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2022 was a year of normalization – I went back to what I love to do most – evangelizing about the opportunities in revenue and commercial leadership, meeting with and talking to executives, consultants, and startups across the world, spending 130+ days on the road, doing my part in the recovery of business travel.

From my many conversations on the road, here are my predictions – and what I consider revenue management key priorities for 2023 and beyond.

The Great Resurgence

While leisure travel has been powering the hospitality industry in the last 18 months, 2023 will be the year of business travel, groups, and meetings – and China outbound. Yes, the environment is still uncertain. Operating costs are still rising, as one regional chief commercial officer told me recently, Revenue has to continue to increase by 15% next year just to make up for increased costs.

Labor is hard to find, and we are looking at a potential (mild) recession in the western world. However, the industry has proven to be very resilient, and all indicators point to another positive year for the industry.

For revenue and commercial leaders, an uptick in groups, meetings, and business travel – segments with traditionally lower average daily rates (ADR) – will mean more of a balancing act between occupancy and average daily rate. Adding those segments to the strong-performing leisure segment needs to be carefully managed to avoid depressing rates through the displacement of potentially higher-rated business. Having extremely robust forecasts and revenue management strategies that consider your total revenue from all segments will be critical.

Sell Anything, Anywhere, Anytime

In many conversations with commercial leaders, a common thread is emerging about how the industry is moving towards a model where just selling a room is not enough. Room rates are at an all-time high, customers, especially in the leisure segment, want a more personalized and customized experience, and new technologies will provide hoteliers the ability to “merchandise” their inventory more effectively.

As George Roukas, partner at Hudson Crossing, and I discuss in this Phocuswire video conversation, this has been a long-time desire in the hotel industry. However, we are getting closer and closer to making it a reality, with a number of technology providers starting to offer attribute-based shopping (ABS)-like capabilities to hotels.

A number of articles, including research by StayNTouch and NYU, have shown that customers are receptive to ABS, and hotels can see increased conversion when done right. This report demonstrated that 68% of travelers believe ABS would provide clarity when booking a hotel, with 46% willing to pay more to select their preferred room attributes.

As studies continue and software companies face and solve the technical challenges of using an attribute model in distribution systems, we are already beginning to see advancements in the potential to pave the way to ABS.

Human vs. Machine or Human and Machine?

A typical hotel must make about five million pricing decisions every year for room types alone. Fold in other revenue streams and merchandising, and the complexity increases exponentially. How is a revenue or commercial leader supposed to optimize all this complexity continuously and dynamically without automation, especially in an environment where labor is hard to find?

Modern, cloud-based revenue management technology that automates most of the daily pricing decisions is now no longer a “nice to have” but a “must have”. In 2022 many public company CEOs – from Choice Hotels to Hilton Worldwide and others - have stated in earnings calls and owners’ meetings the incredible benefits derived from their modern revenue management platforms to help them achieve record performance. Investment in 2023 is expected to continue by the most forward-looking and innovative companies.

The Long-Term Perspective

What we have learned over the last few years is that the hotel industry is incredibly resilient. Travel and tourism are expected to continue to grow significantly due to the rising middle class and increases in discretionary spending.

What do people typically do when their basic needs are met? They spend money on experiences, with travel usually on top of the list. Although there will be ups and downs along the way, the long-term trend will be up. At the same time, customer needs and behaviors will get ever more sophisticated, perhaps even demanding, and expectations will evolve.

As commercial and revenue leaders, we need to understand that customers will be ever more discerning, which in turn will need an ever more granular and finetuned approach to pricing, distribution, sales, and marketing.

As our world continues to shift and expectations change and morph, attributes abound in the hotel guestroom. However, now is the time for operators to think beyond the guestroom in order to offer true personalization, and technology is the catalyst that will bring our industry closer to providing the type of experiences tomorrow’s guests will expect.

About IDeaS

IDeaS, a SAS company, is the world's leading revenue management software and services provider. Combining industry knowledge with innovative data analytics technology, IDeaS creates sophisticated yet simple ways to empower revenue leaders with precise, automated recommendations they can trust. With 35 years of expertise serving hospitality, including hotel, event, and parking clients, IDeaS delivers revenue science to more than 30,000 properties in 164 countries around the world. Results delivered. Revenue transformed. Discover greater profitability at IDeaS.com.

Kim Dearborn
+1 909 455 4316
IDeaS