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AI in Hotel Revenue Management: Data is Key, But Intuition Wins
This is one article I’m genuinely thrilled to write — because revenue management is the bread and butter of any hotel business. It drives not just occupancy and rates, but long-term brand value, guest loyalty, and ultimately, profitability. Unfortunately, in many properties I’ve seen, this critical area is often sidelined to just the revenue manager, without full engagement from the General Manager or leadership team.
That’s a costly oversight.
Mr. Philip Cyril Raj,
seasoned Hotelier
Revenue Management Is Not a Solo Game
Revenue decisions must be grounded in data, yes — but also in strategy, vision, and market understanding. AI-powered revenue tools offer tremendous support by processing massive datasets, identifying trends, and forecasting demand. But if that’s where the involvement ends, the property is likely leaving money — and brand equity — on the table.
This works fine when:
• The city’s demand is strong,
• Your product and location are top-notch, and
• Your reviews are glowing.
But what happens when the market turns? When supply exceeds demand? Or when your hotel’s true value is misunderstood?
The Airline Pricing Model Isn’t Enough
Hotel owners, understandably, want high occupancy and high rates. Many embrace the airline-style pricing strategy — higher rates during peak demand. But consistency is just as important as profitability. That’s where many fail.
Let me ask you:
When your hotel is sold out, who do you turn away — the high-paying first-timer or your loyal repeat guest who pays a steady, moderate rate?
For me, the answer is always the loyal guest. But traditional revenue strategy may say otherwise. That’s a critical disconnect.
Case Study: When Dropping Rates Damages the Brand
During COVID-19, I consulted for a luxury boutique hotel that had dropped its rates to budget-hotel levels. Understandable in tough times? Maybe.
But here’s what happened:
• It attracted the wrong market segment
• Repelled loyal, quality-driven guests
• Demoralized staff, and
• Shifted service delivery downward
The brand lost its identity. It wasn’t just about price — it was about perception and emotional value. Something AI tools can’t always capture.
Revenue Management Is Not a Solo Game
When I came on board, I doubled the rates — during the same pandemic period. The leadership team thought I was out of my mind.
But I believed in three things:
1. The product had intrinsic charm.
2. The service could support the price.
3. The sales and positioning were misaligned.
Within a week, everything changed:
• Higher average rates
• Stronger occupancy
• A new, more aligned market segment
The emotional value of the property — the kind that doesn’t show up in Excel sheets — began to shine again.
Beyond AI: The Missing Piece in Revenue Tools
Every AI-powered tool in revenue management must be paired with:
• A deep understanding of market volatility
• Sensitivity to guest behavior and psychology
• Adaptability to geo-political and economic shifts
AI can crunch numbers, but it can’t replace emotional intelligence or human judgment. Relying purely on automation is a dangerous shortcut.
Key Takeaways for Hotel Leaders
• Revenue strategy is a leadership issue, not a departmental one
• Repeat guests matter — even when higher-paying options appear
• Emotional value is real — and should influence your rate strategy
• AI is a powerful tool, but it’s just that — a tool
• Leadership must remain involved, not just in decisions, but in monitoring and course correction
In Conclusion
Hotels don’t win with data alone. They win with a balanced blend of smart systems, sharp strategy, and sincere human insight. AI should enhance, not replace, the art of revenue management.
Let’s use AI as a co-pilot — not the one flying the plane.
