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Revenue Management & Business Intelligence Solutions

Market Summary – Revenue Management Systems

Market Overview

Revenue Management systems (RMS) come in many forms. Their functionality is available from chains, brands, software companies, consultancies, service providers, and nearly any combination. The solutions are usually sold as a grouping of software and services from vendors and hotels, restaurants, or golf companies. As a result, businesses needing revenue management capabilities have multiple options, which may require reviewing other vital decisions connected to a chosen Revenue Management Solution.

Affiliating with a brand or franchisor, signing a contract with a management company or franchisee, or selecting a core system vendor may influence or define a property’s RM solution. As a result, buyers may need to become familiar with a marketplace with more than 79 prospective solutions to do proper due diligence on a purchase in this category.

Revenue Management solutions began arriving in the hospitality marketplace many years ago, but only from a few companies. More recently, Capsolve has witnessed significant innovation in this category, with new approaches being launched regularly by hotel and restaurant companies. As buying organizations walk the learning curve of revenue management and navigate from basic to more mature business processes, the systems, and services they rely upon must also deliver more sophistication. This report will explore the types of solutions standard in today’s marketplace, enabling buyers to identify, evaluate, and compare these solutions in the context of their unique revenue management strategies, processes, and objectives.

The introduction of cloud capabilities was a critical change that positively affected the RM solutions in the marketplace. As cloud-based solutions mature, they continue to offer more and deeper capabilities for the benefit of all constituents and effectively support interaction with other complementary systems, specifically Property Management Systems for the hotel segment. However, RM solutions are now connected to more data, services, and software than ever. Businesses can better distribute and yield their inventory, pricing, and availability across channels and segments.

Marketplace Context

Revenue Management Solutions can play an essential role in a property’s software and technology infrastructure that places value on yield management methodologies. This functionality may be deployed in many forms, creating opportunities for companies to formulate a revenue management strategy specific to the needs and characteristics of their company. Whether you are yielding rooms, tables, tee-times, or other perishable inventory, revenue management principles have created significant value for many industries.

Even if your company doesn’t rely upon revenue management as a component of your pricing strategy, your competition likely does. The marketplace has created multiple types of solution sets to address the needs of companies that are either employing RM methodologies or competing against those who are.

Capsolve has organized the RM Solutions in the market into six categories. While these categories represent the existing solutions within our coverage industries, many of the solutions provide facets of functionality or service across more than one category, as you may expect.

Furthermore, the interconnectivity of these solutions is increasing with third parties and as a result of recent acquisition activity. Interfacing with other systems can be essential when building or modifying a marketing and technology solution map for a given property. Further to this, RM Solutions and the Services that may accompany them can include numerous capabilities in today’s marketplace. The desired software functionalities may be purchased from one multifaceted solution provider or a combination of partially or fully interfaced solutions.

These systems also require people to make them work well together. Thus, they are often packaged as a fully functional service encompassing a set of Revenue Management capabilities extending well beyond the limits of any software. These combinations of services and capabilities may be offered by software vendors, management companies, brands, or service-based companies specializing in the needs of hotels, vacation rentals, restaurants, or other industries. If multiple systems are purchased, the sophistication of integration across these systems becomes a consideration when determining the needs your organization has today. Planning for the future is crucial regardless of what solutions are selected to be part of a capability roadmap at any point in time.

Solution Paths

Changing your revenue management system is less intrusive than some changes, but it can still be somewhat complex since it affects your pricing across distribution channels. However, the critical element is deciding what type of control you want for your pricing. As distribution channels increase and product parameters change, revenue management complexity can heighten. A few standard approaches enabled by today’s technology solutions within this category include:

• Comprehensive Core: a solution with multiple modules designed to provide a fully integrated approach to covering most or all business needs
• Best Fit Core: a solution with multiple modules covering the minimum requirements in combination with critical strategic capabilities
• Minimized Core: a solution typically covering the most crucial strategic and operational needs but providing significant flexibility to connect to other best-of-breed solutions to complement the core
• Best Strategic Fit: a solution providing a balance between comprehensiveness and long-term strategic needs

These solution paths are not necessarily mutually exclusive. Solutions within the marketplace may create the opportunity to combine one or more paths and meet more of your selection criteria. Appropriately formulating an RFP to share with potential vendors will help to ensure you ask the best questions specific to your business while allowing you to learn about the depth of each potential vendor partner.

Pricing Information

Numerous pricing models exist in the marketplace, and it is crucial to understand how each one will affect your total cost of ownership. The standard pricing structures are:

• Base Software Price plus a Maintenance Charge: This pricing is usually charged for on-premise software installed on local servers. It is generally charged based on the number of servers, user licenses, or user accounts. There is an ongoing charge for modifications and upgrades based on the percentage of the base software.
• Subscription Price: This pricing is more prevalent with the adoption of Software-as-a-Service. The price is often charged annually, quarterly, or monthly and applied to each location or user account. This type of pricing is sometimes aligned with the number of rooms associated with the property within the hotel industry but is less likely to be applied in the vacation rental industry unless multiple properties are part of the purchase.
• Revenue-Based Price: These fees are based on the effect the RMS solution has on your business. This type of pricing is usually experienced either due to a performance-based contract or as part of a brand affiliation, where the RMS is provided as part of the agreement. It may be defined by a transaction fee or a fee based on a percentage of revenue.

As expected, a combination of these pricing approaches may be applied to any software. Furthermore, fees associated with professional services, interfaces, or implementation may be part of your total cost of ownership.

Sales & Marketing Considerations

RM functionality works hand in glove with the sales and marketing function at most locations. Hotels with group business as part of their mix must stay connected to the revenue management decisions to price themselves effectively, be competitive within the market, and comply with contractual commitments. Traditionally, a hotel must distribute its rates, inventory, and availability information to multiple customer segments to reach the audience responsible for purchasing or coordinating a group’s reservations and activities. The price of individual rooms and group rates are interconnected as they relate to winning clients in each segment. In a similar vein, restaurants and Country Clubs also seek to manage pricing, costs, and distribution channels.

RM implementations bring revenue opportunities at the local level and operational efficiencies where centralization is appropriate. In today’s environment, there is a significant amount of innovation occurring not only in technology but also on the marketing front. This creates both opportunity and potential complexity when selecting and implementing RM Solutions. These solutions are working to support the marketing needs of venues, such as pricing and restriction management.

This phase of rapid marketing tool proliferation has created opportunities to improve businesses, reach new markets, decrease costs, and increase marketing exposure. It has also dramatically increased the complexity of venue marketing, which affects RM Solutions. The result is that the bar is now set higher for sales and marketing teams to be efficient, and it usually requires the effective use of software to perform at a competitive level. Intelligent strategies can alleviate this somewhat, but ultimately, more has to be done with fewer MPTT resources.

Current Trends

While foretelling the future is entertaining, it is more practical to discuss the potentially crucial developments in the marketplace right now. Here are a few active trends influencing the RM solution landscape.

1. The majority of RM software is now available in the cloud. This transformation is nearly complete for the category, but be aware that not all clouds are the same.
2. While the hotel RM category was initially limited to a few solution providers, the category is growing, as are the types of solutions.
3. The specific needs of all RM marketplace constituents are being addressed with more tailored solutions. Hotels, Restaurants, Vacation Rentals, Golf Courses, and companies with multiple locations all have more and better tools to improve their ability to manage revenue more efficiently than ever.
4. Innovation and interfaces are breaking the traditional bounds of the RM category, creating automation opportunities across the industry.
5. Digital channels are proliferating more than non-digital channels. This creates a need to actively manage rates across these channels and sites as they are updated by RM processes.
6. More data input to RM Systems provides demand signals, which improve forecasting techniques and help model a business’s uniqueness.
7. Attribute-based selling (ABS) is changing the distribution landscape and may impact the functionality of CRS, IBE, CM, and RMS.
8. Acquisitions are playing a small role in industry consolidation, resulting in a segment of larger companies with a software portfolio that can better address the comprehensive needs of a property, including RMS.
9. Blockchain features may introduce dynamic capabilities that influence select systems, such as revenue management.
10. Privacy regulation is becoming more prevalent worldwide, with consumer information at the center of the deliberation. If your RM solution includes CRM data as an input supporting personalization, pay attention to this.

Questions for the Future

As the world of revenue management continues to change at a rapid pace, here are some questions your company may want to answer:

1. How will your business position itself to utilize innovative solutions within its potential Solution Map?
2. How will RM software decisions affect each property, whether independent or part of a portfolio or brand?
3. Should machine learning and artificial intelligence play a role in the next generation of revenue management?
4. How will RM systems need to adapt as the marketing and technology ecosystem around them continues to change?
5. Should marketing, distribution, ecommerce, and revenue management solutions work more cohesively in the future, and what form should this take?
6. Does your property garner a price premium from a strategy, product, or service, such as a sustainability approach? How does the RM system factor in the price elasticity of demand for this?
7. What new revenue management functionality should be considered, and how will it affect your roadmap and solution map?

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About this Report

This document reviews the marketing information and capabilities of this category’s solutions and the surrounding technology ecosystem. It contains original content written by Capsolve to provide a perspective of current trends affecting one or more hotel, restaurant, golf, and country club industries. The analysis covers a statistically significant portion of the previously defined category marketplace.