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Automating hotel revenue management: who's already doing it?

Find out why your hotel or accommodation should use AI to improve revenue management.

Automating revenue management in hotels | Smartpricing

Do you handle revenue management? Have you ever wondered how many of your competitors do? It's hard to say exactly how many accommodations are using revenue management principles to maximize their income.

Some time ago, the Global Business Travel Association (GBTA) looked into the matter with an international study on the use of dynamic pricing

  • 75% of accommodations said they were aware of the possibility of using dynamic pricing, 
  • but only 22% said they were actively using them.

Why so few?

If you've ever tried it, you’ll already know the answer: revenue management is great in theory ... but in practice, it becomes a complicated activity to carry out, as it requires specific skills and a lot of time to devote.

(If you've never tried it, we recommend you start with our complete guide to revenue management).

So what do most hoteliers do?

Many give up altogether, while others limit themselves to the simplest form of revenue management: the seasonal rate list, patiently calculated and compiled by hand on the basis of their own experience and "commercial intuition" which, in most cases, proves inadequate to cope with today's increasingly complex (and nuanced) seasons.

In revenue management, size doesn't matter

Another factor that holds hoteliers back is a widely held belief among those in the industry that revenue management is a "luxury" available only to large hotels and accommodations.

This may have been true a decade ago, but global tourism, the advent of online booking platforms and the rise of short-term rentals have completely transformed the market, making it more accessible and open, but also more unpredictable and incredibly rich in competitors.

According to the latest Eurostat data, out of a total of about 30 million accommodations in Europe:

  • 58% have up to 25 rooms,
  • 34% have between 25 and 99,
  • And only 9% have a capacity of 100 rooms or more.

In this context, distinguishing between "small" and "large" hotels loses importance, and strategies to emerge become crucial even (and especially) for those in the most crowded segments of the market.

Of course, revenue management strategies vary according to one's availability: large hotels may have dedicated teams and larger budgets, while small and medium-sized hotels will need to consider more intelligent and flexible solutions.

The imperative, however, remains the same: maximize revenue and improve operational efficiency.

How to simplify revenue management in hotels

The second myth to dispel is that, for large hotel companies, revenue management is "easier." But when you think about it, they face no small level of complexity: they have more rooms to sell, more locations to control (perhaps scattered all over the world), more employees to manage, more services to coordinate, and more tourists to book.

So how do they do it? Simple: they get help from technology to automate revenue management.

Now, you may be thinking that if they can do this, it’s because they have a lot of money…and it’s true. Many use proprietary software created exclusively for their establishments or have access to high-end, highly technical solutions to enhance the activities of their revenue teams.

But for the vast majority of hospitality businesses, none of this is needed. Today, the market offers numerous solutions in the area of revenue management software and dynamic pricing, which are within the reach of all budgets and accessible even to those who don't have an in-house revenue manager or the skills to do it themselves.

That’s why to do or not do revenue management doesn’t depend on your size, dedicated staff or budget. It depends solely on your desire to evolve and grow your hospitality business in an increasingly competitive market.

It may be challenging and can strain the routine you've created over years of "old-fashioned" price management, but it’s neither impossible nor difficult. You just need to choose the right tools.

Artificial intelligence in revenue management: a revolution in the making

As mentioned earlier, the range of software available to automate revenue management has expanded considerably in recent years. However, these tools are not all the same: in most cases, they are designed to be used by revenue managers or people already familiar with the dynamics of revenue management.

This means that even if they offer a good level of automation, in many cases, they are complicated to configure, and the user must have advanced skills in data analysis and understanding of dynamic pricing mechanisms.

Making the wrong choice and being confronted with software that is too complex can be highly demotivating, and end up confirming the initial idea that "revenue management is hard."

That’s why the arrival of artificial intelligence (AI) into revenue management software has been a revolution for the entire industry. And guess who were the first to benefit? 

According to a Statista survey of tourism companies with revenues over $1 billion, AI-influenced revenue in the travel industry was 21% in 2021 and will reach 32% in 2024. In other words, as early as this year, almost a third of their annual revenue could come from AI.

What are the benefits of automating revenue management with AI?

The reason why large hotel companies immediately turned to artificial intelligence is quickly stated: no other technology had previously made it possible to achieve such a level of operational simplicity efficiency.

Thanks to the sophisticated algorithms they employ, these software programs eliminate all the obstacles that have until now existed in the adoption of revenue management:

  • Specific expertise is no longer required;
  • Accommodation performance data is collected automatically, as is the monitoring of the target market, including competitors, holidays, and events;
  • The algorithm cross-references all collected data to identify patterns and trends in the location, and, based on this analysis, can react quickly to any changes and fluctuations in demand, adjusting prices accordingly;
  • Finally, price publication is automated across all booking channels.

And while the algorithm does the "heavy lifting" (the work that would have required hours and hours of complex analysis and calculations), the hotelier can devote more time to overseeing the strategy, making adjustments and pursuing growth objectives in an infinitely simpler, more effective and faster way.

Why choosing dynamic pricing and revenue management software now is essential

Like all great technological innovations, artificial intelligence has raised doubts and fears in every sector where it has been introduced. We talked about this in this article, where you’ll find the 4 most common fears hoteliers have about artificial intelligence.

These fears translate into hesitation to adopt technological tools. According to a recent analysis by Skift Research, only 28% of hotels use revenue management software and, excluding the free tools provided by Expedia, only 10% of hotels purchase advanced revenue management technologies.

As and Statista report, the UK shows some apprehension when it comes to adopting AI:

  • Only 7% report using AI, e.g. for customer service or its dynamic pricing algorithms,
  • 20% have not yet implemented AI, but plan to do so in the near future.

That's why choosing to handle revenue management using the most cutting-edge technologies currently available can mean not only maximizing your revenue but also getting ahead of the competition and gaining a decisive competitive advantage.

Want to move from theory to practice and better understand how dynamic pricing and revenue management software work? 

We’ve put together the ideal guide for you. Inside, you’ll find practical examples of dynamic pricing strategies, how a state-of-the-art RMS works, the differences compared to applying dynamic pricing "by hand," and some testimonials from hoteliers who’ve already taken this step.

Download it now!