The Hidden Costs of Operating Without an Advanced RMS

Major hoteliers across the industry can point to investments in technology and new operating practices as a key enabler in their recovery over the past two years. Still, despite these advances, much of the industry continues to run without an optimal revenue management practice, or in some cases, even a revenue management system (RMS). Everyone loves savings, but more operators than ever are investing in revenue management technology, or at the very least, adopting revenue management strategies or dynamic pricing schemes to remain competitive in today’s marketplace. This much is clear: hoteliers must do something to retain their place in the competitive landscape.

According to a recent story in The Economist, most of the world has nearly returned to pre-COVID activity levels in terms of spending, but the rules governing hospitality haven’t exactly stayed the same. Consumer expectations remain high even as hotels struggle to fully embrace the gradual recovery taking place–in fact, consumer expectations are increasing with each passing day. Additionally, while leisure travel has rebounded in a big way, mixed signals and systemic changes continue to mute the much-heralded return of pre-pandemic business travel trends.

Adapting to this environment and what comes next is a challenge for hotels without access to an advanced RMS. These capabilities go hand in hand with contactless mobile technology and self-service kiosks as tools that saved hotels during the darkest days of the pandemic and are now helping redefine service and success today. The cost of competing without these tools, especially in the fast-growing limited-service hotel environment, can be disastrous.

The Numbers

One need only look at monthly hotel performance figures to see that the market has far from normalized, especially with headwinds from labor shortages, inflation, and geopolitical concerns added on top of pandemic concerns. According to STR, occupancy for July 2022 was 69.6 percent, a tempered 5.4 percent lower than the same period in 2019. However, average daily rate (ADR) was up a staggering 17.5 percent during this period with revenue per available room (RevPAR) increasing 11.2 percent.

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Hoteliers simply can’t look at these figures and claim to know they understand the trendlines behind them without access to an advanced RMS. While travel is recovering, the landscape has changed enough to require viewing forecast data through a variety of lenses to derive value from it. Operators cannot safely lean on the known, particularly because, according to STR, these figures were softened due to unexpectedly weak weekend group business, even as weekday group business improved during this period.

These changes represent broad shifts that are taking place unpredictably across the industry, and only hotels with comprehensive RMS capabilities are positioned to flip the script and profit as hospitality evolves. These operators can employ every tool in their chest–from rapid trend analysis to overbooking protections–with a focus on maximizing return at every opportunity.

Every Segment Blues

Full-service and resort hotels are traditionally the most avid adopters of RMS technology due to the abundance of on-property customer touchpoints and revenue-generating opportunities. These hotels can monetize areas of their property beyond the hotel restaurant, including spas, amenities, and recreational activities. However, every hotel segment can benefit from the insights provided by RMS technology today. But even without these amenities, hotels can benefit from implementing an RMS by better understanding their local standing over time, reacting faster to shifts in market dynamics, identifying key guest segmentation, choosing proper pricing strategies, adjusting purchasing decisions, and positioning themselves for continued success.

Limited-service hotels’ technology needs are also rapidly maturing. Occupancies in Europe, for example, were just 10 percent shy of pre-pandemic levels in July 2022, according to STR. Hoteliers need to maximize the return on each stay and utilize technology as well as best practices to maximize revenue. This is particularly true of hotels that are willing to take on new technologies and strategies to become more profitable and efficient.

For example, in the past, hotels employed overbooking protections to ensure they were close to 100 percent occupancy while marketing the most profitable rate. Operators using these strategies were still not maximizing their guestrooms’ hidden value. Many of these rooms stood vacant for hours at a time. In an era where short-term layovers and partial stays are becoming more of a desire of today’s travelers, hoteliers were losing potential profit by not looking at maximizing their inventory.

Hotels operating today already have the technology and capabilities needed to serve these guests and earn more revenue without introducing new rooms or amenities to the property. With better organized housekeeping operations, a guestroom could be rented for five or six hours for a day visit, cleaned in the mid-afternoon, and rented again for the evening. Such a strategy could earn hotels monumentally more revenue than current room pricing strategies.

The New Era

Hospitality is now well within a new era defined by technology and predicated on finding ways to do more with less–if hotels take on the capabilities that allow this. In some select properties today, every aspect of hotel operations can be controlled remotely, and operators have the latitude to set rates at their discretion. Getting there, however, can be prohibitive depending on the hotel and its resources.

For example, while technology investment is on the rise across hospitality, getting all of one’s tools to work together harmoniously continues to create major barriers to operational success. Property management systems are traditionally locked down to preserve intellectual property and proprietary information. This leads hotel operators to seek out multiple partnerships and integrations to reach the level of connectivity and control over their properties that is necessary today.

Hoteliers don’t enjoy charting a new web of necessary integrations prior to opening just so they can compete on a level playing field. This makes the current technology landscape unsustainable as a result. With a recent survey showing 80 percent of hoteliers believe technology is helping them better achieve their professional goals, simplifying the technology adoption process is a significant challenge the industry must overcome.

If hoteliers want to understand their guests’ habits and trends, they must have access to an open, unified system capable of breaking down barriers and conveying information on their terms. This sentiment is increasingly shared across the industry as more and more operators realize how necessary modern technology is for managing their operations and maximizing revenue. The breakneck pace at which competition will continue to grow in hospitality will ultimately drive us all toward a more interoperable technology strategy. The RMS will be the catalyst to lead the unification of hotel technology systems around revenue and profit and drive a connected commercial organization.

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Mike Chuma is the vice president of marketing, engagement, and enablement at IDeaS.