We always say that a perfect pricing strategy is a combination of human and machine.
NB: This is an article from RoomPriceGenie
The human role is to set up the strategy, rate policy and expertise in a context that the machine doesn’t have. The computer then does all the calculations to get perfect pricing.
Our clients sometimes ask us how much should they intervene. What is the perfect combination? Should they apply any adjustments? And if so, when? And how often?
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But before we dive deeper, the first thing to say is that everyone does better with a revenue management system. It doesn’t matter if you are a beginner or an expert, you will get better pricing.
How does it help a beginner? And how much should you be involved?
For someone who has a basic understanding of revenue management and is not comfortable with new hotel technology, using an automated system will hugely improve their pricing. The machine will do better than they did as it has access to so much data that it crunches hourly.
The algorithm is constantly monitoring demand, both from your own reservations and the prices of the hotels around you. It also knows how many rooms you have left and adjusts the price so it will sell that number.
Typically this would mean at least 15-20% increase in revenue just from switching an RMS on!
But even if you are an absolute beginner, you can always learn how to do more, and then you can add to the system your knowledge. What kind of things? You may want to change your gaps between rooms, or impose minimum stays? You may want to put your price up especially high when there is a wedding at your property.
But what if you know a lot about pricing and you are very experienced with hotel technology?
For an experienced revenue manager, having an RMS means getting the consistency of having your own expertise repeated multiple times a day.
In 15 minutes a week of oversight and adjustment, you can get better pricing than ten clones of yourself working full time to keep up with the changes in the market. As before, you will set pricing to where you want it. But now you will know that the prices will react to changes in supply and demand in between checking times.
The consistency of performance from this also typically results in double digit revenue increases as well as saving a lot of time.
To be able to do this, your revenue management system should allow implementation of different revenue management strategies, having flexibility and transparency. Some revenue management systems are more ‘black-box’, meaning you don’t get access to the algorithm. These systems will often produce better results than a revenue manager working alone; it depends on the circumstances. But we believe that an experienced revenue manager works best when they have control over the algorithm.
In any case, once strategies are set, the system will execute those for you and you can come back to the RMS either to apply new strategies or to check existing ones are achieving what you wanted.
Key takeaway – is to learn how to combine the best of human and machine.
Whether beginner or advanced we believe that there is always more to learn, and it is always possible to do better. And often a few small tweaks can make a big difference.