Guest post from eZee. Pricepoint is integrated with eZee Centrix – the fastest channel manager that helps hoteliers automate their inventory distribution in real-time.
The hospitality industry has evolved unbelievably in the past few decades, making it one of the most competitive industries in the world.
Hotels are incessantly looking for ways to stay ahead in the game. This is where revenue management comes into the picture. With the help of data and analytics, revenue managers, from the get-go, have been predicting and shaping the customer path to purchase.
And guess what, hotels are extensively espousing this idea of revenue management.
But as I mentioned, this industry is ever-evolving. Today, technologies like artificial intelligence (AI) have invaded the hotel industry and is getting the show on the road,
Initially, people are highly sceptical about AI’s capabilities. But soon everyone is convinced that it is more of a boon than a bane.
Today, in this article, I will walk you through the entire scenario of AI in hotel revenue management. I will try to cover every important aspect to help you understand better.
The Emergence of Revenue Management in Hospitality
To understand the evolution or emergence of revenue management in hospitality, we have to go back to the past and learn about the internet.
Now you must be wondering, what the internet has to do with revenue management. Well, there is a connection.
1983 is considered the official birthday of the internet. But to be practical, the real impact of the internet started in 1989 when Sir Tim Berners-Lee invented the World Wide Web (www).
Just after the invention of www; in the early 1990s, the Internet was fully available to the public and subsequently commercialized. This is when hotel room inventory started appearing online.
So, does this mean revenue management started after the dawn of the www? Not exactly!
Revenue management in hospitality existed even before this, but it was in its infancy. Only a few accommodation providers were utilizing it. Others didn’t find the need to invest in such strategies because managing demand manually still made sense. Not to mention, many hotels didn’t really know what revenue management was.
However, with time, data was becoming a game-changer for hospitality establishments and they started realizing the importance of it. Today, revenue management has grown incrementally and revenue managers play a significant role in a hotel to drive a successful business.
But do you exactly know what a revenue manager does? Let me explain!
Why Are Hotel Revenue Managers Important?
When it comes to dealing with aspects like maximizing a hotel’s profitability, hotels need to have professionals who are supremely well-versed in the industry.
Talking about the role of revenue manager, it has evolved to a great degree. A few years back, the job of a revenue manager was only about collecting, compiling data, and analyzing data to decide hotel rates.
But today, things have changed; the role has become complex. They have to get their hands on tasks that go far beyond optimizing room rates and forecasting group profitability.
But why is it so?
Because the industry has transformed; traveler preferences have changed; the amount of data getting generated daily is massive; and whatnot.
Well, that’s not all. Revenue managers also have an ally — Artificial Intelligence.
The Rise of AI in Revenue Management
Technology like AI is fast becoming a significant part of a hotel’s operations. From a hotel website chatbot to predicting guest behavior, AI is being deployed everywhere.
But talking about AI-powered hotel revenue management, it is much more critical than we can think. The amount of complex tasks it handles is just amazing.
Now, did hotels require such an advanced tech?
As I mentioned above, the amount of consumer data is being generated is huge. This data holds a tremendous amount of information that could benefit hotels in various ways.
But unlocking the potential of that data wasn’t possible with legacy or traditional systems because they are usually complex and technically outdated. And this is where AI and machine learning (ML) stepped in.
At present, an Al-based hotel revenue management system can process millions of data in a fraction of time. Not just that, with machine learning, it can compile them, bringing a lot of valuable insights to the table and also learn about customers’ behavior.
These insights help revenue managers to make better pricing decisions.
If you take a closer look, more and more hotels are getting their hands on AI-powered hotel revenue management systems and are witnessing significant growth in their revenue numbers.
“No business is going to survive in the future without implementing, or at least gaining an understanding of artificial intelligence and how it can be used to better grasp data they collect.”
– David Gasparyan, President of Phonexa
How AI is Improving Revenue Management
Gathering the right set of data
Data gathering is one of the first and foremost things in revenue management. Without the right set of data, optimizing a hotel’s revenue channels is like getting blood out of a stone.
But with AI and machine learning, the process gets supremely simple because most of the aspects get automated. Further, machine learning algorithms are trained to gather certain types of data. Meaning, you do not have to worry about unnecessary ones.
Identifying patterns and trending insights
Guest patterns or you can also call it guest behavior is critical for a hotel. Because it isn’t static and keeps changing with time and circumstances. Therefore, a hotel must be able to identify and attend to them.
But to make a hotel ready, revenue managers have to identify all the guest patterns from a huge pile of data, which is a mountainous task.
With the emergence of technologies like AI and ML, this task has become easily manageable.
Most AI-powered systems are designed to digest, translate and identify patterns in a large amount of data.
Over and above, these systems are so advanced that the speed at which they can pay attention to a lot more information at one time is super-fast.
Creating guest personas
Detailed and data-driven guest personas are important for efficient revenue management. But creating guest personas manually or using traditional methods have a few flaws. This is where automatic and data-driven persona creation is used.
Today, there are several systems available that empower revenue managers to use AI and create much more nuanced personas of your guests.
That’s not all.
When we talk about personas, there’s also something called the propensity model. If you aren’t aware of the propensity model, it is basically a scorecard that is used to predict the behavior of your guests or prospect base.
With predictive analytics and machine learning, revenue managers can predict how customers’ preferences and past behavior will lead to future purchases. As a result, they can optimize the revenue channels of a hotel precisely.
Identifying and eliminating unproductive guest discounts and segments
There are times when hotels run guest discounts and they don’t invest much to analyze it. They fail to determine whether these discounts are worth it.
But when AI is incorporated, hotels can easily monitor every discount or promotional campaign and determine which ones are delivering good results and which ones aren’t.
Apart from that, hotels can also determine the guest segments that are more likely to spend with them. Because targeting a guest segment that suits your hotel’s offering is a critical thing.
Helps with setting prices
Pricing is the most important aspect of revenue management.
Ever since technologies like AI and ML invade this segment, it has become the modern solution to all the pricing related pain-points.
As machine learning algorithms already have access to all the data, it understands relationships between the different data fields related to your hotel’s offering, giving a more predictable outcome.
Not to mention, these ML-powered systems will continue to learn, optimize, and adjust over time. Meaning, it will just get better and better.
Monitoring and identifying potential risks to revenue
While all the above-mentioned aspects are definitely getting better with AI and ML, these techs are also helping hotel revenue managers rule out risks.
There are several areas and channels that cost a lot of investment and don’t deliver expected results.
But with an AI-based system, you can continually monitor every channel and let the system alert you about potential risks. Further, these systems are usually fed with specific metrics and conditions for risks, and whenever it finds something that matches the conditions, it sends an alert.
Where will AI take us next?
Artificial intelligence has made massive impacts on several industries over the years and hospitality is no exception. From the front desk to revenue management, it is marking its territory in every single segment of a hotel business.
Today, the way AI-powered hotel revenue management is getting revolutionized is just commendable.
However, many might argue that artificial intelligence for hotel revenue management would rule out human jobs. But in reality, AI, ML, and other sought-after techs are more likely to work in collaboration with humans going forward.
Looking into the future, technology is going to be a vital player in the hospitality domain. Hotels that are going to leverage these techs are the ones going to stay ahead in the competition.
You never know, a few years down the line, every guest might get to see a personalized room rate on hotel websites and OTAs.