GDU Ninja Update 18 - The Future Part 3 - Automatic Rate Management

Automatic Rate Flexing.

Over the last 10 – 15 years hotels have moved towards selling their rooms mainly online through OTA’s (Booking.com/Expedia etc). Much as hotels don’t like the commissions they pay to OTA’s, they are slowly starting to become aware that they can use these platforms to boost their rooms by moving the rate up and own (rate flexing) to match demand. Ie If they are 5€ more expensive than their competitors they will lose the sale and if they are 5€ too cheap they have probably lost 3€ of revenue per room as they only needed to be 1 or 2€ cheaper to make the sale.

For this reason many properties are becoming aware of the need to manage rates on a regular basis but there is a problem; Who is going to do this? When do they do this? What makes them decide to change the rates? How do they know what rates to set? The 'Who' is probably the largest problem at a time when Hospitality is struggling so much to attract, train and retain staff.

The industry has been trying to solve this problem for some time and specialised software exists that can be purchased that will help with this problem. but many are quite complicated, use unhelpful algorithms and can generate a lot of work for the staff. All of them will have their own fans and enemies. These solutions tend to be more for the larger hotels with dedicated Revenue Management Staff.

The obvious question is how do you calculate the room rates and the most frequent answer is 'Demand', but how do you measure demand? We have seen many problems created when the demand is based on the amount of searches on the hotel website. For example 'Rate Shopping Tools' can falsify this demand by doing date searches on your booking engine without actually booking anything falsifying the apparent demand for rooms.

You could also price the rooms based on the prices of the rooms of your competitor ie ‘Make me 5€ cheaper than the Lime Trees Hotel down the road’. This also has its problems....What if your competitor is full because they have a Wedding or Conference? This does not mean you can raise your prices because the demand is high.

We could go on but all rate management systems will offer advantages and disadvantages, We find it interesting that we work with one Revenue Management Group that manages 18 hotels and is rate flexing manually.

We do expect to have a Rate Management tool available in mid 2024 but this first version will be simple and will move rates into different buckets (defined by the hotel) depending on how many of the rooms are sold with the ability to over-ride specific days.

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