Marketing chief for US-based Software-as-a-Service developer IDeaS, Mike Chuma, says the pandemic was a lesson for the hospitality sector about the true value of using tech to optimise commercial operations
Company Profile: COVID was hotel revenue management 'watershed moment'
The COVID pandemic was a “watershed moment” for the hospitality sector, according to US-based revenue management software specialists IDeaS.
Mike Chuma, vice president of global marketing, said the firm has achieved growth levels since the pandemic outstripping anything it has ever seen.
This has been driven by operators from multinationals like Accor and Hyatt to small independents battling staff shortages by embracing tech to automate and improve efficiency.
Chuma said: “Necessity is the mother of all rationalisation and innovation. Hotels have discovered who their best friend is during COVID, and it’s revenue management.”
IDeaS has taken on 13,000 properties in the last two years, doubling the total compared to pre-pandemic, and is now well established in key north American and northern Europe countries.
The still highly fragmented markets in southern Europe like Spain, Italy and Portugal are seen as an opportunity for further growth.
Chuma said: “COVID was a watershed moment for the hospitality industry as a whole. Once the initial shock of the pandemic fell away, we grew faster than ever before.
“The pandemic dramatically increased knowledge of and demand for not just revenue management systems but the ability to have insight and automation within the commercial operations of a hotel.
“We still have labour shortages in hotels – that’s the number one issue operators are trying to deal with.”
Chuma said focussing on revenue management and optimising profit helps hotels to operate “more meaningfully” while still pushing traditional performance indicators like average daily rates (ADRs) and occupancy.
IDeaS has seen increasing demand for its ‘non-flagship’ products, says Chuma, that provide users with the opportunity for greater operational efficiencies like on staffing and housekeeping.
RevPlan, a budgeting tool that forecasts demand in areas like food and beverage and other ancillary revenues to help hotel operators increase their profitability, has “taken off in Europe”.
Chuma said meetings and events is another area that has seen a significant come back, particularly for small groups booking function rooms, which has rebounded faster than business travel.
This reflects changing work patterns with teams of colleagues travelling to meet fellow employees as opposed to travelling in large groups to major city centres. “Business travel has almost become group travel, in a way,” Chuma said.
Getting a handle on these and other insights is helping the industry to be more profitable, a trend that was happening before COVID but which has been speeded up by the crisis.
“The industry was going to get there anyway, COVID just accelerated it. What it did do was create the accelerant to break people away from the traditional excuses as to why they could not do it.
“It took away the reasons not to and forced them to do things they talked about but were reluctant to do.
“You cannot human your way out of this. You have to have systems and toolsets because you have fewer people making more decisions
“In the Spring and Summer of 2020 hotels learned how to operate more leanly, now they are bringing people back but doing it in a much more intelligent manner. Hotel operations are now much more strategic.”
Recovery in travel has seen many people new to the hospitality sector enter the sector that need to react to market conditions and not be hamstrung by the old silos that existed pre-pandemic.
Chuma said this greater cooperation between functions like commercial, marketing and IT has given people a “different lens” through which to manage their businesses.
IDeaS shifted to cloud and Software-as-a-Service in 2002 after the 9/11 attacks enabling it to react to the pandemic crisis by “completely reformatting” its 112 separate algorithms, something Chuma said it continues to do around every six weeks.
This has helped the firm to be more “reactive” and “nimble” and dial down its reliance on historical data, which is still considered an indicator of human behaviour, but among a mix of factors that go into continually updating for “right-time optimisation”.
“In the past the revenue management industry was heavily reliant on historical data. We have removed that reliance by becoming in some cases ‘memoryless’.
“It allows us to react to situations and we are already seeing that right now with the economic situation and the cost of living crisis. We are already in the next crisis.
“We have to react to the right parameters and have just deployed a series of algorithmic tuning to be able to react. Real-time is okay but that data gets super-chatty. It can be misleading.
“We basically run hundreds of tests behind the scenes with machine learning and artificial intelligence to give the best forecasts. It’s a decisioning system.
“If we have a data anomaly or a changing event, we can reforecast that within a very short period of time so that hoteliers can react in the appropriate manner.”
The pandemic prompted iDeaS to accelerate how it works collaboratively with hotel clients like Choice Hotels and Wyndham to develop and roll out a bespoke mobile white label version of its system.
ChoiceMax offers revenue management in a more flexible, user-friendly format that is adapts to the client’s unique business strategies, said Chuma.
“We were able to launch 5,000 properties in less than a year,” he said. “It’s a rapid change in the evolution of how you can consume revenue management tech.”
While this new platform is currently being offered to the larger players, iDeaS says revenue management must be adopted by hotels of all sizes if they are to retain a competitive advantage and react quickly to market conditions.
“It’s being more intelligent about how you utilise your most valuable asset - the room. If you’re consistently booking out at 100% you are probably leaving a lot of money on the table.”
Chuma estimates IDeaS is able to achieve a 15% uplift in revenue for its clients and adds $225 million for the operators on its system in a single quarter.
But he says this combines with support in helping organisations to save time managing revenue and becoming more strategic in the way they operate.
And an important aspect of this is the distribution channel mix and understanding the value of indirect partners and OTAs versus direct.
“It’s a bold statement to say everything has to go direct,” said Chuma. “This is not reasonable for every hotel. Third party business is incredibly important. OTAs provide a service that goes way beyond in some cases what they are given credit for.
“If you go direct you have to support your own marketing costs and your own costs of acquisition, your own data, customer retention and loyalty programmes. OTAs are a necessary part of the eco-system.
“It’s not us versus them from a direct booking stand point. Hotels needs to make a decision about the right mix for their need. The way we work is we give them the opportunity to have more intelligence about what their optimal channel mix is.”
Ultimately, while IDeaS promotes the advantages of automation, human operators are always able to step in and override the machines if they do not agree with a recommendation.
And for Chuma this not only ensures that the right decisions are made but that the technology is continually learning and improving its decision making.
“We talk about automation, but in reality the biggest advantage of what we do is that the system relies on the intelligence of the person,” he said.
“It’s when people interact with the system appropriately that you see a massively higher amount of performance and revenue. That’s the balance of man plus machine.
“If the past few years have taught us anything it’s uncertainty is getting greater not less. The algorithm helps carve a path through uncertainty.”