Posted on December 2014
What is revenue management?
Revenue management is about predicting consumer behaviour and optimising room inventory so that it is priced in a way that will maximise revenue. The difficult part for Revenue Managers comes in deciding how to work these things out!
Hotel rooms have a sell-by date: at midnight, any unsold rooms become a lost commodity and untapped revenue eats into your fixed costs, driving down profit margins. So which rooms should you sell to whom, when and at what price to achieve maximum profitability for your hotels? A good revenue management solution can help answer these questions.
It's all about being able to predict travel patterns based on an understanding of the market place, a dynamic view of your bookings portfolio and an in-depth knowledge of your customer base.
It's all about being able to predict travel patterns based on an understanding of the market place, a dynamic view of your bookings portfolio and an in-depth knowledge of your customer base. To help make more precise predictions, Amadeus has developed a Revenue Management System (RMS) which gives hoteliers unique insight into on-the-books business and forecast trends. When combined with historical bookings and market information, Amadeus Hotel RMS can produce a much more accurate view of projected business.
Let's see how Amadeus Hotel RMS works in the real world. We took the opportunity to interview one of the industry's experts in hotel revenue management, to find out more about why hotels need to pursue a revenue management strategy and how Amadeus can help.
"Revenue management isn't a nice-to-have, it's a must"
I have been working in revenue management since it first hit the hotel scene seventeen years ago. I started out as Revenue Manager in an Accor property, progressing to Country Director and finally on to Head Office, where I oversaw Accor's revenue management department for ten years. It was there that I got to know the Amadeus Hotel RMS product very well! Now, I've come full circle and set up my own revenue management consultancy company for independent hotels and Accor franchisees.
To make it simple, we cannot pretend to practise revenue management in a hotel without a clear forecast by date and by segment. And to pilot this forecast, you need to be hands-on meaning you need to have some sort of revenue management system.
I first ask hotel managers a few questions:"Do you know how many room nights you sold yesterday? For which arrival dates? By which segment? Through which distribution channel? Was this worse/better than planned?" Invariably, the response is 'no' or 'I don't know', and the reason for this is that hotels just don't have a full view on pick-up business, which makes it impossible to take control of demand and manage yield accordingly. It's at this point that I suggest they think about a revenue management solution. To make it simple, we cannot pretend to practise revenue management in a hotel without a clear forecast by date and by segment. And to pilot this forecast, you need to be hands-on, meaning you need to have some sort of revenue management system. Otherwise, it is like participating in the “Route du Rhum” boat race without any skipper experience, without any GPS or a compass.
First and foremost, it is essential to involve top management in all decision-making concerning rates and room allocations. Whether defining price management strategies for high or low demand dates, cross-company buy-in of the hotel's priorities is a must, so I always encourage hotel managers to get involved in any revenue management decisions. Overall, I would say the key components of a good revenue management strategy are: top management involvement, a good tool to control and forecast the demand, and great connectivity to implement recommendations in the sales platform.
Generally, the properties I'm in talks with, most still use very manual methods, such as Excel sheets or even 'educated guess work' to set their room inventory and rates. As soon as they realise the return on investment they can achieve from an automated revenue management tool, they want to start the implementation process straight away!
Accor has endorsed the use of Amadeus Hotel RMS as one of the referenced solutions across its managed and franchised properties to ensure consistency and transparency in revenue management practices.
In the case of Accor, franchisees benefit from the company's global culture and technological infrastructure when it comes to revenue management. Firstly, the Accor Property Management System (PMS) and Central Reservation System (CRS), known as TARS, integrate seamlessly with Amadeus Hotel RMS - this makes communicating and exchanging data between these components really easy. In addition, Accor has invested heavily in a worldwide revenue management training programme, aimed at both General Managers and Revenue Managers. As a company, Accor has endorsed the use of Amadeus Hotel RMS as one of the referenced solutions across its managed and franchised properties to ensure consistency and transparency in revenue management practices.
My mission is to help franchisees, who do not have any revenue management expertise internally, to better leverage revenue management levers for their revenue growth, including the use of the RMS.
No, it doesn't matter whether you're an independent property, chain or franchisee, the principles and processes are the same. And therefore the beauty of Amadeus Hotel RMS is that it can be accessed from anywhere and by anyone. So I can be sitting in my office talking to a client anywhere in Europe about group rates, sales policies, packages, and we can adjust availability and inventory instantly, based on information sourced directly from Amadeus Hotel RMS.
I speak to hotel properties every day about revenue management and I've seen first-hand how Amadeus Hotel RMS can help in specific situations. For example, hotels can follow every booking made on a daily basis, giving real-time insight into on-the-books business. They can also properly evaluate group requests and decide which bookings to take, at what price and with what sales conditions. And because hotels know they can trust the quality and accuracy of the information provided, they feel safe and comfortable using the tool.
It certainly does, but only when used consistently, as the solution needs to develop a detailed understanding of learned booking patterns and demand trends to generate reliable sales recommendations.
"For the past 3 months, from August to October, We have seen a RevPar increase by 9.8%, versus the same period last year!"
Let's take the example of one of my clients - Novotel Poitiers Site du Futuroscope in Poitiers, who was the first Accor franchised hotel to contract my services with Amadeus Hotel RMS. I have been working with this hotel within the new referenced ACCOR RM SERVICES for partners so called “Revenue Management on Demand” (RMD) to get the most out of their demand. For the past 3 months, from August to October, We have seen a RevPar increase by 9.8%, versus the same period last year!
Understandably, the hotel's owner, M Christian Fort, and his general manager, Dominique Camaille, are delighted with the results. Dominique recently told me: "With the increased turnover, we were able to cover our annual revenue management costs (Amadeus Hotel RMS and RMforYOU) in just one and a half months- that's the equivalent of 1.3 room sales per day."
been using Amadeus Hotel RMS for many years now. Could you sum up the three key benefits for
hotels not familiar with this solution?
Amadeus Hotel RMS is a fantastic tool with multiple benefits, but if I have to choose three, I'd say:
For more information on Amadeus Hotel RMS, please visit our website or contact account_hotel_RMS@amadeus.com.
Amadeus Hotel RMS lets your revenue managers maximise their potential
Amadeus Hotel RMS consists of three core components. Firstly, all reservation information is captured from the PMS and presented in a series of reports so that Revenue Managers can analyse historical and on-the-books business. Statistical algorithms are then applied to this data to predict future demand patterns and produce sales forecasts. Based on this, Amadeus Hotel RMS will make a series of recommendations, defining how rooms should be allocated and at what price, so as to maximise the hotel's revenue potential. Equipped with this detailed information, Revenue Managers can obtain a clear and dynamic overview of each property's yield capabilities, allowing them to focus on fine-tuning the hotel's price management strategy.
The bottom line - a good RMS can increase your RevPar
Amadeus Hotel RMS is a web-based, user-friendly tool that is available to hotel chains, representation companies and franchisee set-ups. 1,400 hotels are already using Amadeus Hotel RMS with RevPar gains of between 2-10%. The business intelligence that it generates assists not only hotel owners and revenue managers in defining profitable room rate strategies, it also gives those responsible for marketing and sales important insight into the hotel's customer base and booking behaviour.
RMforYOU is a dedicated partner to implement hotel’s strategies and focus on Topline opportunities every day.
RMforYOU is a new company created in July 14, which has for objective to deliver RM services to hotels which do not recruit RM resources directly in their hotel. The key benefits for hoteliers are numerous: They can trust in a real professional RM expert platform; they can adjust their RM resources to their specific needs instead of recruiting one full time position; they can modify their organisation year after year with flexibility; and of course they increase their TopLine thanks to a precise RM daily implementation.
Freddy Bodin (Freddy.bodin@rmforyou),the founder, hold approx. 20 years of RM experience and gives many conferences and international RM lectures.