Unconstrained Conversations – An IDeaS Podcast
Unconstrained Conversations – An IDeaS Podcast
Episode 45: Checking the Pulse of Revenue Management – Ulrich Pillau & Klaus Kohlmayr
Welcome back to the Unconstrained Conversations podcast! On this very special episode the tables are turned and the interviewer, IDeaS’ chief evangelist Klaus Kohlmayr, becomes the interviewee. Ulrich Pillau, CEO & co-founder of Apaleo interviews Klaus on The Pulse by Apaleo: The Voice Of Hospitality Tech Leaders Podcast. We are sharing their insight-packed discussion with you here. Topics addressed include:
- The future of revenue management coming out of the pandemic
- The value of revenue management during periods of low demand and how having the right price is now more important than ever
- How IDeaS was able to recalibrate its revenue management systems to respond to the unprecedented, rapidly changing demand in 2020
- IDeaS’ product updates to accommodate the future of revenue management
- How hospitality companies are using the crisis as an opportunity
- Now is the right time to re-evaluate your business and operations to ensure recovery readiness
Please subscribe to our podcast on your favorite podcast network and share with colleagues in the travel and hospitality space who may find this episode useful.
Hi everyone, welcome back to another really unconstrained episode of our podcast. A couple weeks ago, Apaleo, a property management system startup, invited me to their new podcast. Uli Pelau, co-founder of Apaleo, and I talked about the evolving technology needs of the hospitality industry, the convergence of data, and accelerating innovation in times of crisis. I do hope you enjoyed this very, very interactive conversation, and we'll be back with a new guest next week. Thank you.
SPEAKER_02:Welcome back to the Pulse by Apaleo, the voice of hospitality tech leaders, the podcast all about sharing insight and knowledge from thought leaders within the hospitality and tech community. I'm your host Alicia, and today we're chatting with Apaleo founder and CEO Uli Pillao and Ideas Chief Evangelist and Head of Strategy, Klaus Kobe. In this episode, Klaus and Uli talk about the future of revenue management. You will gain insight into why big brands have used this past year to replace their dated revenue management systems with the next generation and new tools. You will also learn why Ideas is focusing on smaller hospitality owners who can only afford to spend 10-15 minutes a day on revenue management by simplifying tools, creating seamless integrations and connections, and scale up on an adaptation to revenue management. Stay tuned until the end to see how Ideas and Apileo are going alongside of each other down the same path. What path is that exactly? You'll want to find out. Alright, so before we get started talking about the exciting topic of future of revenue management, I just have to ask Klaus, as a native Austrian, how did you end up in my hometown of Minneapolis, Minnesota, of all places?
SPEAKER_00:Yeah, what a coincidence, right? That uh you're in Munich and uh from Minnesota, and I'm from near Munich, not in Munich, near Munich, and um I'm ending up in Minnesota. Um it's been a long journey. I uh finished hotel school in Austria uh when I was uh 20, and then um I worked with various companies that kept moving me around the world, um including um IHG, where I uh worked for 12 years in uh uh started in Vienna with them and then uh moved to uh New York and Paris and London and Singapore. And then when I was in Singapore and I became more and more involved in revenue management and pricing, I um joined Ideas, opened up their Singapore office, and started building their consulting arm or the services arm. And then after a few years, Ideas asked me to um move to their head office in uh beautiful Minnesota, which where I've been uh since 2010. So that's how I ended up in Minnesota.
SPEAKER_02:So you got there about the time that I left.
SPEAKER_00:That's right. Yeah, 2010. And I'm I'm actually enjoying it.
SPEAKER_02:So glad to hear. Um, so to get to a very fun topic uh with Uli and myself now, what are your thoughts going forward as we are hopefully going to be getting out of this COVID pandemic globally soon? What is the future of revenue management looking like?
SPEAKER_00:Um I believe uh it's been extremely hard for everyone in the industry, first of all. Um I know a lot of my friends and colleagues um are looking for a job or out of um out of a job at the moment. Um so it's uh it's been a devastating year for many, many people around the world. Um uh but we do see some green shoots coming up in you know, starting in Asia, New Zealand, Australia, and and I believe over the next six months we'll see more and more of a rebound announcing itself. Not a full rebound, but a full uh rebound announcing itself. There have been a lot of questions in 2020 about the value of revenue management if there is no revenue to manage, and and I always say I would have agreed maybe seven, eight, nine years ago, um, with traditional revenue management approaches that really looked at um the peak periods and compression days of high demand, managing inventory and managing opening and closing rates. But the the approach to revenue management has really changed now. It's really more about pricing and it's more about inventory management. And if you look at the right price is still relevant, I would argue it's even more relevant if you're at 20 or 30 percent than if you're at 90 or 80%, because right now hotels need every single euro or pound or dollar that they can get in order to pay their lenders at the end of the month, make payroll, keep their people employed, um, and just get through this crisis, get through the next six to eight months. So I would think revenue management, because it has moved on from where it used to be, is um as important and as critical as it has always been. And there's a couple factors, if I if I could just expand. Um, one is that we have seen that people at the hotel and at the corporate office need um accurate and trustworthy data. And the revenue management system, together with the property management system, is usually the system that has the most accurate description of data. It's the closest to the sort of truth that you can get. You need to be able to forecast not just for revenue management purposes, but also for labor labor planning and resource planning uh focus uh purposes, and you need to automate the distribution of your pricing decisions and your rates through as many channels as you can, and you need to do that, especially now with the least amount of people and the least amount of manual interaction possible. So, because of these three factors all coming together, they remain critical, and revenue management therefore still remains very critical.
SPEAKER_01:Klaus, before we go more into where is the future of revenue management and the accommodation industry, actually, because obviously that's very tied together from our perspective, can you explain us a little bit how you manage the last year? Because essentially, when I look at those systems that are there, um they are obviously built around certain models. And the models in 2020, I suppose, were totally different from than any year before that um uh that that crisis here. So, how are you able to calibrate the systems and respond to the changing demand and ups and downs and everything? Because I think that's a very interesting question for the people that are listening.
SPEAKER_00:Yeah, absolutely. And Ula, you and I we've been on many stages and we've discussed many times the value of man and machine or man versus machine. I think this was that the last 12 months have really proven that it is a man and machine scenario, not a man versus machine scenario. So that the first thing that we had to do was make sure back in uh March-April, we made sure that our hotels that are working with us around the world are properly equipped to deal with the high level of uncertainty. So we uh spent the first few weeks, I would say six to eight weeks, to making sure that the hotels, when they're closing, uh obviously proper the system knows that hotels are closing. The system understands that demand periods have changed and demand patterns have changed, and we had to do that manually. There was just no other way to do that. We had to tell the system that what is happening right now is not a normal situation. Um, and we went in and made some significant changes to our algorithms to put more weight on the most recent past than the 12 or 13 or 18 months past. Um we do incorporate a lot of future demand uh uh signals into in our system. We work with uh companies like Travel Click for the demand 360. We incorporate some SDR data for information purposes. So we look at forward-looking signals that help the system understand what's going on, and obviously that's been very, very critical. Um, but first we had to teach the system that what's happening is out of the ordinary. We told the hotels to set special event periods or make sure that the flag in the system, the period that they're that they're in, that that the system understands that it's not something that is going to happen again. And then when demand came back in the summer, we had to tell the system that now demand starts coming back. Um, tune up the sensitivities and tune up the decisions. And now, as we're going through the third or or second or third lockdown periods, we're we're going back again and telling the system that there is another lockdown. So we're kind of applying learnings from March into the current lockdown scenarios. Um so we kind of know now how to handle that. And as soon as we see demand coming back, we will tell we'll go back in and tell the system that what what is uh what the system is seeing now will be the the normal trends going forward. So we're constantly working with our 14,000 hotels and making micro adjustments to the algorithms.
SPEAKER_01:Understand. Very interesting. And I mean, one thing we we saw in our user base was that essentially a lot of hotels and groups were closed, obviously, during that period over here in Europe. But we um in fact had a number of clients that were pretty successful even during the crisis, either during a certain period, let's say summer of last year, summer season of last year, or throughout the whole period and keep kept the hotels open. Do you have an estimation? Well, I mean, your client base is obviously huge worldwide. You have a million hotel rooms or so with ideas. I and was my last information, maybe it's grown since. But do you have any information how many of your properties um kept uh were kept open and which were the good ones uh among all of these crisis hotels last year?
SPEAKER_00:Um yeah, if I remember it right, I think at the peak of the lockdown in April, June, I think 70% of the hotels that we work with. So we currently have 14,000 hotels that we support. Um 70% of them were closed. Um we're now back to I think 90% or 80% of the hotels back open. Um obviously in the UK it's still very difficult. In parts of Europe, it's still very Europe is still very difficult. The US has always kept their hotels open most of the time. Um China obviously very aggressive in February, but since then have re have rebounded with most of the hotels looking at about 60% occupancy. Um in we have about 400 hotels in China that we support. So it's been it's been kind of a big drop in April, May, 70, 70% of the hotels closed, and then uh since then a nice rebound.
SPEAKER_01:And and when you look at kind of the system side, um I must admit from our perspective, we have learned a lot of things. Actually, what was fascinating for us to watch that uh was that last year we had a number of record months in a row. Um because we are able to do implementations onboarding in a certain way. It's it's very lean, it's very fast. What are your learnings from from last year? I mean, when you when you say you want to position revenue management now for the future for the accommodation industry, what things are you changing within the system and also within the procedures you're using to onboard clients? Have there been any adaptations or main changes from that perspective?
SPEAKER_00:Yeah, the first thing that we did in we worked with all of our clients to help them through this very difficult time with relief efforts, right? So we we extended uh credits, we became more flexible in our payment terms and invoicing, and we really worked very closely with all of our clients, which was very highly appreciated, uh, to make sure that we understand the financial situation that they're in, right? So that was the first part. Now what we're seeing is actually through through the second part of 2020, there's two big trends that we're seeing. Uh, one, uh, a couple of the big brands have decided to take this opportunity to uh replace their revenue management technology with the latest um you know next generation technology. And uh we were fortunate enough that um you know we had we have continued to innovate and continue to build um new tools and new platforms and and new revenue management technology um that uh that that they were interested in or that they uh they were able to adopt. Um so um there is a big amount of investments going into upgrading revenue management uh systems right now. Um on the other hand, we're also seeing uh a strong interest in tools beyond revenue management. We launched a uh operational forecasting tool at ITB last year, which probably nobody remembers anymore. But uh it's called it's called exactly it's called Ref Plan, and with Ref Plan, hotels can forecast their overall revenues, their total revenues, uh including F and B meetings, and they can also use that to plan for their entire operation. Um so we have a Ref plan in place, I think at uh over five, six hundred hotels right now. Very, very strong feedback. Some hotel companies have told us they wouldn't be, wouldn't have been able to go through the budgeting uh process this year without a tool like that. Um so we were very fortunate in it to be in a situation where we had something ready that helps people not just with revenue management, but also with operational problems, operational forecasting, understanding total revenue.
SPEAKER_01:Okay. Ideas has been around for many years, obviously, very successfully.
SPEAKER_00:30 years.
SPEAKER_01:30 years, yeah, crazy. I've spent more than 10 years of my life with the life with the company.
SPEAKER_00:That's why you lost all your hair, Uli. That's what it is.
SPEAKER_01:Yeah, exactly. That was the hard time at Ideas. You are having the fun times right there. So going backwards, I mean, your system is obviously a very um solid one. It has good history. Um, you know what you're doing both with the system as well with the procedures. Um today I've met a lot of hoteliers and hotel uh hotel groups that say we want to go rather with lean revenue management than in the past. So some of them, obviously, the groups might stick to the bigger systems, but there are others as well that say um isn't isn't there anything kind of easier, faster, quicker to implement and to use? Now I'm aware of obviously the ideas pricing system um rather than the full system. Are there any other efforts to maybe look at developing new systems from your perspective? Or are you at this moment enhancing what you currently have?
SPEAKER_00:Um both, Uli. And and um I think I think the reality is that um revenue management, as I call it, gets more and more democratized, right? In the beginning, when when when you were with Ideas, a very small number of hotels could afford a revenue management system. I remember when I uh uh received Ideas in 1998, uh it was a six-figure price tag, right? And a big box and lots of floppy disks that we had to uh you know put into the system to load it all up and get it started. Um, for the people that remember floppy disks. And it's true that um our path is uh democratizing revenue management so as many people can use revenue management tools as possible. And with that comes a simplification of revenue management systems. We need to be able to put revenue management systems in the palm of people's hands on their phones. We realize that people can't, you know, they don't want to sit hours and hours in front of a desktop computer anymore. They want to get pricing decisions very quickly. Maybe they can only spend 10-15 minutes a day on revenue management and pricing areas if you're an owner-operator or a general manager of a smaller hotel. So our path is towards simplifying revenue management, making the tools easier, making the integrations and connections seamless, as you know, Oli, you've been on this path as well. And uh just in general, scale up the uh the adoption of revenue management tools significantly. And and I can't go into the details today, but you'll see a significant increase of the number of our hotels that we're supporting over the next um 18 months. Um and that is one of the that's that is one of the outcomes of the effort in innovation, uh building new tools, building simpler tools that we have gone through over the last couple of years. So if you if you look closely at our website, website, you will see the number very, very quickly increasing from 14,000 to way beyond that.
SPEAKER_01:Great. And um actually you mentioned something which is very interesting and uh which has to do with integrations. I mean, I remember doing interfaces for you was always a kind of struggle, not because of your technology, but obviously you need a lot of data. So you want a lot of data from the PMS, but also from other sources in order to come up with the best possible forecasts. But you also want them to distribute the decisions and pricing to different systems, not only to the PMS. And in the past, that has always been a pretty long procedure because the PMSs are so different, the distribution systems are so different, it's hard to get the right data from them, it's hard to distribute the right decisions again. So I believe you've been doing a lot of work on your side on how to integrate to different systems.
SPEAKER_00:Um absolutely. And part of that is thanks to companies like yours, only right. Um, apaleo and others have shown the way that um integrations don't have to be complicated. They can be a plug-and-play or can be done overnight or within a couple hours, like like Apaleo does. Um and we're on that same path. You know, we do want to make integrations easier. We feel you know, they shouldn't be uh breaking the bank for hotel companies. They shouldn't take six months or nine months or two years to accomplish. And we've always struggled with that. As we connect to more and more hotels, we we have to connect to smaller and smaller property management systems and smaller and less sophisticated tools, and that makes integrations um uh pretty hard. Some of our integration work takes years to accomplish. Um, and that's not the future, right? You've talked about APIs and you've talked about modern ways to connect with each other's systems, and we firmly believe we should be all part of one ecosystem that we can easily integrate and connect and exchange data with. And that we're on the same path. We're working on APIs, we're working on uh different ways of creating uh connections and interfaces. So I think it'll for the industry it'll be much easier in the future to just plug different systems in whenever the need arises.
SPEAKER_01:Cool. And and uh when we talk about the future of the industry, um, I mean, we we have been speaking with a lot of hotel groups, hotels, owners, operators, investors over here in different parts of the world to figure out where all of this is going. Um and and I think there you see a lot of traditional hotel groups that are there and don't really know how to react to the crisis. They are there and say, hopefully it will kind of come up again, demand will be there again, it will return to what it was before. However, we also see quite some players that are using that opportunity actually to come up with totally new concepts, with hybrid businesses, um, mixed businesses. There are a lot of new ideas which actually people are putting into place in the accommodation industry right now. And I mean, Oyo and Airbnb have been there for a while, but I see lots of players coming up in different European countries. What is your general um feeling where the industry is going? I mean, will it be again the same type of hotel we have seen for the past 30, 50, whatever years? Or do you think there will be a radical change to the industry in many ways?
SPEAKER_00:Um I think it's a really, really exciting time because um I don't think I've ever seen the amount of entrepreneurism and uh startup mentality and innovation and creativity in the accommodation space ever. And and a lot of people are coming up, as you said, with very, very creative ideas. And I think if our core doesn't buy all of them up and integrate them into their own uh infrastructure, um it's very exciting that to see that uh we will we we we are expanding what it means to stay in to stay somewhere else, right? Away from home. Um I'm excited by you know the alternative accommodation space. I'm excited about the mixed use, kind of where you have flexible rooms, where you have like Citizen M, the lot of a lot of social spaces and meeting spaces that you can interact with, right? That the work from home, I think, is going to stay in certain areas of um of the world and for certain industries. So I'm very, very excited about the change in accommodation. And if we look at the forecast now that Airbnb is uh is a public company, right? It's easier to get data from them. Uh they're but they're predicting a 30% uh I think revenue increase next year, which is probably the only accommodation provider in the world that is really bullish on actually 2021, right? So it's uh uh it's very exciting to see how the the space is evolving. Um and I think it's great for the industry. It all keeps us uh keeps us engaged and keeps us um uh on track. What's interesting to see is that some of these startups there that started out in the alternative accommodation space are now starting to buy buildings and converting them to hotels, right? So it's uh some of these companies have started on one side and moving to the other side. Hotels are moving from the hotel side to the alternative accommodation side. It's it's all becoming more and more mixed, and it's all becoming just about providing a customer the right accommodation for their purpose or for the need that they have at the moment, right?
SPEAKER_01:Yeah, and actually, I'm I just can confirm that from our perspective on a smaller scale. I mean, we see quite some businesses over here which are using that crisis actually as an opportunity. I mean, uh, talking about some of our own clients like Limehome, Cozy Hospitality, Stary, and so on, those are new companies that actually during the crisis received quite some big um investment from parties that say this is actually a concept that can survive at any time. Um, and and some of them have been running occupancy throughout the year of 60, 70 percent, even though most of the other hotels were closed. So we we think that's a big opportunity as well and and and should be used in in many ways by those people. And we see more and more coming up. Actually, what's interesting as well, it's it's in many cases, it's not hoteliers doing it. It's not the kind of traditional hoteliers, operators, owners, but it's people coming from outside the industry that say, you know, it's it has been run in the same way for the past 50 years, there must be a better way to do accommodation business today. And some of them are really successful, also using, I would say, more hybrid technology than in the past. Because if you really think about the changing demand for those properties, um doing this with legacy system, let it be revenue management or property management or whatever system, is extremely hard because just changing the configuration or onboard a different uh hotel type, uh, it takes them months and months. So we believe in this um to happen much faster and the onboarding and everything which has to do with it as well. I agree. And now one important piece is obviously um when it comes to revenue management, there is a lot of training and education involved. Um, have you been moving a lot of um that online or have you been doing it before, or what is your kind of perspective on how to educate and train users and even non-users of revenue management?
SPEAKER_00:No, I you know, I always like to think about uh uh when when a hotel or or any accommodation provider um gets our system, they're not just buying a tool or a system, they're also uh joining the community, right? So they're joining right now a community of 14,000 users that are also using the same tools and probably similar processes. Um the first thing, uh actually, one of the first things we did obviously last March and April was move all of our training virtual because we just didn't have an opportunity to go to the hotels anymore since they were closed. Um we've always tried that in the past, but what we found is the industry always has a preference for face-to-face training. So our approach is we we give the hotels what they like most and what is most effective to them. So obviously during the lockdowns, we had to move everything to a virtual environment and we're able to train and get our hotels up and running completely virtual with no problem. We have seen over the last few months as hotels reopen and wherever it's safe in Australia, New Zealand, in Asia Pacific, hotels are asking for us to come back on site and train the staff face to face, and we have trainers around the world who can do that as long as it's safe and it confirms with the government regulations. Um, so we're kind of in a hybrid environment. We have all the tools and the technology and the learning platforms to engage people remotely. We have a team of client relationship managers who speaks to most of our hotels on every single month, um, like as a buddy or mentor, and engages with them. But we can also do that face-to-face if people want us to come on site. So we're we're our one word, I guess, is we're flexible and we're we're open to do whatever is works best for the hotel.
SPEAKER_01:Understand. Now, when I we you mentioned a core before, and um in fact you're right, they have been buying and are buying a lot of different businesses, and they are actually also converting their own hotel group with new products or to different products. So the CEO announced a lot of changes to the account in general. Um one personal question. I mean, I always like, for example, the 25-hour suit product. I think it's a great hotel product, they have very nice hotels, and obviously our core are now taking control. If you would go around the world personally and say outside those big groups, are there three clients where you would say this is really a hotel accommodation product which really impressed you, both from a hotel perspective, but also from an operating perspective. So making money out of hotels or increasing the value for the owners? Um, anybody that that strikes you there?
SPEAKER_00:Um I'll have to think about it a bit. You know, I I um um I'm independent of client or not client, right? So I think what Accor is doing is really great. They're really a lifestyle brand rather than a hotel brand. Um the mama shelters, the 25-hour hotels, SBE in the US, right? They have been incorporating some of these more uh lifestyle-focused brands into their brands, which makes the company a different company. I think it's great, and I think it's a sign of how a hotel company needs to pivot and needs to evolve with the evolving consumer demand. Um, I agree, you know, 25 hotel, 25 Hour Hotel is a great, is a fantastic company. It would be one of the companies and one of the hotel hotel groups that I would look to as a as a good example. Um, in Asia Pacific, you have Como hotels, which is similar, right? Boutique high lifestyle hotels, uh, which is great. There's a company in the US, it's called Under Canvas, which are luxury tents and clamping. I've used them a few times, and that's just a great experience when you're out in desert somewhere and you're you're you're in a luxury tent. Um not cheap, it's still two or three hundred dollars a night, but um you get the whole experience of sleeping under the stars in a nice environment. Um Citizen M always comes up, right? I everyone talks about them. I just love their company and what they do, and and uh the leadership team is always pushing the boundaries, as we've seen over the last few uh months as well, with the launch of subscription services for both individual and corporate travelers. So I think that would be on a non-traditional hotel world, that would be my topics.
SPEAKER_01:Yeah, makes a lot of sense. I mean, I see some some new players here. Um what we see happening, which is a trend really, is that those hotel accounts that are popping up now, a lot of them are tech-driven hotels. So they look at um operating the hotels in a different way than in the past, much more efficient through automation and technology behind. We see where that that trend will go. Obviously, there is still a five-star segment like the Mandarin Orientals of that world that will operate on a high service level with staff, but actually everybody else could really use technology to automate much more and work much more efficiently than in the past.
SPEAKER_02:So, gentlemen, we are coming to the end of our conversation. And Klaus, I just want to ask you, in your perspective, are there any critical items which you believe really need to be discussed and brought to the forefront to really help prepare the accommodation industry for the future?
SPEAKER_00:No, I I think everyone right now in the industry needs to have a hard look and evaluate and rate themselves how ready they are for the rebound. Right? It's unquestionable there's going to be a recovery and that there's going to be a rebound. Uh, it's not an if, it's when. It's just the question is when it's going to happen. Some some will see it, some are already seeing it in parts of the world. I guess the most of the Western world will start seeing it in June, July with the summer months, and then getting into uh September, October. Um, so now is the time to prepare. Yourself now is the time to look at your technology stack. You know, do you have the right technology in place that will make it easier for you to connect other systems and other technologies? Do you have the right infrastructure in place and the right structure? Right after this call, I'm going on a I'm getting on a call with a CEO of a company in Europe that has some questions about centralizing their revenue management and automating their revenue management approach. So is your current structure the best structure you can have for the future? Do you have the right ways to get access to clean data and accurate data that you can trust? And then are you able to run your operations and run your revenue management and run your marketing and sales as efficient as possible? You need to spend the next six months to get ready for the rebound when it happens. This is the ideal time. Obviously, funding is always a uh is always a question, but this is the ideal time to prepare yourself.
SPEAKER_02:Absolutely. So, what's on your agenda for this year?
SPEAKER_00:Um, you know, I was just telling Uli that I would love to go over to Europe and go get some skiing under under my legs, I guess. Um, but I'm not sure if that's gonna happen. So um I think my my my number one priority would be to um be able to go over to Europe and see my family. I still have uh parents and brother and sister in Austria, and I haven't seen them in a year. So that would be the first thing I would do when travel is safe again. So um at the moment uh I'm staying safe here in Minneapolis, but as soon as borders are becoming a little bit ordered, the situation becomes a little bit more um forecastable, I would say, or uncertain or certain. Uh I would you find me on the plane over to Europe.
SPEAKER_01:And hopefully then you'll see some old friends here in Munich as well.
SPEAKER_00:Of course, Uli, of course. I'll work out of your office. How about that? That's right, thank you.
SPEAKER_02:Thank you so much, Klaus, for joining Uli and myself today. It was a pleasure getting to speak with you, and hopefully we'll be able to see you soon over here in Munich.
SPEAKER_00:That would be great. I'm looking forward to it. Thank you very much for listening, and I hope you found this episode valuable for your own business circumstances. Check out the show notes, link to the episode. Help more people in the industry find this podcast by sharing and rating. And don't forget to subscribe to the series wherever you listen to it.