January 12, 2019
After the third day full of seminars and discussions with exhibitors at HITEC and HSMAI ROC in Toronto, it’s time to summarize what’s happening within hotel technology and revenue management.
The hospitality industry is far behind other industries in digitization. First, the hotels were fooled by the telecom companies who installed the wifi for free against the guest paying directly to the telecom company. The development went so fast that the agreements suddenly were extremely expensive and bad. Cheated. Then came the OTAs who wanted net prices, which the hotels perceived as free. Really cheated this time, which is apparent only now. The great topic of discussion in technology right now is artificial intelligence and voice control, for example Siri from Apple, Bixby from Samsung, Google Assistant, Watson from IBM and Alexa from Amazon. Several exhibitors already have solutions for how to speak with the hotel room or with other systems used in a hotel. Do not buy any voice-controlled systems! The technology is not well developed yet, regardless of what the vendor says, while everyone competes on who will take the game on voice control.
A lecturer gave the answer as to why so many hotels find it hard to keep up with developments. “The hotel director was not born in the digital world”. There are certainly some hotel directors that are involved, but not the majority. The changes in the next few years will be greater than the last ten years. It is now going to retire or to keep in the future.
There is much talk about “Big data”, ie. How a hotel will be able to use all the data they collect in their systems. There are good systems that help analyze data so that the hotels can make better decisions, which in turn increase profitability. Focus is shifted from maximizing gross revenues to net income (after cost of earning revenues). In order to successfully obtain the right information, competence is required in computer science, analysis and programming or that the hotel finds a supplier with the right skills. Whether the hotel does this on its own or with a system vendor, expect the cost to be high. The high cost is due to the need for specialist competence and the right data. Marriott told them that in a decision-making model they built on their own, they needed to buy data for almost a million.
There are no cheap solutions that work, but there are plenty of newly started companies who think they have found the right formula to set the price of the hotel room. One of the PMS companies worked to integrate 20 new startups, all of which are all about price optimization. The audience in a seminar was asked how often they change their prices. If they only accept the revenue system’s recommendation, they do not do their job meant the lecturer. Each revenue manager will implement the hotel’s strategy and change the strategy’s prices at least once a day for at least 90 days ahead. The hotels change their prices far too rarely and also make mistakes when they only follow their competitors’ price changes. Here the hotels have a lot to learn.
If the hotels are to succeed in paring the ever higher costs of getting the bookings, they must change the focus to the income after deducting the cost of getting the booking. It starts by finding out what the cost of getting the reservation is which is significantly more complicated than just looking at the invoices. The next step is analysis to find a revenue that leads to higher results. The hotels that do not change focus will see their profitability curtailed over the next few years.