You need to validate an RMS before you put one in. Fact. The problem is – there is no commercial tool to help you do this today and there is little know-how.
NB: This is an article from Pace Revenue
There is no standardised methodology to even begin to do it and what does exist is a range of imperfect – and that’s being generous – comparisons performed ad hoc.
Ultimately, hoteliers need to figure out what the return on investment (ROI) is for any given RMS. Only big corporate chains with deep pockets have been able to tackle the conundrum thus far. But for smaller chains and independents the sensational marketing of the revenue management vendors is too often dictating the decision making process. Plenty of salivating numbers are plastered all over RMS sales pitches. They look exciting. They are aggressive. The system is the best system ever. Even Pace is guilty of it! 🤭
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So an executive team gets sold on the idea and signs off on all the contracts. No testing. No validation. Now a lack of trust in validation has led to the RM vendor space becoming a horse trading bazaar of sorts.
For example, a hotelier may decide to choose a ‘cheaper’ RMS system because they think they are saving money but, in fact, they are overlooking the fact that performance is EVERYTHING. A difference in revenue gains of one or two percent between one RMS and another is a HUGE difference, so much so that the price paid for the system itself becomes almost irrelevant. Mathematically, you should pay more for the RMS that gets you the better performance, even if it’s just a 1% boost. The better ROI will more than offset the extra cost. Every time.
“ A difference in revenue gains of one or two percent between one RMS and another is a HUGE difference, so much so that the price paid for the system itself becomes almost irrelevant”
But smaller brands don’t have the scale or the resources and too often ignore this statistical truism even though they shouldn’t. Ironically, it’s the smaller groups that will benefit the most from getting an RMS. Most hotels still do not use an RMS at all and it’s the pricing capability of the solution which has the biggest impact and not the inventory controls and other trimmings championed by many software companies. It all starts with actually being able to determine what the performance of an RMS actually was and hoteliers need an affordable tool to help with that.
Field experiments are everything
To validate an RMS properly you need to do robust AB testing or, in the academic parlance, ‘field-experimentation’. Field experiments means controlled experiments and the best analogy to use in a post-Covid world is that it’s like testing a vaccine for efficacy. The RMS you are testing is the equivalent of the vaccine being trialled and, as most of us now know, there are reasons why you don’t just simply give the vaccine out to a bunch of people and test if it works. Technically, that’s just not how a proper trial works. You need to do a controlled experiment that includes inoculating people with a placebo and so on and so forth.
Here is a link if you would like to see an interview with David Lopez discussing RMS Field Experimentation following the publication of their white paper.