Will Revenue Management Technology Replace People?

Artificial Intelligence and Hotel Revenue Management

This question is very prescient in early 2018; artificial intelligence (AI) is becoming an increasingly talked about topic outside of the computer science environment.  

This question looks at what the recent developments in AI mean for those involved in Hotel Revenue Management and revenue analysis. This is not an issue solely restricted to Hotel Revenue Managers; many professionals are looking nervously at huge improvements in machine learning and automation, and questioning whether their job may be replaced or displaced.

Hotel Revenue Managers, on the face of it, may have more to fear than some professionals because their expertise is in managing data, performing an analysis and using this to pursue optimal outcomes: something that computers do very well. There is already much automation in pricing within hotel revenue management. Price structures can be set in advance by revenue managers, and an automated process can monitor the demand on rooms and adjust prices accordingly. For example, if a high-profile concert is announced on a Sunday, hotel rooms will start to sell quickly and the automated program can react and adjust the pricing to balance the demand and maximise revenue. Traditionally, this may have been done in office hours on a Monday by the Revenue Manager, by which time valuable revenue would have been lost.

The question here essentially asks: can the artificial intelligence go a step further and remove the need for any human input in pre-setting pricing structures? Is AI capable of performing this type of function? Can they perform it better than a Hotel Revenue Manager?

The capabilities of AI in 2018

AI had probably first permeated the public consciousness as a genre feature in Science Fiction, but perhaps it was in 1997 when the IBM supercomputer Deep Blue beat the reigning chess Gary Kasparov, that people began to see AI as a ‘real thing’.  Whilst heralding a new age of computers being ‘smarter than people’, it was found that this specific processing capabilities for a specific game did not translate well to making messy decisions in the real world; Chess is known as a ‘perfect information game’, the real world is far more difficult to figure out, leaving the computers well behind revenue managers. 2017 has seen some recent advances in computers displaying a much more human intelligence. One example is a machine built by the University of Alberta, named ‘Deepstack’, that managed to beat four accomplished poker professionals simultaneously and displayed an ability to learn to adapt to different strategies and incomplete information. This system is now being adapted to solve more complex real-world problems like security and negotiation. There is no doubt that advanced AI has the capability, in theory, to perform the same type of analysis as Hotel Revenue Managers and react to a changing market.

What the future holds for Hotel Revenue Managers

Revenue Managers, however, have little to fear in terms of imminent replacement. There are huge leaps forward taking places in university programs and powerful corporations, but this advanced technology is still many years from being widely available. Even when this technology becomes available it will require expertise to integrate into hotel management systems; the Hotel Revenue Manager is best placed to act as a bridge between the AI and the hotel. The Hotel Revenue Manager will become the custodian of the technology, not the victim. The potential of automated analytics and managing huge increases in guest data will make the Hotel Revenue Manager working together with AI a powerful combination to improve revenue and protect shrinking margins.

If you are daunted by new Hotel Revenue Management technology, or worry that you may be falling behind the competition, then Octopus Revenue is here to help.  Revenue Management Consultancy or Revenue Management Trainingcan help.  Bespoke Training Packages are also available to help with coaching and skills development to suit all businesses and budgets.

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