Why Real Time Pricing is a secret weapon for Revenue Managers
Recently Atomize, as the first Revenue Management System in the world, released real-time price optimization.
What does this mean for the hotel industry and for you as a Revenue Manager? In this article we explain why this is a huge competitive advantage and how you as a revenue manager can use this as your secret weapon.
If you are pricing your rooms slower than the hotel next door, you’re giving up profits without even knowing. That doesn’t sound like a good scenario, right?
But don’t worry, there’s a simple solution: faster yield management software and real-time pricing are your secret weapons as a revenue manager.
Since Atomize is the first RMS to support real-time price optimization it gives a possibility for you as a revenue manager to get a huge step ahead of your competitors, if you use Atomize for your room price-setting.
Why? Here’s a simple example.
Hotel Quick uses real-time pricing while Hotel Slow updates rates manually. The hotels are direct competitors and get most of their business from events at the local convention center.
When a world-famous performer announces a surprise event next month, this is guaranteed to drive demand for both hotels. Since Hotel Quick’s real-time pricing system picked up on this new event, it immediately upped the room rates.
Hotel Slow only followed suit several hours later. By this time, several bookings at low rates had already come in which means Hotel Slow lost out on revenue. Hotel Quick on the other side made the most of this surprise event from the moment it was announced.
Even if your market and compset look different than in our example, not pricing in real time means you’re leaving money on the table.
Real-time pricing: a must for hotels today
Until recently, revenue management meant pulling reports and using historical data and experience to forecast future demand, pick-up pace and revenue. This worked well when revenue management first emerged, and everyone was doing this work manually. But faster paced and more competitive markets have made more sophisticated pricing strategies a must and monthly, weekly or daily rate updates are no longer enough.
“Revenue managers need only to look at how the stock market has evolved to see where their trade is moving. Stock traders have everything to lose which has led to massive investment in real-time trading. Tenths of a second can literally mean billions of dollars for hedge funds. While hotels don’t see losses at this scale, the concept and importance of real-time pricing are the same,” explains Jordan Hollander, CEO at Hotel Tech Report.
Revenue managers today must keep their eyes on many quickly changing variables and be able to update rates at a moment’s notice. The common practice of gathering data in spreadsheets makes this impossible because by the time the collated data is analyzed, it’s already outdated, opportunities have passed, and money was left on the table. In short, this means keeping up with today’s market is impossible without the assistance of software. To make matters worse, revenue lost by slow rate updates is not highlighted in your P&L, so you’re likely unaware of the leakage and its magnitude.
Cutting-edge revenue management systems (RMS) have improved the situation with easy-to-apply rate suggestions. However, until recently these systems often used several-hours-old data to make recommendations because they were not able to handle more frequent optimization runs.
Real time pricing: the future of revenue management is here
Today, rates must be updated as often as possible to maximize revenue and stay ahead of the competition. This counts especially for highly dynamic markets and the final hours of the booking window.
With this in mind, as an industry-first and the only RMS currently offering this in the world, Atomize has made the futuristic dream of real-time rate optimization a reality. By using advanced, real-time optimization algorithms, Atomize continuously calculates the optimal rate and pushes dynamic prices for all room types to the PMS via a 2-way integration live, around the clock, for the coming 365 days.
With this, the hospitality steps into a new era – the future.
How real time pricing works
Let’s take a closer look at how the Atomize RMS works. Atomize continuously receives data from the PMS and executes real time optimization runs as soon as new data is available, for all room types and future arrival dates to the PMS.
To calculate the best possible rates, Atomize monitors PMS data including current pick-up, reservations and cancellations. It also respects the pricing hierarchy and the effects on shoulder days and other room types. On top of that, they system runs continous checks on competitor information, search trends and other factors such as local holidays. To account for every change in these data points, continuous scans and rate updates are done.
This means that for a typical hotel Atomize can calculate over 50 billion price points per year. While even hotels in very dynamic markets might not need that many rate updates, working with an RMS which has this capacity is the key to outperforming your compset.
Benefits of real time rate optimization
Of course, real time rate optimization will help your hotel generate more revenue. To paint a more vivid picture, here are two specific examples of how you can benefit from Atomize’s new capability.
Ensure your rates are immediately optimized when an event is announced in your area
When important events are announced, nearby hotels experience high demand and more booking searches for that date. Real-time pricing will help you be like Hotel Quick in the example above: instantly optimized rates bring in high revenues and prevent you from selling out for a low price.
Adapt to dynamic, fast-paced markets
No matter how fast your competitors update their rates, using real time pricing optimization will keep you right in line with the market. This means you have the advantage of always selling your rooms at the ideal price.
It won’t surprise you that this highly dynamic pricing strategy will have a strong positive impact on your bottom line.
Gothia Towers in Gothenburg, Sweden, one of Atomize’s largest clients explains how they benefitted from real-time pricing and why it’s so important for them.
“Gothenburg is a very dynamic market that quickly can turn. Combined with Gothia Towers’ large proportion of group bookings, this means that our occupancy rate can change dramatically within seconds. Waiting for several hours for a new optimal price to be calculated is simply not sustainable for us. Therefore, it is a great advantage and security for us to work with Atomize which supports real-time pricing. Now we know that we are always selling at the right price, no matter how fast the market turns!” says Johan Forsberg, Revenue Director at Gothia Towers in Gothenburg
In summary, using real-time prices helps you spend less time collecting and collating data and more time refining and applying your revenue management strategy, so you never leave money on the table.
But most importantly, it ensures you’re always a step ahead of your competition when it comes to securing market share and maximizing rates during high-demand periods.
Read the full article at Hoteltechreport.com >