Why your Revenue Management System is handicapped

Regardless how much revenue management systems (RMS) cost they all have a severe handicap… garbage in, garbage out. Booking data is collected nightly, data is ‘crunched’ and a predetermined set of rates act as a pricing guardrail. If you are currently at $149 and your system thinks you should raise rate, you will get a recommendation to go to your next higher rate level of $179, if that is what you have built into your pricing structure.  If you set the next rate at $189 that would be the recommendation and here we stumble across the reason why your revenue management system is handicapped.  Set your rates wrong, and while your system recommendation may be directionally accurate, your rate will never be truly right… and you will always leave money on the table.

You invest time daily reviewing your reports, pricing recommendations, then you override the rates. You know you do. The very system that is supposed to save you time actually eats your time while you correct its mistakes.  What should your system do differently?

In a perfect world, your RMS would serve as a single version of the truth… one combined view of everything you truly need to make well informed pricing decisions.  You need to see your rate, the lowest competitive rate in the market, which direction the pricing is heading in and what the market will actually be priced at.  With all that information and insight, your pricing decision would be made simple. Powerful. Market share stealing!

Today, Fare-1-1 serves as your single version of the truth. We offer the Lowest Daily Fare in your market (organized by hotel star rating and length of guest stay), a Market Fare Forecast (organized by same parameters) and the pricing trend (which way is the market pricing moving?).

If your rate is set at $149 and the Lowest Daily Fare in the market is $159 you might feel a sense of comfort undercutting the competition. What you probably don’t know is the market is trending up, and the Market Fare Forecast predicts your competition will be at $199. This means you are not leaving $10 on the table, rather you are actually leaving $50 on the table. Per room night. If you recover $50 on just 10 room nights per week (5 rooms sold Friday, 5 rooms sold Saturday) that translates into an incremental $24,000 per year for your property (pure profit). You can recover a lot more money than that.

Once you set your rates, you’ll need to focus on other things… you can’t spend all day obsessing on just rates. Set your rate Alert and when any piece of the equation changes you’ll be the first to know… just by glancing at your email.

Your RMS doesn’t do that. Fare-1-1 does that.

Stop wasting time, stop leaving profit on the table.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com. Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.

 

Situational Awareness

Situational awareness is critical to success.

A long time ago, someone very wise offered me great advice…

Situational awareness. Always be aware what is happening around you.

When setting your rates, this awareness is critical. Your price should always be set first and foremost based on your property’s own supply and demand situation, then adjusted to maintain your competitive edge and protect market share. This is where situational awareness plays a big role.

So you set your one night length of stay rate at $149. You then need to compare your new rate against the market, and upon checking the Lowest Daily Fares you see the lowest comparable rate in your market is $159. You also see that the Market Fare Forecast predicts your market will be priced at $189, as the rates in the market are trending up over the past week.

How does that new rate look now? Your new rate at $149 is leaving $10 on the table, and very likely actually $40. The opposite of this scenario also presents opportunity… if you are $40 higher than where the market is headed, you will want to adjust so you don’t lose occupancy for the sake of protecting rate.

Situational awareness is great, immediately helping you identify small opportunity… but when you gain insight and take action to properly position your hotel in the market based on what the competitive rate will actually be, you really unlock hidden revenue and profitability.

Don’t just rely upon a spreadsheet that regurgitates what rates are found online… don’t simply react to the competition! Gain insight with valuable data found in the Market Fare Forecast, take action and drive your business.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.

 

Worst Decisions Ever

Worst Decisions Ever

A client recently asked us what were the worst decisions ever we observed over the years. Revenue managers make a lot of decisions daily… everyone makes mistakes. The important thing is to learn from your mistakes, and not repeat. The next few posts present some lessons our clients have learned.

Blindly following the leader and dropping rates.

Don’t blindly match the new lowest rate in the market. This race to the bottom is a dangerous game, and not a sound hotel pricing strategy. First and foremost, you should always price your property based on its needs, its own supply and demand. If you are high on supply and short on demand and a competitor drops rate below your own, we recommend a couple things. First, run the numbers to see how many lower priced bookings you could take and still make forecast and budget… know the numbers. Second is there a way to drive demand without a ‘public’ rate drop? Can you run a package sale, drive opaque bookings, etc.? Do you really need to match that new low rate, or maybe just fine tuning your price by dropping it a small $10 will win?

If you run a package sale, or a room upgrade promotion, it will give you something to talk about (marketing!).

Where is your inventory need? If not in your lowest room category, and you drop your lead rate, you just diluted that demand and failed to target the actual need.

Tomorrow we will present another lesson learned and observed!

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.