Revenue Management

by Tim Unwin, EVP Hospitality Solutions, RateGain                                            

source: her-consulting.com

The author and inventor Arthur C. Clarke was not only a visionary through his science fiction writings. He also made some highly perceptive observations on the nature of technology in the real world. One of the most often quoted of Clarke’s observations is captured as his Third Law which states that “Any sufficiently advanced technology should be indistinguishable from magic.”

In the world of hotel distribution technology it can be all too difficult to see where the magical part is. The proliferation of channels, control points and data sets creates layers of complexity which multiply several times when interfacing, integration or productivity tracking are attempted.

As we continue the quest for technology that satisfies the promise of magic we can be guided by our own laws which help to point us in the right direction:

Rule 1 – Technology should support and facilitate the distribution strategy, not dictate it

The easiest mistake to make when evaluating a technology solution is to assume that it will do everything you want and fit perfectly in to your existing operations and business processes. There is no more frustrating form of buyer’s remorse than that which results from the discovery that a shiny new technology solution places limits on the way your distribution works or requires wholesale changes in business process in order to be effective. It’s fine to change procedures to fit the technology you use; it’s not fine for the technology to limit your tactics or strategies. In the world of distribution management, it’s easy to be distracted by technicalities such as XML formats or the type of API a channel has when the primary consideration should be whether the channel will deliver incremental business.

Rule 2 – Technology should be reliable, easy to use and cost-effective

Even though these three elements are apparently fundamental it is surprising how often a hotel will continue to struggle with out-dated or badly designed technology. The thought process could be described as “some automation is better than none”. In reality, if it’s bad automation, the reverse is usually true.

Rule 3 – Make sure the ROI is clear

It can be notoriously difficult to determine the potential return on an investment in technology, especially in a niche as complicated as hotel distribution. To begin with, there are usually multiple options. In channel management, for example, there is no shortage of providers with long lists of features and functionality and access to every obscure channel of distribution you could ever wish for. Is that magical? No, because unless the features and functions are relevant to your requirements and unless the channels they connect to are the ones that can create business for your hotel, the rest is simply noise.

The real question to be answered in assessing return on investment is “will this technology help me to generate more business?” In its basic form, distribution is about generating revenue and every piece of technology should make a contribution to that objective. Returning to the channel management example, it’s not enough to provide automation, however advanced or sophisticated that automation might be. The real differentiator is the ability of the features and functions and channels and interfaces and analytics and automation provided by the technology to deliver more revenue.

Extending our consideration of ROI a little further, in the modern world of hotel distribution the path from booker to hotel can often be a convoluted one and can have multiple technology steps, some of which are visible and controllable, others maybe less so. A shorter path should create the possibility of a lower overall cost of sale and so we should look for technology that enables us to remove expensive intermediaries. The options for automating and controlling distribution which existed ten years ago were relatively limited in comparison to today and yet those old models are still widely used, even though there are more flexible and cheaper alternatives available.

Looking again at the specifics of channel management it is now perfectly possible to deploy technology which meets the objectives set out by our rules and which simplifies the multiple layers of complexity. Channel management has evolved beyond simple automation and now provides enough sophistication, ease of use and ROI to be considered as a complete distribution management solution. As the proliferation of channels continues, and as the necessities of keeping distribution costs under control and optimizing revenue become even more critical, placing the right technology solution at the centre of the distribution picture can deliver measurable benefits.

Using a commonly applicable set of assumptions regarding types of channels, productivity, rates and yield management objectives RateGain has calculated that correctly deployed distribution management technology can deliver room revenue gains measured in hundreds of thousands of dollars over the course of a year for a typical hotel. The specifics can vary with circumstances but the overall message is clear: if we use the rules and make sure the technology is doing what it should, the path to magic should not be far away.