The Future of Revenue Management: Interview with Dr Ravi Mehrotra of IDeaS

Company: IDeaS

Founded: 1989

Founder: Dr Ravi Mehrotra

We spoke with IDeaS Founder, Dr Ravi Mehrotra, about hotel revenue management and how intelligent automation is helping hoteliers dramatically increase key metrics and create a more holistic commercial strategy.

IDeaS, a SAS company, is the world’s leading provider of revenue management software and services. Combining industry knowledge with innovative, data-analytics technology, IDeaS creates sophisticated yet simple ways to empower revenue leaders with precise, automated decisions they can trust.

Drawing on 30 years of experience in the industry, driving better revenue for more than 13,000 clients in 140 countries, Ravi explains why he believes revenue management will evolve to become a major hub between marketing, distribution and sales systems–and why strategy in chess translates perfectly to strategy in revenue management.

IDeaS was ahead of it’s time with its revenue management system – can you give us some information on what you were working on prior to starting the company?

After receiving my doctorate degree from Carnegie Mellon University, I started my university career as a professor in the Department of Electrical & Computer Engineering at North Carolina State University where I worked on pioneering models for parallel computing and algorithms for distributed processing based on data science and artificial intelligence.

I became very interested in exploiting the power of data science to make better business decisions. Data science could be used to improve our problem-solving abilities by helping us explore new ideas and acquire greater knowledge through the collection, analysis and interpretation of data.

How did IDeaS come about?

I found it confounding that most companies were relying on guesstimates and gut feelings to make important business decisions. Complex decisions in any business encompass far too many variables for the human mind to comprehend and analyse. I was convinced the amount of available data and the ability to process it with machines would continue growing exponentially. I realised that we had a massive opportunity to use that growth and solve some of the most difficult business problems.

As a result, I became passionate about applying mathematical and scientific reasoning, as well as quantitative data analysis and optimisation, to support complex decision-making in business, removing ambiguity and improving speed and accuracy.

This led to the establishment of IDeaS (Integrated Decisions & Systems, Inc.) in 1989 that began a journey to change the revenue management industry from a culture that largely depended on gut feelings and heuristics in decision-making to a culture that was much more objective by combining the power of data, advanced mathematics and sophisticated technology.

We pioneered the “opportunity cost” approach that provided a simple yet optimal way for the practical determination of inventory availability, demand determination and pricing that later became the industry standard for dealing with the complexities of the network or length-of-stay effects in hotel revenue management.

IDeaS revenue management screenshot

What opportunities does this technology open up for hotels?

IDeaS empowers hoteliers with revenue science, driving greater profitability and productivity by infusing sophisticated, integrated technologies with deep hospitality industry knowledge.

With our technology, people and processes hoteliers are able to dramatically increase their key basic metrics, but we provide game changing capabilities on total profitability of the whole property. Our hoteliers are better able to drive a more holistic commercial strategy, with the ability to generate the most profitable mix of pricing, promotion, product availability and distribution.

We are a proactive partner with a relentless pursuit of innovation. Our automated solutions simplify the complex and transform data into precise pricing and forecasting decisions hotels can count on. With 30 years of expertise and over 13,000 clients in 140 countries, we are the world’s leading and most trusted provider of revenue management software and services.

What concerns do hotels have when implementing a revenue management system?

Hoteliers are not comfortable making changes to prices without knowing the effect it has on their ability to reach and maintain. Additionally, they are required to serve many “customers”, whether it be the asset owner, the investors, the employees or, most important, the guest. This often causes a delay in a hotel’s ability to make ongoing strategic investments in mission critical back office technology, such as a property management system upgrade or revenue management technology like IDeaS. The travel industry is also globally sensitive to market volatility.

In a volatile market, too much emphasis is placed on meeting budget and making safe pricing decisions that ultimately limit a hotel’s revenue achievement. Placing an emphasis instead on demand-based pricing will help secure the highest possible revenue from the marketplace. Some hoteliers believe it is prudent to wait until business is strong and making more profit before they invest in “nice to have” tools such as revenue management software. That is like saying an athlete should wait until they can run faster before they buy good running shoes. It is the revenue management system that will enable them to maximise their yield and create the bigger profits.

What does the future have in store for IDeaS?

Since forming IDeaS in 1989, there have been many dramatic changes to the hospitality business, but I have continually been surprised by the speed of change in critical technology systems, such as the CRS and PMS. While there has always been a focus on the technologies surrounding the guest experience, the rate of change at the core operational level for the hotels has been very slow. This reticence to change, on one hand, is understandable, but it undeniably has become an area holding the hotels back, especially across the complex ownership structures.

Ultimately, reticence to change makes it difficult for hoteliers to take advantage of opportunities to grow revenue the proper way. At IDeaS, our lifeblood has always been the data and the quality of the data provided from those systems. But, as data proliferates and increases in quality, we believe that IDeaS will become one of the industry’s most easy to leverage platforms, providing world-class capabilities to commercial leaders, supporting requirements ranging from simple to enterprise level complexity to drive profitability by powering a connected commercial organisation.

IDeaS revenue management interface

What have been some of the highlights?

We have been incredibly fortunate to have been a driving force in the early days of revenue management, but we are more fortunate to have a team as talented as we have here at IDeaS. I am incredibly proud of our team.

We hit our 30-year anniversary this past summer. But, we don’t let that stop us and our innovation. We recently surpassed 13,000 clients with 2.1M rooms, event spaces, and parking space under management across 140 countries and 6 continents.

We have had so many firsts over the last few years, however some of the ones that I am immensely proud of are ones that come from voting from our clients.

In the past few years, we have been voted Hotel Tech Report’s 2020 “People’s Choice Award” as well as multiple years as the “Best Revenue Management Software”. This means a lot because it is our clients and users voting.

But, outside of our tremendous growth over the past few years, I am most proud of our 98% retention rate. This tells me that we provide value to our clients each and every day, and driving that value is truly our singular focus.

What are the major hospitality trends in 2020 and how do these affect you?

I can’t help but be excited about the future for IDeaS, whether it is next year, five years or another 30 years in the future. By our estimation, there are still hundreds of thousands of hotels, meetings & events venues and car parks going without the power of automated, science-based revenue management solutions.

Our immediate goal is to show the hospitality and travel industry, in tangible ways, how revenue science can empower their business success and growth. I believe IDeaS will be at the centre of the largest global commercial evolution between sales, marketing, distribution and revenue management we have seen yet.

Our commitment to innovation and elevating what’s possible for our clients drove us to create a feature called Agile Rates. The industry is shifting away from pricing products in isolation. Agile Rates provides the ability to dynamically price and distribute key linked or independent products for the wider market or specific guest micro-segments while maximising profitability of all priceable products.

This technology offers hotels—especially resort and all-inclusive properties—the ultimate flexibility to personalise rate plans and deliver a customer-choice driven shopping and buying experience. Agile Rates empowers hoteliers to transform their pricing strategy through multiple dimensions of demand, guest behaviour and product attributes to build the most relevant and unique price and product for each guest.

IDeaS revenue management service

What does the future hold for revenue management?

I’m no Nostradamus, but there are quite a few areas ripe for disruption. In my opinion, there are two main areas we will see a major category shift in the next five years.

First, I believe automation in day-to-day revenue management will become standard, resulting in a higher-order shift of the revenue manager and leader’s roles. This is especially true when we deal with inevitable market upturns, and most importantly, downturns. The sheer number and complexity of the daily decisions a revenue leader must make will exceed their capacity, driving them to rely on intelligent automation to ensure they remain competitive in a fast-paced market.

Second, revenue management concepts will continue to spread across more segments in the guest’s total trip compilation, from the time they start searching online to the time they are reflecting on their memories and preparing to plan the next trip. All of this layers together to show that revenue management will be a major hub, if not the major driver, between marketing, distribution and sales systems. I think we will see players in complementary areas start to link themselves together to drive a more direct connection to revenue, while delivering the right price to the right person at the right time.

I love the game of chess and have been known to play multiple games simultaneously. I find that strategy in chess translates very well to strategy in business, especially revenue management business. In both, you must always try to imagine all possible outcomes and plan accordingly, considering all your resources, before making each move—all while keeping an eye on the clock and, of course, playing to win.

Interested in how revenue science could improve profitability across your hotel chain?  Get in touch and we’ll discuss the different ways we can help you get started.

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