Revenue management: Another emerging vertical of travel tech | Techsauce
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Revenue management: Another emerging vertical of travel tech4 min read

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Posted date May 17, 2019

Revenue management within the hotel industry hasn’t been executed with the highest level of optimization in most countries in Asia. With more than 300,000 independent hoteliers globally, only 1 in 10 uses any sort of revenue management software.

More than 10,000 of these independent hotels are in Thailand while Malaysia and Australia have 5,000 each. Coupled with the recent completion of US$3.7 million Series A funding raised by a travel tech startup specializing in revenue management ZUZU, this only goes on to show why APAC is the next destination for disruption in the travel industry.

The emergence of different players in travel tech

Expedia and Booking.com have always been the big players in the travel tech industry. But the issue with these giants was, the smaller hotels are not gaining much favor from these platforms. Expedia and Booking.com didn’t have enough time and resources to go train the smaller guys in the hotel industry. So, it became clear that someone has to help these small players who do not have the technology, the resources and the understanding of how technology can be used to grow their businesses. This problem led to the emergence of different verticals within the travel industry that extends beyond just booking and search to channel management, distribution, insurance, property management system (PMS), sharing economy, travel marketing, and global distribution system (GDS).

Current tech adoption state of independent hotels in Asia

When it comes to going online, most independent hotels in Asia only do the basic stuff like connecting with hotel listing platforms such as booking.com and Expedia and a lot of these hotels haven’t even utilized tech and data in their property management system.

According to ZUZU, many hotels in Indonesia were not even doing the basic stuff like linking to an online hotel listing platform, while hotels in Taiwan are very competitive and they have already done those basics although revenue management is still out of touch. Hotels in Thailand and Malaysia are at a similar stage as the ones in Indonesia, while Australia is on a par with Taiwan, if not better.  

“As hotels everywhere around the world are experiencing the same problem on the backend and data efficiency side, we believe revenue management as a service can be a global business that works in both developing and developed markets”

  • Vikram Malhi, Co-Founder of ZUZU Hospitality Solutions


The importance of “pivoting”

In the world we live in today, it is difficult for a lot of businesses to grow by just staying where they are at – they have to adapt or die. Pivoting is a process where a person, a team, or an organization turns to a different direction after the initial path is deemed ineffective. Just like in any big corporate organization out there, innovating is a part of the pivoting process. In startups, redoing the business model is the process of pivoting if the initial plan doesn’t meet the market validation. In any small hotel, pivoting could mean taking a different approach in growing revenue and profitability. With the power of data analytics available today, hotels can now utilize information on their confirmed bookings, customer behavior, marketing result, competitors’ pricing, and other relevant factors in order to set the optimum pricing for their customers. This way, hotel do not just vaguely determine the price through “gut feeling”, but rather, through a quantifiable means, data.

Opportunities in the revenue management business

If you examine companies that provide revenue management as a service carefully, their business model is actually pretty sustainable. Investors of these companies understand that this business can make money from Day 1 in the sense that as soon as the hotel is acquired as a customer, they get paid. Having said that, the leadership team and the depth of expertise are also essential in ensuring the success of the company – they have to be experienced enough to execute the business. More importantly, given that there are over 300,000 independent hotels globally and online is becoming big, the opportunities are endless.

In order to sustain, revenue management businesses need to continuously work on:

  • Regional market expansion: Continuously expanding the local sales team to acquire more hotels and work closely with each of them.  
  • Technology improvement: Adding new technology and constantly improving the technology so that the tools are user-friendly and customers can see the improved results. Word-of-mouth and referrals can make or break a business.
  • Growing the revenue manager community: This is one of the biggest challenges due to the lack of revenue managers in the market, but is essential in maintaining satisfactory service with clients.

 

A journalist who loves writing about business, startup, and tech for Techsauce Global. Catch me hopping around South East Asia and China or reach out to me at vanessa@techsauce.co

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