Towards a Customer-Centric RM System

　　Revenue management, with its roots in the airline industry, was traditionally based on capacity.

　　However, by 2000, its application in the hotels sector was proving not to be as effective as hoped.

　　Today, it is price management based on many factors that is superior to revenue management based on capacity. And looking forward, it is the complete integration with multiple systems and an approach more aligned to CRM which is what hotels of the future need.

　　The early days

　　When the airline industry became deregulated in the mid-1980s, aggressive competition provided the catalyst for developing new ways to maximize revenue from airline seats. Companies started to introduce Revenue Management Systems (RMSs) that optimized the balance between the fixed amount of resources for sale, the time these resources were available, the price customers were willing to pay for a seat, and segmentation across the products available on a flight.

　　Approaches that work for the hospitality sector

　　But by the 1990s it became clear that capacity-driven revenue management systems, built for airlines, simply didn"t work as effectively for the hotel industry. Principally, this was because airline customer profiles are not as complex or as fluid as those of hotel guests.

　　So the hotel industry"s demands - multiple segmentation, matching capacity to customers - needed a new approach based on something more sophisticated than just capacity. Enter price management. This looks at the Best Available Rate (BAR) based on future predictions of many parameters such as where the customer is, the current season and, critically, what a company"s competitors are offering. From the simple grid of capacity management we now look at a vast array of variables to manage pricing and rate levels.

　　The importance of price management not just revenue management

　　It is now possible to address, at a macro-scale, the pricing issues that hoteliers are facing, and at a micro-scale provide pricing solutions, including dynamic pricing, real-time group quotations, with more granular competitive intelligence. This enables systems to reveal many more opportunities for increasing revenue for hotel companies.

　　With dynamic price management techniques hotel rooms can be filled at the most profitable price according to learned demand patterns. Advanced forecasting models can make intelligent rate and inventory recommendations. This can be done in real-time, adjusted dynamically to changes in the hotel environment, ensuring accurate and reliable ‘always on" business intelligence.

　　In essence, the fixed, disconnected and disparate model of revenue management has now been overtaken by the fluid, dynamic model of price management, and this multi-variable model works much more effectively with the complexities of the hotel industry.

　　Today"s systems also look at markets and try to establish the influences on a price point within that environment. The technology really is affording us this deep look at both when and where a customer is, and this environment will come to be dominated by whoever has the biggest computing engine, the most effective systems and the capabilities to effectively merchandise the hotel product.

　　Technology is allowing a greater focus on individuals and helping hotels to better cater for their personal preferences. By analysing booking and stay data in detail and moving beyond traditional segmentation to personalization, of channel bookings, lead times and combinations of rates and activities, the prospects for driving up revenue whilst retaining guest loyalty are significantly improved.

　　This goes beyond revenue management, and beyond price management, to become customer-centric revenue management. What could be lost in the quest to create dynamic pricing models that take everything into account except the individual, can be regained with this approach.

　　As we start to zero in on the customer we also start to ask interesting questions. For example, if systems are geared to the preferences of a small group or even to the level of the individual, how can the concept of brand value be incorporated?

　　Towards a customer centric RM system: getting it right in a world of increasing expectations

　　This is critical in the hotel industry. While an airline operator will be looking at fairly limited competitors and alternatives to price, a hotelier is in an extremely tough market with many more competitors all adjusting their offerings based on seasonality and market demand. So in the hotels sector, absolutely the most important factor is becoming the hotel"s value proposition and brand, and how this is perceived by the customer alongside the competition. It"s not just about matching rooms to people or prices to segments, it"s about matching a hotel"s entire operations, from rooms, amenities, location, perceived quality and loyalty programs, to the expectations of the right person in the right place at the right time. It"s a formidable logistical task and why deploying enormous computational power is critical to addressing this challenge.

　　Talk about customer-centric revenue management also acknowledges that revenue management is moving closer to marketing. And, in the same way marketing pervades an organisation and essentially sets its direction, so could and should customer-centric revenue management become integrated across a hotelier"s systems, throughout the distribution systems, from the point of sale through to after-sales follow-up. Greater customer insights, and the proliferation of new channels for interaction with those customers such as email and social media, means it is vital to offer them the best possible deals for them as individuals rather than just their broad behaviours.

　　It"s probably fair to say that the movement from RM to PM (Price Management) to CRM is the result of a symbiosis between market competition, customer choice and technology. If the environment in which you work is becoming more complex, then make sure you have the right tools and technology to enable you to lead it. If the customer is becoming all-powerful, then it is important you know how best to meet their needs.