Red Lion Hotels rolls out new room pricing tool
Product expected to be in all its hotels by year-end
Katie RossJuly 31st, 2014
Red Lion Hotels Corp., of Spokane, is rolling out a new “revenue strategy” system from San Francisco-based hotel technology company Duetto Research, says Jason Thielbahr, senior vice president of revenue optimization and distribution services for Red Lion.
The Duetto system uses an algorithm to generate an optimized forecast of what the demand for lodging could be, Thielbahr says, which then allows the hotel to set its guest room pricing and availability accordingly.
The company started activating the system, which is cloud based, in its hotels about a month ago. It’s expected to be fully rolled out at all of the company’s 52 owned and franchised hotels by the end of the year, Thielbahr says.
Red Lion has a multiyear contract with Duetto for a subscription to the system, Thielbahr says. He declines to specify how much Red Lion is paying for the subscription.
Duetto will act as an aid to help the company set its pricing, Thielbahr says.
“The primary purpose of a revenue strategy system is to allow a hotel to forecast with the highest level of real-time data,” Thielbahr says.
Forecasting, he says, is the first step in creating a revenue strategy.
“The start of any revenue strategy process is an understanding of what to expect,” Thielbahr says. “So if I know that over Hoopfest weekend, for example, every room in the city is going to be sold out, and in fact it’ll be 20 percent above demand, I’m going to set my pricing and strategy accordingly. Conversely, on a Sunday night in December, demand is going to be much less. I can then set my strategy and pricing accordingly.”
When a hotel is forecasting, Thielbahr says, it uses two sources: historical expectations and rational expectations. Historical expectations are based off of what room occupancies were on the same day or weekend the previous year. Rational expectations, Thielbahr says, are Duetto’s domain. The program uses a forecasting algorithm that integrates third-party data to provide an extremely accurate forecast, he says.
“Rational expectations are what Duetto does,” he says. “It pulls in third party data, like airline traffic; it has the ability to include demand for local airport’s arrivals and departures. If we see there’s a high level of airline traffic coming into a city, we would expect to see demand increase.”
Prior to Duetto, the company didn’t have a specific revenue strategy system, Thielbahr says, instead relying on historical data and current rates to set pricing strategies.
As another example of the system being added, Thielbahr says that Duetto can pull information about the current prices of rooms at competitor hotels.
“If (competitors) are priced higher, customers are going to look elsewhere,” Thielbahr says. “By integrating that third-party rate data, it allows me to improve expected demand. That integration of third party data sets are what really allows Duetto’s forecasting algorithm to be the best.”
Beyond the forecasting element, the system will offer different price points across different segments, such as customers shopping far out from their stay or close to it. It also identifies different distribution channels, such as online bookings, phone bookings, or bookings done by a travel agent.
Thielbahr says the company has already begun to see results from the system.
“We’re seeing updates to our forecast and seeing better strategies deployed,” he says. “I’d say our ability to be more proactive with opportunity is where we’re going to see the most change right out of the gate. Looking out further, the system is letting me know when opportunity or a lack of opportunity reveal themselves.”