Hotel Rev. Management. Artificial intelligence for the big ones - Gut feeling for the little ones
Even the best revenue management systems don't work without a revenue manager who understands his business. In normal times, the systems should learn from qualified managers in order to become better and better and to process information and data correctly. The manager, the human factor, will always remain indispensable.
What these systems learned up to 2019 was pretty useless when the Corona measures began to effect buisness. Crises like the corona measures cannot be predicted and AI (Artificial Intelligence) can therefore not have such information, let alone process it. The experienced revenue manager was in demand again for the big brands like Marriott but also smaller businesses. But he was also overwhelmed here. If there is no revenue at all, there is no revenue to manage or optimize.
Revenue management makes sense but is very difficult in the hotel and catering industry, with many factors that influence sales. It is therefore very important for the large chains to integrate the right systems and use the information correctly, but for smaller companies operating locally it is often a far too expensive investment. Here artificial intelligence must be replaced by human intelligence, experience, feeling and common sense.
A small hotel in a small town can also benefit from large trade fairs and events in the metropolitan areas if rooms are scarce and visitors are willing to travel longer distances as long as they get a room. Raising prices and thus increasing sales is of course sensible for this period. However, if there are many celebrations, families or local companies taking place in the local area at the same time, which guarantee restaurant sales and room occupancy, the local hotel owner will certainly choose the local events. In the short term, this may mean less sales, but in the long term it makes more sense to keep loyal customers who continue to live in the area satisfied in the long term and thus invest in the future.
Now, with high inflation and rising prices, especially for smaller business, it will be difficult to pass on the costs to the guest, since prices that are too high mean zero sales if nobody comes anymore. As in England pub owners can't possibly charge £15 to £20 a beer what in reality they would have to do to offset rising energy prices and costs for staff and products. Even the best revenue management system can only suggest locking the door forever.
Times of crisis are times when revenue management needs people more than the system. In times like now, especially in Europe, people who were a target group for the hotel and catering industry can no longer afford the holiday or the restaurant. Rising costs are even more of a deterrent. Making revenue at all has been the only important thing since the end of 2019. Managing sales needs to take a back seat.
The first decision to be made is to keep the business or rather close it before falling too far into the red. The hotel and catering industry is dependent on a peaceful, functioning system and a reasonably functioning economy.
We had the fatal Corona measures, then sanctions that did a lot of damage, inflation and waves of bankruptcies. What's next?
We will continue, but we have to manage more flexible and better and not just manage wealth and sales as we did until the end of 2019. Crises are times when flexibility and resourcefulness count. Those who just blindly follow any promises, statistics and instructions are the real threat to revenues in the hotel and catering industry! Many predictions and economic forecasts are usually made in such a way that they put political measures in a better light and should be viewed very skeptically and critically when planning by revenue managers
Stephan Busch has an invaluable and diverse experience in the hospitality industry ranging from senior management positions with the most renowned hotel and resort companies to the project development - launch of operations, business development- for hotel and cruise companies in Asia, Europe, Canada and Russia.
His expertise includes not only planning, opening and operating of hotels, international golf clubs, airports, resorts and cruise ships, but also successful restructuring and repositioning of businesses during the financial crisis in Asia.
Stephan Busch earned his Master Certificate in Hospitality Management from Cornell University, USA and served many years as Academic Director / Faculty of Hospitality & Tourism at the State University for Humanities RGGU Moscow as well as the Swiss International University St. Petersburg.