The future of revenue management: What technologies and trends will shape its outlook?
TD speaks with Klaus Kohlmayr about the technology trends that will shape the future of revenue management.
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The competitive nature of the Asian hotel sector means hoteliers need to work harder than ever to ensure they have the right team, systems and strategies in place to capture market-share, generate revenue and ultimately return value to shareholders.
Staying on top of what is needed to succeed today is hard, but what about two years or five years into the future? What do hoteliers need to know about where the industry is heading?
TD speaks exclusively with Klaus Kohlmayr, chief evangelist for IDeaS Revenue Solutions, about the major technology trends that will shape the future of revenue management.
TD: How is machine learning impacting revenue management?
Klaus Kohlmayr (KK): A typical hotel makes roughly five million pricing decisions every year. It’s not humanly possible for any revenue manager to get every decision right, every day. That’s why it is critical to have an automated revenue management system in place which uses sophisticated revenue science to produce accurate pricing decisions. Forward-looking predictive analytics, embedded in today’s advanced revenue management systems and supported by machine learning, help hoteliers uncover emerging trends and identify more profitable opportunities.
A revenue management system powered by machine learning not only generates prices that adapt to market changes but actually anticipates these variations in advance. In a competitive hotel market, slight pricing changes can have a big impact on demand. Therefore, any hotelier operating without systems that can analytically decipher the impacts of a specific price change (USD 20 higher or lower) on occupancy and the resulting revenue benefit (or lack thereof) for their property, is operating at a disadvantage.
TD: How will the trend of convergence influence revenue management in the future?
KK: Technological convergence is the new norm for forward-thinking businesses. Solutions originally developed unrelated to other systems are now becoming more integrated and unified as technologies advance and move into the cloud.
Technology is merging together at a pace unlike anything we have witnessed before and will have an enormous influence on the practice of revenue management in the years to come. If you are not thinking of cloud-based, mobile-first and integrated technology stacks, you will be left behind. As we see technology moving into the cloud, data becoming more accessible and generated at a higher frequency, we can also see a convergence in revenue management between pricing, distribution, marketing and loyalty.
No longer is the revenue manager in a corner, crunching numbers. They are now tasked with leveraging the new capabilities of technology, AI (artificial intelligence) and automation. In fact, the revenue manager’s function is increasingly moving toward a converged commercial function, making sure they suggest the right offer, at the right time, and distribute it to the right channel.
TD: Should hoteliers embrace artificial intelligence (AI) or be wary of the levels of automation the technology brings?
KK: Two of the key issues for hoteliers today relate to increasing labour costs and the resulting pressure on operating margins. Additionally, the amount of data being generated and collected by hoteliers will continue to increase, with the world’s unstructured data forecasted to increase from 36 zettabytes to 163 zettabytes by 2025. Automation and AI will help make a hotel more productive by helping front-line employees to do their job more efficiently.
Customers expect a more relevant experience with personalised offers. According to research, we know the majority of consumers are willing to provide data if they get a more personalised experience in return. AI offers a wide range of opportunities to modify and alleviate the burden of processes that are currently cumbersome through system enhancements that are automated, yet still personal. The result of AI enhancements (when properly implemented) is higher levels of engagement and guest satisfaction.
Hoteliers considering implementing AI-based systems in their property should first audit current systems and operations looking for highly repetitive processes that have multiple but predictive decision paths. This will help identify what could be improved and be made more efficient through the use of AI (i.e., automated chatbots or natural-language processing capabilities). Ultimately, AI should allow hotels to review their team roles and see how they can be adapted to carry out less mundane tasks, so staff can spend more quality time engaging with guests and delivering exceptional and defining experiences.
TD: Blockchain has attracted a lot of interest in the wider business community, but are there any use cases for the hotel sector?
KK: Although blockchain is an emerging technology and no one can predict its full impact on the hotel sector, the fact leading players in the travel industry is championing the technology indicates it may not be long before blockchain usage is more commonplace.
Today there are already a number of use cases for blockchain in the hospitality sector. Blockchain platforms certainly have the potential to streamline and disrupt the distribution channel. Several use cases include streamlining availability, rate and inventory (ARI) and descriptive content updates, payments for bookings, the enablement of direct bookings and loyalty programs to name a few.
An area of interest for all hoteliers related to blockchain should be what the OTAs are doing. Some industry observers believe blockchain has the potential to put many of these players out of business in the future. But OTAs have been traditionally resilient and adaptive in the face of change. Platforms such as Swiss-based Winding Tree claim they are poised to disrupt the industry by offering an open-source blockchain that supports a decentralised travel industry, effectively cutting out Expedia, Airbnb, Booking and other third-party players.
In addition to distribution, the advent of the digital ID and wallet is getting closer. One of the companies to watch is Civic, an Amadeus partner company that has developed an online app that dynamically provides businesses and individuals with the tools to control and protect their identities.
TD: Is attribute-based shopping set to deliver a long-term boost to hoteliers’ revenues (in particular, ancillary revenues), or is the approach overhyped?
KK: Multiple research studies have shown customers want more choice. They want to be empowered to pick and choose the components of their experience to make it personalised and relevant. In a restaurant you can pick from the pre-set menu or you can assemble your own a la carte experience. In a pizzeria, you can buy a pre-assembled (packaged) pizza or you can build your own. In the future, attribute-based shopping capabilities will provide guests with an unprecedented ability to assemble their own experiences—if they want to. When smartly implemented and augmented with insights and analytics, attribute-based shopping will enable the industry to increase conversion and, in turn, enhance revenues.
Klaus Kohlmayr is the chief evangelist for IDeaS Revenue Solutions. He is speaking at the upcoming ITB Asia event in Singapore on October 16 on the topic of, ‘Convergence and the role of the revenue strategist in tomorrow’s competitive environment.’
For more information on this topic or the future of revenue management, please connect with Klaus via: www.linkedin.com/in/klauskohlmayr