JDA software boosts hotel group's revenue

By Nicola Brittain
15 Aug 2011 View Comments
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Hotel group Carlson, which comprises big names including Radisson and Park Inn, has increased revenue from rates by between 2 per cent and 4 per cent as a result of rolling out price optimising technology from JDA software.

The technology was installed at the company's US-based hotels at the end of last year and is being installed at the group's UK-based hotels at the moment. The chain is also about to start rolling out to premises in Asia.

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The rollout to all 1,700 hotels will be complete by the first quarter of 2012.

The software has been designed to help manage the downward pressure on prices experienced by the hotel industry.

Fredric Deschamps, vice president of global revenue optimisation at Carlson, said: "In recent years the customer has been provided with so much comparative pricing information, through travel management tools such as Clickbook or Expedia, or other sites such as Priceline, that we are no longer able to pitch differently priced packages to different clients."

"Business customers traditionally require more flexibility and we used to be able to charge a premium for this, while leisure customers tend to be more price sensitive. But these separate channels don't exist any more."

Deschamps explained that the revenue that comes from price comparison sites – which makes up about 10 per cent of the overall bookings revenue – will have a 10 per cent to 20 per cent discount on those bookings that come from the group web site or American Express, for example.

The software from JDA, called JDA Demand and JDA Travel Price Optimiser, measures price elasticity in the market by scanning competitor prices on the internet, and attempts to grasp what the customer is willing to pay, not what it wants to pay based on the market.

It also determines price elasticity by using historical booking information owned by the chain.

Consequently, it is able to determine how many customers are willing to pay at each price level and evaluates this against how many rooms there are to sell.

"We needed a more sophisticated method of matching rates to demand so we could measure our success based not only on occupancy rates, but also on the revenues generated by individual bookings – and the value of 'missed opportunities' caused by quoting higher prices during a low-demand cycle," said Deschamps.

The software deviates down as much as up according to Deschamps, but in these circumstances the hotel makes money by increasing volume.

The software provides hotel managers with price comparison information via a website for the following 120 days and gives recommendations. The manager can opt to either accept these – this would update the hotel booking information immediately – accept some or ignore the recommendations if they choose to do so.

"Most managers in the US recognise that they will benefit from taking advice from the software now and are opting to do so," said Deschamps.

 

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