AI Revenue Management

September 29, 2023 •

5 min reading

How hoteliers are using AI for Revenue Management

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Hotel revenue management is the process of optimizing revenue by predicting demand and setting prices accordingly, most commonly found in hotels to forecast occupancy in order to maximize their room rate, hotel marketing strategy, and overall property performance. It's a complex and ever-evolving field for a revenue manager to navigate, with many channels and tools to keep up-to-date with. But it is a key function for any hotel that wants to remain competitive in today's marketplace to get a firm handle on in order to welcome more guests through their doors. Today, Artificial Intelligence is making the job of data analysis much easier in a variety of ways, this article will go into detail about how Revenue Managers can use AI to get ahead of the competition.

Why is revenue management important for hospitality businesses?

Hotel revenue management is important for a number of reasons. First, it helps hotels to maximize their profits. By setting prices that are aligned with market demand, hotels can ensure that they are generating as much revenue as possible from their rooms. Second, hotel revenue management helps to improve the guest experience. By offering rooms at competitive prices, hotels can attract more guests and ensure that they are getting the best possible value for their money. Finally, hotel revenue management helps to protect hotels from financial risk. By understanding demand patterns and forecasting revenue, hotels can make better financial decisions and avoid losses.


Revenue management in the age of AI and Big Data

A study by McKinsey Global Institute found that AI adoption by businesses could increase global GDP by up to $13 trillion by 2030. What's more, attitudes towards the technology are shifting as a survey by PwC found that 72% of business leaders believe that AI will be a significant business advantage in the future. AI is integrating many industries and professions, the lodging and hospitality industries included. Revenue Management is one of those professions that is set to reap the benefits of AI integration. Since the key to being successful in revenue management is following data trends closely and using these insights to set the right pricing at the right to the right customers, AI is perfectly suited to supporting this hotel function.


Preparing routine reports for a revenue management team can be a time-consuming part of monitoring performance. Business analytics and data visualization tools such as Agile Business Intelligence (BI) and Power BI by Microsoft are transforming the hospitality industry in significant ways with their ability to rapidly process and analyze data, produce reports, and integrate information on one platform.

Data visualization

Data visualization makes huge amounts of data more accessible and helps communicate complex information more effectively. It also helps professionals find the core meaning of big data by displaying patterns, trends, and correlations in a visual context. Thus, it can reveal new insights allowing revenue managers to understand the key components driving demand and revenue. Today’s effective BI tools combine real-time external and internal data, so revenue managers can quickly adjust in order to improve performance.

Geographic Information Systems

In addition, Geographic Information Systems (GIS) can be useful support tools for revenue managers since they allow them to incorporate geographic data into demand patterns and business performance. For example, GIS enables restaurant revenue managers to make informed decisions for their business. Using GIS, managers can compare the characteristics of a target area with those of surrounding areas. At the same time, GIS helps decision-makers identify differences in a visual way that cannot be seen through traditional data analysis.

The human factor in hotel revenue management

Ever heard the expression "AI will not take your job. Someone who knows how to use AI will take your job."? AI tools are not something to be feared but to be embraced. If used properly, it will only enhance the ability of the Revenue Manager to make important decisions.

The discussion around technology, including AI, versus the human touch that is so valuable in hospitality settings is becoming an increasingly heated debate. However, it's clear that the role of a competent revenue manager has never been more critical. Forecasting is a cornerstone of hotel revenue management and it can be divided into statistical forecasting and judgmental forecasting.

Revenue management systems (RMS) interact with revenue managers as follows: the methods do the complex calculations and the managers make evaluative judgments thereafter. Revenue managers’ judgmental forecasts can be improved by having more contextual and technical knowledge. Nevertheless, it isn't very easy to measure the result by separating the contribution of the RMS and the revenue manager. Therefore, understanding the association between human judgment and RMS is important in order to improve the accuracy of forecasting.


Effective communication between asset and revenue manager

While hotel asset managers try to have a holistic overview of the entire hotel business and work to reduce potential conflict between the hotel owner and hotel operator, revenue managers tend to focus on day-to-day pricing changes and inventory management.

The industry’s professionals highlight the importance of effective communication and collaboration from both sides. Regular communication between an asset manager and a revenue manager helps to develop long-term performance strategies by keeping the company’s goals and objectives in mind regarding the hotel’s target segment, brand image, and position in the market.

In doing so, they will help revenue management education and research in hospitality reflect more closely what is really happening in the business world. Academics and industry practitioners are kindly invited to submit their papers and practitioner cases in all areas of revenue management with particular emphasis on data analytics.


What can aspiring hoteliers do to prepare for the future of hotel revenue management?

The future of hotel revenue management is bright, and there are many opportunities for aspiring hoteliers to make a mark on the field. If you are interested in a career in hotel revenue management, there are a few things you can do to prepare:

  • Get educated: There are a number of educational programs that can teach you the fundamentals of hotel revenue management. You can also find many online resources and courses on the subject. Just make sure that the course you pick has classes dedicated to AI revenue management.
  • Gain experience: Once you have a basic understanding of hotel revenue management, it is important to gain experience in the field. You can do this by working in a hotel revenue management department or by interning at a hotel revenue management company.
  • Stay up-to-date: The field of hotel revenue management is constantly evolving, so it is important to stay up-to-date on the latest trends and technologies. You can do this by reading industry publications, attending conferences, and networking with other professionals in the field.

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Written by

Associate Professor of Revenue Management at EHL