes instead that Operators should look at ROU, which roughly speaking takes market dynamics and most of the variables out of the equation. An ROU analysis (Revenue Uplift Opportunity) establishes a baseline measurement over a 90 day period that requires the establishment of two models (carbon copies) of the Hotel in question. The first, is a manual model that mimics the manual process of yielding and inventory management and overbooking, while the second utilizes the decision process of the installed or applied RMS. The author states that what Operator realize is the hidden maximization opportunity in both pricing and inventory controls based on manual processes reacting to demand conditions rather than anticipating. The value of this outside of the above application is how a KPI and a different manner of looking at the data can lead to valuable insight on what a real ROI can be. As an RM professional whom utilizes an advanced RMS on a regular basis it is sometimes it is difficult to see outside the box and perceive the value of the technology that is a mainstay in the Branded community. Being able to see the implications it can have for those not using or not having bought into the technology is actually a bit of a back step as it speaks to the value that this solution provides for the company.