How to choose new technology to assist with Revenue Management?

Annemarie Gubanski - Taktikon AB

Oliver Geldner - Taktikon AB

Minna Vaisanen - Pace


If you prefer to view this whitepaper in pdf format click here.

Abstract

This paper is written in collaboration with Taktikon AB and Pace Revenue Management on how to choose new (revenue management) technology that is fit for purpose, how to validate its suitability, and finally, how to implement it successfully.


Executive Summary

It is not unusual that purchase decisions are based on impulses.

We make impulse purchases every day. That bottle of water at the airport, that chocolate we buy on the way home, another coffee from a name brand store on some street corner. But when it comes to software for hotels, the conversation you had on a flight with a seat neighbor might not be the only or best basis for choosing a solution that fits your hotel operation.

Balancing impulses with validation has become more crucial than ever.

The hospitality industry is at a pivotal point, where an influx of new revenue management technology is evident. Gone are the days where you were limited to choosing a single system that was so costly you would never dream of changing it. Now you are at the paradox of choosing from the plenty!

Many of these new systems have the ability to provide the hotel teams with tools to improve efficiency and performance. The dilemma is: how to make sure that you are able to choose a system that fits your needs from all angles. Taktikon AB and Pace had the pleasure to partner up in publishing this whitepaper on “How to choose a new technology to assist with revenue management?”

In this document, we provide you with a framework and a process map for choosing, validating and implementing revenue management tools to drive the best performance for your property.

Dive straight in, or alternatively, feel free to start with a section that matches your current state in your journey.


Selection Process - Request for Proposal (RFP)

What questions should I ask my property when I want one of those?

We frequently assist hotel companies and operators in the selection process for choosing the right technology platform for their revenue management needs, and have done so for a number of years.

For us at Taktikon, the most striking aspect in the decision-making process is the apparent disconnect between the ambition for the solution that the decision-making body wants to implement - and what the operation body of any operation can achieve.

This might sound evident, but in everyday life, this is one of the main hurdles to overcome. The decision making body who often initiates the search for new ”heavy” technology (like a CRS/PMS/POS/RMS for example) is often unaware of the operating body’s priorities, skill set, or career timelines.

If your hotel, single asset or group, is considering a switch from a legacy solution to a more lightweight cloud based solution, you should bear in mind the following logic or process:

Is your idea for a system switch based on tactical needs: i.e to gain an advantage over your competitors?

Is your idea for a system switch based on functional needs: i.e to improve handling of processes of your operation?

Is your idea for system switch based on technology needs: i.e your current system setup does not allow you to handle processes in an efficient manner because your back-end systems require you upgrade to a new platform?

Is your idea for a system switch based on economic needs: i.e long-standing contracts are expiring and you want to move forward in realigning your technology stack at lower cost?

Or is it all the above? With a higher emphasis of one over the other? What are the priorities?

Here’s where an RFP process is useful, helpful, beneficial, and fruitful.

Our RFP process maps your requirements and demands against the offering in the market. In our experience, it is useful to consider the existing teams and their skill sets to implement, use and make benefit of the new technology solution, usually within a 3-5 year window. This is why we consider it crucial to hold workshops prior to defining the components of any RFI/RFP.

The initial part of the workshop helps us determine the requirements you have for making your operation work today, including the skill set available as a baseline for any RFP. Consider it a doctor’s appointment where your hotel or chain operation is being diagnosed on how you are doing today.

The second part of these workshops is an assessment of where you want to be as a business, and which tools will get you there in relation to skills you have honed in-house in the recent years. As well as which skills you will you need to develop or hire in order to manage these tools.

Based on the above mentioned priorities, Taktikon assembles all of the so-called ”line items” (every desired function) with their respective weight (priority) versus their effect (functionality) for achieving the desired results.

This documentation helps us to assess the offering from different vendors against the current and future demands of our clients, and how the vendor technology can be successfully integrated into the current and future setup of the client. Line by line, item by item, functionality versus effect.

All too often we find that decision making bodies want is not what the operation body needs.

You should definitely upgrade your tech-stack, but do it wisely, matching:

  • Your capacity for change (economically)
  • Your capability for change (resources)
  • Your purpose for change (reason)
  • Your plan for change (strategy)


Implementing a System

Can implementing be plain sailing?

In this section, we will talk about implementing a system or a set of systems. The steps to take are the same, though the time taken and number of people involved depend very much on the type of system.

Having good preparation for your implementation is vital in getting your system working optimally. At Taktikon we use the following steps for our implementation projects:

  • Form the team. Put together the project team and decide who will be involved in the process and what their responsibilities will be. Make sure that any person involved in the project is dedicated to reach the goals and deadlines, but also has the time to work on this project. At the same time; keep the size of the team manageable. You will need to be able to make ad-hoc decisions and meetings during the process, and the larger the team, the more difficult it will be.

  • Assign a project manager. This person will make sure that deadlines are held. In our experience it is best that this person is not involved in actual operational related tasks in this process. The project manager might therefore be an external person. The benefit is that they are unbiased and will be able to put demands on the supplier. The project manager should have a clear goal and deadline, and have a full mandate to decide all details within the project. Do not forget to have your provider assign a project manager as well and that this person should understand the goals and deadlines prior to the start of the project.

  • List all systems that will need to be integrated. During the previous stages you will have done a thorough investigation already, though experience has taught us to have a very detailed look at all system integrations that will be impacted by your system shift. Involve all departments within your company and have them list their systems and tools that are dependant on your current systems. This might even include home-made tools and systems.

  • Formulate your strategies. You will have decided your main strategies during the previous stages, but for implementation purposes, it is vital to have them written down in detail.

What customer segmentations will you need? A customer segmentation means the type of customer depending on the booking pattern and expectations the customer has on your product.

What channel segmentation would you like to track? Examples of a channel segmentation is; Travel Agencies, Online Distribution Channels, At property, etc.

What are your pricing strategies? Would you like to have a flexible pricing (which is recommended) or will you set-up pre-decided rate plans?

What are the products you are going to sell? In a hotel world this usually means; (meeting) room types, spa facilities, restaurants, etc.

  • Schedule a pre-meeting. Make sure that the complete project team, including your providers team, is invited and present during this meeting. We propose the following agenda:

A quick run-through the system. Even though, by now, all should have seen the system, it is good to highlight the key functions of the system once more.

What information does the provider need from you? Usually a provider has a set of documents to complete. Make sure that these documents are adapted to your project, your interfaces and strategies, and contain all the information needed to get the system running smoothly.

What information do you need from your provider?

Go through all necessary System integrations. Does the provider already have a fully functioning 2-way interface or does this still need to be built?

Which steps will have to be taken and what are the deadlines? Make sure that this is all put in writing and adjust the deadlines as soon as one is not met.

How will we test all functionalities and integrations?

  • Set deadlines. Start with a detailed planning of all necessary steps to take within the project, then set the end date and plan backwards accordingly. This will give you a clear idea about the size of the project, but also if your goals will be achievable. Furthermore, it will enable you to understand the implications to your project if any of the steps within your project are detailed. Do not forget to already schedule Training The Team.

  • Find a good project tool. The system provider might have a tool which is used to log incidents, but generally these tools are not suitable for implementation projects, especially if they involve several integrations. There are a number of project tools on the market. Some of these are free of charge and very well suited for projects such as this.

  • Schedule project meetings. It is vital that these meetings are followed up with an agenda with action points which are shared with the team and followed up.

  • Test, test, test. Make sure that all systems and integrations are thoroughly tested and keep a log on these testings. We strongly advise to have a dedicated person within the project team to do these tests. In our experience; the more people doing tests and making changes and re-maps in the systems, the bigger the risk that you will lose control over your tests.

  • Do not forget to train the team. Make sure that it is the provider who holds the training, as they are the experts on the system, and make sure that the system is fully running and tested prior to the training.


Choosing and Validating

How can you evaluate if all Revenue Management tools created equal?

In this section we will focus on the final step, and give a deeper focus on how to validate a system, in particular tools that assist you in revenue management side.

You have worked through the RFP, implementation planning, and decided that you have the capacity and capability to change; and you are willing to put in the work to adapt to a new system and I have committed to implementation timeline.

You have heard multiple sales pitches and now you are confused on which type of tools to pick.

Needless to say, choosing is often one of the hardest parts of any purchasing decision, and you might be overwhelmed with the number of tools that you could choose from. How do you know if it will work for the team?

Fret not! In this section, Pace is providing a full-scale guide to evaluate and make sure that you know what is suitable for your needs based on items to look out for.

A quick side note: here we are not talking about the implementation and training it takes to get you up and running on the tools as part of the evaluation. Of course, this in itself should be smooth sailing and take the least possible effort from you, as you have followed the rigorous plan from the implementation section.

Based on our experience, here is our checklist of items that you want to validate:

  • Key performance indicators. If anything, revenue management tools are meant to increase your net revenue and profit, so you want to ensure that there is an easy way to track the uplift. Of course, there are a number of customer segments that a Revenue Management tool can assist to manage better and get an overall uplift, so if you are testing multiple tools at once, pick a segment, where you can see results fast. If you have the opportunity to test multiple properties, ensure that you develop a way to run a comparative analysis. Ultimately, this should be a REVPAR gain game in the period of x that you are focusing your test, but do pay attention to how it is achieved and if this is a sustainable approach on the long-term!

  • Implementing and Adapting your strategies. You should be able to easily implement your strategy in the tool, while the tool should be able to adapt it to your market conditions. Monitor this: Is the tool able to learn from your input and market information? What is the level of science and automation incorporated into the pricing recommendations, or do you have to be the expert by programming the tool with ‘rules’ and ‘commands’? Basic configuration at the implementation stage is normal to getting any tech system up and running, but after the initial set-up, ask yourself: how much time am I spending on attaining the output that I am happy with? Are you fully aware what types of input you should tweak or is the tool a complete Rubik’s cube?

  • Ease of use in the long run for all stakeholders. You want others to be able to log-in and self-serve themselves the information they need. If the installation includes a training/installation week; walk away now because - Did you need a week to use your iPhone or any other App that you are using right now? If the tool cannot be understood and navigated after the first demonstration/on-boarding call, the product is not going to be the one that you could use in meetings across multiple stakeholders and make it everyone’s go-to tool for performance indicators. (Look after yourself on this one – do you really want to run all those reports for everyone on daily/weekly/monthly basis forever!?)

  • Insights that the tool can give you at a glance to focus further on your performance for need and opportunity periods (we are not talking reporting!). This point refers to the above ease of use – but in more depth. The tool might be easy to navigate, but if it cannot cover 80% of your current reports that you manually produce as easy-to-understand analytics, again, it might not be one that helps you. Hence, if the tool can only give you reports after another, you will end up in analysis-paralysis. Ask yourself - can I find out the answers to my performance questions in one view and look at the opportunity from multiple angles? Remember that one of the benefits of a tool is to gain efficiency in your daily life and to focus more on strategy, while the tool completes those mundane tasks. Pay attention to what features are part of the package!

  • Company – Service and Success. When choosing your new tools, we would encourage you to do research not only on the platform but the company foundations. Can you easily tell what the profile of the company is, their focus and philosophy, as well as proof points in the industry? Are they making the customer their focus or an after-thought? Secondly, be careful to clarify the support structure in your contract. Do you need to pay for ad-hoc support or does the company run a success model where they listen to the customer’s needs? Ask during the sales/trial process: What are the methods that you, the customer, can ask questions and provide feedback? What is involved in their service level agreements; and is the customer support a reactive or a proactive function? Ultimately, answers to questions such as the ones above will give you an indication of the scalability of the solution, the company approach to their customers and thus, their commitment to serving your needs in the long-run. Notice that I have talked very little about the pricing of the products by this stage, so perhaps a side-note on this since you have been so patient to read this far. Be wary that not always the most expensive product in the market delivers the best return or meets all of the above criteria, and thus, delivers the best fit for your company. Similarly, it might be that you get 80% of the original list of features with a newer product at this point, however, you observe that this company is agile and will develop faster than an older, more established product.


As noted in our two other sections (Selection and Implementation), one of the benefits from the modern hospitality technology landscape is the ability now to plug-and-play and thus, test new systems without costly installation fees or long commitment periods. How better to gain understanding into their methodology, and more importantly, their approach to you as a potential customer than to experience it first hand.

Using the five validation points from above will then help you to wither down the list of potential choices to the perfect fit for your business; rather than just going ahead with one because the price is right.

Finally ask yourself: What if I no longer had access to this system. If the answer causes you to have heart palpitations, you know you have found your match!


Customer Story

To elaborate on the importance of the testing phase, we wanted to share a story from one of Pace customers:

Being a rookie in the field of revenue management systems - a testing phase with guidance was only logical.

There are numerous systems, one promising even more success than the other - our starting point was our Property Management System (PMS). Integrating our systems was key, so finding a Revenue Management System (RMS) that connects with our PMS was essential of course. Based on what we found online, but also what we heard from other hoteliers, we in the end found two systems we were quite enthusiastic about.

Having the possibility of testing a system is always nice in the sense of checking what support is like, to test look and feel and to get to know a system before actually paying for it. However, in the end how can measure real success?

Having two hotels located in the same street with in the broadest sense a comparable target audience, the idea came up to compare two different systems during the exact same period. One system for one hotel and another system for the other hotel. This enabled us to also compare systems in results. Before starting we ran all possible reports with KPIs and on the last day we did the same. In the end we compared percentage wise the results for both hotels and Pace stood out.

For us the RMS system is more than just a system proposing optimal prices, it is also a tool which gives us so many insights in our stats. The way Pace displays the data and gives us these insights was something we really fell in love with during the test phase and made our decision relatively more easy.

Christianne Glazenburg Sales & Marketing Manager Hotel De Kroon


Closing Statement

The above case quite clearly highlights the skill vs. technology dilemma mentioned previously (what capability for change/resources do you have in place).

Any rookie would require that a system ”does some of the thinking for them” and displays information in a digestible manner. In contrast, a team having worked with data trends over a longer period would eventually not require a solution to think for them, but instead would need a solution that assists, for example, with ”tweaking” the RMS and PMS in a way to allow for the application of more complex business rules.

It is here where Revenue Management philosophies come into play.

Some revenue solutions in the market rely on price points and performance relative to the market competition, and some systems are agnostic to market pricing and sales performance.

The jury is still out as to which philosophy performs best, but it’s not a long shot to pair philosophies with skill set and experience within your team.