Surprising Trends from Our Hospitality Revenue Management Report, Part 1 of 3
EDITOR’S NOTE: In part one of a three-part series, we share our thoughts on what we learned from our 2019 Revenue Management Trends in Hospitality report.
Revenue Analytics recently released a research report on Revenue Management Trends in Hospitality, incorporating the findings from our survey of close to 1,000 senior hospitality execs across North America and our own original industry research.
Our goal? To better understand where the industry is going, where companies are investing, and what Hospitality insiders think is coming next.
There were some findings we didn’t expect to see. From changes in supply growth to advances in automation, here’s what surprised us most.
The Most Competitive Market in the Last Decade
Economists are beginning to raise an alarm, predicting that the economy is going to slide into recession again soon. It’s impossible to say for sure, but there have certainly been challenges with the stock market since last December, and ongoing market events seemingly every week. If the economy takes a downward turn, the pressures faced by the hospitality industry will be exacerbated.
And industry disruptors such as Airbnb, Google, Facebook, and OTAs are making the market more competitive every day.
“The good news is that the industry is comfortable living on the edge. The corresponding bad news is that we, as an industry, have seemingly nurtured a culture where we still don’t necessarily trust the recommendations coming out of the system.”
But through our report, we learned there’s something else that’s an even bigger challenge.
We are seeing supply growth outpace the growth of demand for the first time in a decade. This puts significant pressure on the hospitality industry, creating a competitive environment that hoteliers haven’t had to deal with for a long time.
For example, John Murray, President and Chief Executive Officer of Hospitality Properties Trust, has stated that he sees supply growth as an even more important issue than Airbnb.
It’s clear that regardless what happens with the economy, the industry is facing real headwinds with the issue of supply and demand growth.
Upcoming Investments: Revenue Management or Data Analytics?
83% of hotel chains that responded to our survey said they planned to invest in Revenue Management in 2019, with more than half of them characterizing their investment as significant or large.
After the last global recession in 2008, we saw industry-wide innovation in Revenue Management as hotel chains tried to recover from price drops. Transient price optimization was a result of this innovation.
Today, the Hospitality industry has the opportunity to move a bit ahead of any economic pressures that come down the pike and to direct this investment to capabilities that are going to help alleviate an economic downturn before it happens.
I’ve been really curious to see where hoteliers are focusing this Revenue Management investment.
For most, it’s not the whiz-bang stuff, even though I’m hearing a lot of talk about personalization. That’s where everyone wants to be, but surprisingly the bulk of the spend right now is still going into the heavy-lifting type of capabilities: analytics and data intelligence.
There are great ideas around personalization, attribute-based pricing, and Food and Beverage Revenue Management, but that’s not where we’re seeing the bulk of the investment, at least in the short term.
Will We Ever Completely Trust Automation?
I was reminded recently that Revenue Managers were early adopters of big data, analytics, artificial intelligence, and machine learning. Ironically, this was at a stage where there wasn’t as much data, and there wasn’t as much data science. It was really Revenue Managers that were pushing to apply analytics, maybe a little before the data and the technology were even there.
The good news is that the industry is comfortable living on the edge. The corresponding bad news is that we, as an industry, have seemingly nurtured a culture where we still don’t necessarily trust the recommendations coming out of the system.
I’m surprised to learn how many forecasts and inventory optimizations still get overridden. Reviewing price recommendations and putting in manual overbooking controls takes time. The question for us is how do we build that bridge in Revenue Management to gain the same level of trust we have for other automations that are part of our daily lives, like Waze and other apps?
There are so many excellent ideas out there: Food & Beverage Revenue Management, Restaurant Revenue Management, and Function Space Optimization, just to name a few. If people are going to start managing more things like Function Space and Food and Beverage, we must free up resources to focus on new opportunities in the realm of Revenue Management. That’s going to come through the automation of transient decisions.
We have such powerful data and analytics at this stage, we can make automation a reality and get to the “promised land” of total Hotel Revenue Management—using automation and analytics at an above-property level.
With economic pressures looming and an incredibly competitive marketplace, there’s a lot on the minds of today’s Hospitality leaders. To stay up to date on all the issues, download our entire 2019 Revenue Management Trends in Hospitality report.
Have questions? Let’s grab some time to chat.