It is rather interesting to see how most hotels decide on offering the most competitive rates in the market. Unlike the airlines, you will be surprised to know that most hotels tend to keep the same rates for weeks and do not use a yielding system. Often enough as hotels realize it has not sold enough rooms, the decision will be made to heavily slash down rates in order to fight the competition and to increase the occupancy. In that case the decision to slash prices is not based on any statistics or based on the market environment, but simply on a reaction basis.
There is a large number of small to medium hotels that make the mistake of fixing their rates simply based on their expenses and the expected profit that they would like to generate with no reference to the market conditions whatsoever. To believe that the right price to charge for a room is based on hotel costs and ROI expectations is a big mistake. How can a hotel claim “most competitive” rates if it does not even know the rates of all hotels in the entire destination?
Prior to 2000, the traditional model for hotels was to set the rates for their rooms and wait for guests to fill the rooms without any revenue management system. Hotels used to rely on travel agents and tour operator business, meeting planners, brand (flag) reservation systems, GDS, advertising, etc…but all of that changed after 9/11.
In the past most hotels had two sets of rates: one for peak season and another for off-season. These rates used to be printed years in advance on rack cards and brochure. Surprisingly, today there are many hotels that are still following the traditional pricing structure from the past and they do not use a revenue management system. The internet transformed the hotel industry as all rates became transparent to all consumers.
Many hotels believe that discounting is an effective way of increasing revenue. Simple discounting is not a good strategy to increase revenues and to think that weekday strategy and weekend strategy can be the same is simply absurd. Other managers still expect that the flag will fill the hotel. And to think that short term goals must always have priority over long term goals is simply not true.
In the hotel industry there are big discussions about RevPAR over ADR and occupancy, but RevPAR is really the true measurement of a hotel success because it is nothing else than the revenue per available room. When hotels are sold the main consideration in cap rate calculations are based on revpar and profits. Of course there is also TREVPAR, Total Revenue per available room but we hear less about TREVPAR than REVPAR because most revenue management solutions do not affect TREVPAR.
Let’s talk about rate integrity for a minute. In the past decade, hotel rooms have become a commodity or a perishable good. If we don’t sell it today, we will never have another opportunity to sell it ever again. Why are hotels so concerned about rate integrity? Why do we feel it is better to have an empty room - and collect a zero dollar rate rather than to discount its rate to get revenues we can deposit into the bank?
In a transparent environment, why are so many hotels stuck on historical data? Historical data has value but why are we so conditioned to use it? Think about it for a minute, if we made a mistake in the past, why should use the mistake as the basis of our strategy for the future. Look at 2008 over 2009, should we base our rate strategy on a good 2008 to price our bad 2009?
In any environments, it is simple logic that when there is high demand, you can sell your services at a higher price but you need to react as supply and demand fluctuates. No matter where your hotel is located, there is no way the demand can be the same every day so why are most hotels pricing at the same rate for weeks at a time?
Is the hotel industry convinced that Revenue Management artificial intelligence is superior to human intelligence? Why hotels are so savvy about reports but are so behind when it comes to pricing and technology? RevPAR Guru is a cutting edge tool that takes advantage of the modern technologies to help hotels handle revenue management challenges. RevPAR Guru’s system does not require prior training in revenue management because it is automated and simply reacts in real time according to supply, demand, booking windows and all the market changes.
This robust tool monitors the entire market 24/7 to optimize rates to maximize occupancy, ADR and REVPAR. Without the use of computers, it would take hundreds of people day and night to try to compete with this technology, and they will most likely miss most of it. Why are the hotel industry leaders trying to use “gut feelings” models over sophisticated computers and technology statistics? No more manual pricing and no more gambling, RevPAR Guru sets the rates that are calculated based on the market trends, supply and demand and hundreds of sophisticated mathematical statistical algorithm used in financial markets. Manually analyzing the market and adjusting rates is obviously possible but time consuming and most of the time incorrect.
Today American travelers tend to be quite computer savvy, with millions of travelers using the Internet to make travel plans every day. But European, and the rest of the world are also catching up on booking online travel plans, and this is not going to stop or slow down. The use of the Internet to actually book travel continues to increase, as we have seen already smaller hotels relying 100 % on the internet as source of reservations. Let’s see what 2009 trend will bring to the hotel industry, but in the face of an impending recession the only winners in a price war will be the customer.
Traditionally hotels use 5 to 7 hotels in their comp set but this basis is no longer applicable nor sufficient anymore because in a transparent market hotels now compete with the entire market area or destination. For example New York, Los Angeles and Orlando have more than 500 hotels available on travel search engines, Dallas and Miami have over 300, Washington DC has 425 and Paris, France has over 1600 hotels.
In the comfort of their home or laptop, travelers can scan and sort hotel prices in search of best value for money. More than 60% of all online bookings next year will be completed through Online Travel Agencies (OTA) or directly via hotel own websites. None of the traditional intelligence reports address this issue however with the use of technology, software, high volume computing power and data crunching REVPAR GURU has the solution to keep up with the new cycles of supply and demand as it recalculate and updates all pricing channels in real time.
There is a large number of small to medium hotels that make the mistake of fixing their rates simply based on their expenses and the expected profit that they would like to generate with no reference to the market conditions whatsoever. To believe that the right price to charge for a room is based on hotel costs and ROI expectations is a big mistake. How can a hotel claim “most competitive” rates if it does not even know the rates of all hotels in the entire destination?
Prior to 2000, the traditional model for hotels was to set the rates for their rooms and wait for guests to fill the rooms without any revenue management system. Hotels used to rely on travel agents and tour operator business, meeting planners, brand (flag) reservation systems, GDS, advertising, etc…but all of that changed after 9/11.
In the past most hotels had two sets of rates: one for peak season and another for off-season. These rates used to be printed years in advance on rack cards and brochure. Surprisingly, today there are many hotels that are still following the traditional pricing structure from the past and they do not use a revenue management system. The internet transformed the hotel industry as all rates became transparent to all consumers.
Many hotels believe that discounting is an effective way of increasing revenue. Simple discounting is not a good strategy to increase revenues and to think that weekday strategy and weekend strategy can be the same is simply absurd. Other managers still expect that the flag will fill the hotel. And to think that short term goals must always have priority over long term goals is simply not true.
In the hotel industry there are big discussions about RevPAR over ADR and occupancy, but RevPAR is really the true measurement of a hotel success because it is nothing else than the revenue per available room. When hotels are sold the main consideration in cap rate calculations are based on revpar and profits. Of course there is also TREVPAR, Total Revenue per available room but we hear less about TREVPAR than REVPAR because most revenue management solutions do not affect TREVPAR.
Let’s talk about rate integrity for a minute. In the past decade, hotel rooms have become a commodity or a perishable good. If we don’t sell it today, we will never have another opportunity to sell it ever again. Why are hotels so concerned about rate integrity? Why do we feel it is better to have an empty room - and collect a zero dollar rate rather than to discount its rate to get revenues we can deposit into the bank?
In a transparent environment, why are so many hotels stuck on historical data? Historical data has value but why are we so conditioned to use it? Think about it for a minute, if we made a mistake in the past, why should use the mistake as the basis of our strategy for the future. Look at 2008 over 2009, should we base our rate strategy on a good 2008 to price our bad 2009?
In any environments, it is simple logic that when there is high demand, you can sell your services at a higher price but you need to react as supply and demand fluctuates. No matter where your hotel is located, there is no way the demand can be the same every day so why are most hotels pricing at the same rate for weeks at a time?
Is the hotel industry convinced that Revenue Management artificial intelligence is superior to human intelligence? Why hotels are so savvy about reports but are so behind when it comes to pricing and technology? RevPAR Guru is a cutting edge tool that takes advantage of the modern technologies to help hotels handle revenue management challenges. RevPAR Guru’s system does not require prior training in revenue management because it is automated and simply reacts in real time according to supply, demand, booking windows and all the market changes.
This robust tool monitors the entire market 24/7 to optimize rates to maximize occupancy, ADR and REVPAR. Without the use of computers, it would take hundreds of people day and night to try to compete with this technology, and they will most likely miss most of it. Why are the hotel industry leaders trying to use “gut feelings” models over sophisticated computers and technology statistics? No more manual pricing and no more gambling, RevPAR Guru sets the rates that are calculated based on the market trends, supply and demand and hundreds of sophisticated mathematical statistical algorithm used in financial markets. Manually analyzing the market and adjusting rates is obviously possible but time consuming and most of the time incorrect.
Today American travelers tend to be quite computer savvy, with millions of travelers using the Internet to make travel plans every day. But European, and the rest of the world are also catching up on booking online travel plans, and this is not going to stop or slow down. The use of the Internet to actually book travel continues to increase, as we have seen already smaller hotels relying 100 % on the internet as source of reservations. Let’s see what 2009 trend will bring to the hotel industry, but in the face of an impending recession the only winners in a price war will be the customer.
Traditionally hotels use 5 to 7 hotels in their comp set but this basis is no longer applicable nor sufficient anymore because in a transparent market hotels now compete with the entire market area or destination. For example New York, Los Angeles and Orlando have more than 500 hotels available on travel search engines, Dallas and Miami have over 300, Washington DC has 425 and Paris, France has over 1600 hotels.
In the comfort of their home or laptop, travelers can scan and sort hotel prices in search of best value for money. More than 60% of all online bookings next year will be completed through Online Travel Agencies (OTA) or directly via hotel own websites. None of the traditional intelligence reports address this issue however with the use of technology, software, high volume computing power and data crunching REVPAR GURU has the solution to keep up with the new cycles of supply and demand as it recalculate and updates all pricing channels in real time.
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