Hotel Profit Discovery

8 Star Wars Jedi Lessons for Hotel Revenue Analysts

The release of Star Wars: the Last Jedi hits theaters in a couple of days. Time for my inner geek to spend quality time with my outer geek.  Since this is the 8th episode, I will reboot the 7 bits of Star Wars wisdom that I posted on the release of the last episode and add one more.  Here, again, is the Jedi knowledge that is directly applicable to the everyday challenges of a Hotel Revenue Analyst.

“In my experience there is no such thing as luck.” — Obi-Wan Kenobi

Too many patterns in the hotel business, including bookings, F&B spending, and guest behavior are attributed to chance by those that have not been exposed to good hotel analytics.  If you dig into the numbers the right way, you will find that guests are quite predictable and that you can calculate, within a margin of error, what they will most likely do next.  

“Great, kid. Don’t get cocky.” — Han Solo

Say you decided to keep rates high because you thought the demand would eventually show up even though every piece of data you have says the demand is behind pace, then…you are proven correct as the demand develops just as you guessed. Does this mean that you are a market soothsayer who would be better off with a wizards hat than a spreadsheet? No. Good decision analysis is about getting things right more often than not over the long run. Abandon the data at your own peril.

“Your eyes can deceive you. Don’t trust them.” — Obi-Wan Kenobi

Analyzing pickup or pace by simply looking at the raw variance number can lead to huge pricing mistakes.  That’s because our biases can make results look a lot better than they really are. Remember, we are usually overly optimistic about what will happen at our business and equally overly pessimistic about what will happen to the competitors.  Putting variances within the context of a multi-year standard deviation allows you to see if your pickup or pace is truly an exception or just part of a normal pattern.

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“Do not assume anything. Clear, your mind must be.” – Yoda

Hotel Analysts must be keenly aware of their own biases as well as those of the managers they work with.  They must engage all conversations with the awareness that most hotel managers have picked up assumptions about how the hotel business works without ever having looked at much empirical information except for the occasional P&L. They must take the position of mythbusters, challenging any and all strategies, tactics and declarations which have not been validated by organic, raw data.

“Who’s the more foolish; the fool, or the fool who follows him?” — Obi-Wan Kenobi

A big part of developing the analytical maturity of Revenue Managers is to awaken them to the realization that the comp set is the last set of data to be analyzed and not the first. Your internal demand patterns is the force that should drive your rate strategy while the comp set is there for creating boundaries around your strategy. Blindly following the comp set’s behavior is a sure way to make foolish mistakes.

“Your overconfidence is your weakness.” – Luke Skywalker

In the hotel business there is no confidence problem.  Managers across all departments are usually way too eager to make decisions with little or no information, relying mostly on their experience and gut instincts. I mean, that is what they get paid to do, right? That kind of bravado does not exist where there is no confidence. This overconfidence is especially dangerous in Hotel Revenue Management where managers go about deciding on rates and rate changes by mixing a potent cocktail of superficial information and one-dimensional analysis with long-held assumptions and speculation of how demand reacts to pricing tactics. The best hotel analysts have little confidence in their ability to make great decisions without data.  That is true enlightenment.

“Do. Or do not. There is no try.” — Yoda

Bringing a Data-Driven culture to a Service-Centered industry can be an exhausting endeavour.  Some people are so intimidated by math and numbers in general that I sometimes feel like packing it in.  Except that there is no going back to the old way of analyzing the hotel business.  Whether it be RM, Finance, Marketing, or Operations, the data now comes first and the discussion second.  

“Always pass on what you have learned.” – Yoda

These are Yoda’s last words to Luke. For today’s Revenue Managers to be effective, they have to have a teaching ethos. Sharing information and bringing everyone closer to a Data-Driven, Guest-Centric, Total Revenue mindset should now be the priority for any serious RM.  The ability to democratize learning and make everyone a mini-RM should be the standard by which a Revenue Manager’s effectiveness should be measured.  In the end, the smarter everyone is, the easier the RM’s job becomes.

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Robert Hernandez, Statistical Analysis and Data Mining for Revenue Growth Robert is an expert in the field of mathematical Hotel Optimization and Analytics. He has spent the last 17 years building data-driven forecasting and optimization models for companies in over 20 different industries, from tech to tourism. Robert possesses a very unique skill set including cross-disciplinary experience, advanced mathematical and analytics skills, data transformation, industry-specific knowledge and business-process improvement expertise. Robert began his career at the Walt Disney Company in Revenue Planning. Read More+


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