I have been involved in Revenue Management (or Yield Management, as it was originally known) in hotels since the early 1990’s. Back then it consisted of an Excel spreadsheet, manual input of data, and a few basic rules that complimented the pricing strategy. It took off very rapidly across Europe, but 2 UK hotel chains refused to get involved initially I.e. Travel Inn (which became Premier Inn) and Travelodge. Their rationale was that their prices were highly competitive and available to everyone at any time, which enabled them to run powerful, price-led advertising. They even refused to negotiate with high-volume-producing clients! This resulted in both chains achieving probably the highest occupancy levels in the U.K. However, economic challenges came along and Revenue Management became an accepted industry practice.
But, Revenue Management has largely remained ‘below the radar’ as far as the public are concerned. They have been happy to get a great deal when they can, and a little confused when they can’t. But this all changed with 2 recent high profile incidents.
When United Airlines forcibly removed a passenger, not only did it produce global horror, but it suddenly made people very aware of the fact that airlines overbook! Airlines have been overbooking since the 1970’s and frequent business flyers in the 1980’s (such as myself) were subjected to it on a regular basis. But we had no one to tell and no alternative airlines to choose!
And the second incident, that made the public aware of Revenue Management, was the very tragic bombing in Manchester. In this incident it was Uber, rather than hotels, whose Revenue Management software kicked in and said ‘unprecedented high short-term demand = charge very very high prices’. This left victims of the bombing unable to afford to get home.
Thanks to Social Media, awareness of both incidents became global in a very short time. And it incurred the wrath of the public that prices could go up when they needed a service most. Families have always been angry at the premium they have to pay for taking a holiday during the school holidays, but they had little power to change this.
Social Media has really rocked the boat for Revenue Management. In a matter of seconds we are sharing with friends our delight or disgust at the prices we are finding, or have paid. So, is Revenue Management sustainable under such a strong public spotlight?
Traditionally hotels had high season and low season rates, and weekend and weekday rates. They also had packages that gave great value for money, because they included such things as breakfast and dinner. And, of course they charged a higher price for better rooms. But everyone understood those things. My marketing intuition tells me that we might be returning to those days. It would certainly enable hotel chains to run powerful, price-led campaigns again! Am I completely wrong? Only time will tell.