“Smart” revenue management

Pablo Gómez Arjona, Revenue Manager at Paraty Tech, explains what “smart” revenue management means and what new technologies applied to the dynamic setting of rates has involved for hoteliers.

What are Floating BAR rates?

The term, “Floating BAR”, refers to the full relaxation of rates such that adapting rates to your hotel’s demand is constant, eliminating pre-set price ranges.

BAR rates were set based on the rack rate (the maximum rate the establishment sells at). For example, if a hotel establishes a maximum price of €110 for a type of room, a set number of ranges may be established until a rate of €45 is reached (the variation between ranges is not usually high and the number of these depends on the establishment).

With Floating BAR rates, clients are offered percentages of discounts on the BAR rate. Consequently, if the BAR rate is the best non-negotiated price available when the client goes to make his/her booking, the Floating BAR rate is the rate linked to the BAR rate via a percentage or fixed amount. 

How to define a dynamic pricing structure: “smart” revenue management

Once the conceptual issues have been addressed, how to reach a BAR rate structure to which the percentage will be applied and, more importantly, how to use these rates, is another question.

Imagine a hotel with 12 price ranges. The question would be when do you use one or another? Right now, the answer comes from revenue management and technology solutions capable of performing analysis via business intelligence tools on, among other aspects, consumer behaviour and how the competition is acting. Combining both is what’s called “smart” revenue management.

Data will allow for a perfect understanding of the target audience, the client profile and the competition’s prices. As such, the decision making process regarding prices will be simpler. Furthermore, understanding this data in real time will allow a dynamic rate structure to be established and, today, this ensures optimisation of income.

How does “smart” revenue management work?

But how does “smart” revenue management really work? “Smart” revenue management is supported by what’s known as machine learning or automatic learning, which is a consequence of the development of Big Data and artificial intelligence where identifying problems and then solving them is accompanied by a learning process. The technology itself is responsible for making decisions in real time, based on statistical data analysis and even analysis of behaviour patterns.

The revenue manager’s tools

There are multiple alternatives available on the market. We invite you to take a look at an example of how Parity Maker works. This is our real-time price matcher (using a reference OTA) that aligns cutting-edge technology related to reactive automation with your hotel’s objectives, positively contributing to an increase in your direct sales.

As an aside, the revenue manager’s specific tools must be mentioned. These allow a routine fixing of rates from analysis of the variables mentioned previously (demand, tourist profile, competition and channel) to be avoided, therefore maximising profitability by adapting prices to the market.

Paraty Tech’s DMS is currently configured as one of the market’s most comprehensive tools available. It makes the decision making process more flexible by generating all the information required to set dynamic prices.

This technological solution considers and updates all the variables that have an influence on defining your rate structure via a comprehensive business intelligence system. You’ll no longer have to invest a lot of time in gathering and analysing all the data you need to optimise your income: the DMS does it for you.

Let technology help you. It will increase your profit margins, setting a price that will allow you to be much more competitive. The key is not to offer more for less, rather to offer what the client expects at the price he/she is willing to pay.