Interview with Uli Pillau, managing director, EAME, IDeaS Revenue Optimization
Published: 05 Dec 2006
EFT Amsterdam Special
IDeaS Revenue Optimization with its next generation technology has developed “self learning and auto calibrating forecasting solutions”...
IDeaS Revenue Optimization with its next generation technology has developed “self learning and auto calibrating forecasting solutions”, which will adapt the models all the time according to demand changes and pricing changes found in a hotel.
According to Uli Pillau, managing director, EAME, IDeaS Revenue Optimization, too many frequent changes can certainly impact forecast accuracy, but modern technology should be able to handle true dynamic prices and automated “Best Available Rate”.
“For example, we have several clients in the Las Vegas market such as the Venetian Las Vegas or the Wynn Las Vegas with several 1000 rooms and in this market real time dynamic pricing is a requirement,” explains Pillau.
In an interview with EyeforTravel.com’s Ritesh Gupta, Pillau spoke about how RM will evolve, what kind of work will managers will have look at in addition to “traditional” revenue management tactics, automated RM etc. Excerpts from the interview:
I spoke to Hyatt’s Siv Forlie recently and he says they are investing a lot of time and money in training processes and the nurture of a Revenue Management understanding etc. How do you think RM as a function is still evolving?
We think RM will become more comprehensive in the future and involve other areas and departments. In addition to the “traditional” revenue management tactics, managers will have to consider cluster revenue management, channel management, competition set and BAR (Best Available Rate), more complex conference and banquet yielding and other areas. Technology also needs to evolve to address these requirements.
Marriott’s Markus Lewe says - the biggest challenge is the navigation through change and presenting complex pricing and inventory strategies in a format that can be easily understood by non RM experts – and consequently increasing their support for the discipline. What’s your viewpoint on the same?
This is absolutely correct and I agree – people need to be educated to better and easier understand how to solve these complex problems and present them in a way which does not confuse the people (both users and guests). This requires from both revenue directors/managers and technology companies efforts to facilitate the use and implementation of RM strategies.
Earlier this year you told me - Automated Revenue Management has become more and more critical for hotel operations. How do you think hotels are lapping this up?
Experience shows again and again that working with a system is critical, and you need users that fully understand operations and solution in order to apply correctly.
However, once you have the right people and procedures in place automated Revenue Management Decision Systems provide the biggest on-going value compared to recommendation systems only where in addition extensive manual intervention is required to validate and update restrictions.
The needs of a hotel can change by season, month, week and even by weekday vs weekend, this has to be reflected in pricing to impact customer behaviour. What do you think is the key in handling this?
The pricing of a hotel needs to be driven by many factors such as product, services, market, competition, brand and many others. The ultimate key to the success is what the is customer prepared to pay for a hotel room for a given day or period, and it will be the demand that determines the setting of the price strategies. This means that good demand forecasts, which include length of stay analysis, are absolutely critical for any hotel.
Why has Performance Measurement now moved into the main arena and do the fundamentals of PM need to change? How can it be can be benchmarked internally and externally?
Obviously the return on investment from revenue management in general and from systems in particular needs to be visible.
Groups that have a long tradition of applying revenue management (such as Hyatt or Marriott for example) do not need to demonstrate the impact and benefits of RMS all the time – they are fully convinced the value is there and rightly so. I do not think the fundamentals have not changed, but for many groups and individual hotels that only go into RM now it is important to show the financial benefits comparing it to the time where they were without it.
Performance measurement has gained importance in order to quantify the value of RM and the overall financial success of the lodging industry?
Agreed and there are many different way of doing measurements – for example looking at the competitive set or comparing key figures from year to year. Other methods are more complex such as looking at increasing performance for days or periods with higher occupancy.
Can measuring historical performance help you gauge improvement or does `a rising tide float all boats?
Measuring performance of history data does help to some extend. However, hotels that just do pure number comparison this year vs. previous year run the risk of not getting the right picture. There are just too many factors, which can influence the performance of a particular property, i.e. changing demand in the market, pattern changes for certain market segments, opening of new competitors, new prices, management or brand changes etc. In order to be accurate you would need to exclude all these factors and come up with a “net” figure showing the results of certain strategies, which is very difficult.
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