Travel & Hospitality Tech Outlook | Friday, August 14, 2020
AI is already bringing breath-taking transformations in the hotel management industry. What change does it have for the revenue system?
FREMONT, CA: Automation has been the catalyst in the evolution of revenue management. Utilizing advances in Machine Learning (ML) and artificial intelligence (AI), the best of today’s solutions can make cost upgrades and pricing decisions automatically. This enables revenue managers to concentrate on tactics and strategies instead of wasting time on crunching data and punching numbers into spreadsheets. The intricacy and pace of the pricing decisions and the financial outcomes produced by them are unparalleled by the most seasoned revenue manager utilizing the most upgraded solution on the market a few years ago.
The potential to incorporate new sources of data has also contributed to driving intelligent pricing decisions. Upgraded revenue management solutions leverage repository of historical data that resides in the property management system of the hotel as well as a wide range of market intelligence and other data from computer rates information to booking rates information. In this way, demand can be forecasted more accurately, which increases hotel revenue and profitability in exceptional ways.
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Doubtlessly, the next-generation, AI-enabled revenue management, has hit the industry like a storm. Some leading AI-powered solutions usually replace legacy solutions that utilize a hands-on, rules-based approach for making pricing decisions and involuntarily produce an abundance of 100 million decisions across numerous properties every day. These impressive results with giant hotel brands noticing their revenue numbers increase by millions of dollars per year. Smaller properties, too, are noticing substantial gains, in some cases facilitating sales life by more than 15 percent.
Enthrallingly, at times, AI-enabled solutions generate pricing decisions that revenue managers might find as overly aggressive, irrational, or plain wrong. Here is where the power of big data and ML is compared to the humans’ data processing and analytical capabilities. Many experienced revenue managers have reported that they have sold rates that were advised by AI-powered solutions that they would not have published earlier.
AI-enabled revenue management is everything about smart pricing. It is about utilizing demand forecasts, price sensitivities, and competitor rates—while considering any number of other inputs, including demand drivers such as special event dates, seasonality, and day-of-week differences for maximizing room occupancy at the finest possible price. Smart pricing means taking into account other elements like kind of room, length of stay, and the degree to which a discounted price promotion could probably dilute income and profits in the long term. The amalgamative intricacies included in smart pricing are nothing to sneeze at.
Intelligent pricing is channel-agnostic. Instead of thinking in terms of OTA booking in comparison to direct booking, for example, smart pricing sees the relative value of every distribution channel and weighs how much each channel can drive the demand for the guest room and will help obtain the overriding goal. The objective is to increase the profitability of hotel inventory. Smart pricing evaluates the demand from all the sources, which includes OTAs as well. In an ideal world, algorithms then involuntarily implement the appropriate tactics and strategy to funnel enterprises through the most profitable channels.
Total revenue management, usually called its bigger-picture approach to revenue optimization, consider the potential of the guest to spend on recreational facilities, spas, restaurants, and numerous other ancillary income streams while making pricing decisions. For lodgings with casino operations, even the theoretical loss factor into the guest room and group sales pricing decisions.
Apart from other benefits, the business intelligence is acquired from the reporting capabilities, for example, can help enhance sales effectiveness, offer valuable insights into occupancy trends, generate competitive intelligence, channel profitability, etc. The forecasts can be utilized as a guide by the marketing department for determining when to raise promotional expenses to spur demand. It enables the operation team to know when to increase staffing according to projected occupancy.
In short, the benefits go well beyond the department ‘revenue management’, ultimately transcending all parts of the business.
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