Revenue Managers in the Age of AI: Evolution, Revolution or Goodbye?
In the rapidly evolving landscape of hospitality revenue management, artificial intelligence (AI) has emerged not just as a tool, but as a potential co-pilot. Where it started out as handling complex data analysis, forecasting, and giving recommendations for the decision-making process, it soon moved to automation and finally contextualization.
As AI technology advances, the hospitality industry must consider how to best integrate these tools with human expertise to enhance both operational efficiency and guest satisfaction. To become a collaborator or a displacer.
This shift prompts an essential question: Will AI soon take the steering wheel in revenue management, signaling the end for human revenue managers?
It depends. Smaller less complex hotels will be the first ones where there is no need for a revenue manager. Pricing and Inventory Management can be indeed fully automated. The role of a revenue manager already has evolved / needs to evolve to focus more on-demand generation.
For medium-sized hotels or small hotel groups, it is about doing more with less. Revenue managers can overlook many more hotels as technology does the heavy load of automating and gathering insights.
Larger hotels will still require a strategist to focus on all Revenue and Profit drivers. That is even if technology evolves to automate all revenue-generating areas.
Currently, doing research on the topic and most of the experts I talked to indeed think that the position of Revenue Manager will disappear in the next 5 years (replaced by AI tools and/or integrated with other hotel functions such as Commercial).
Now, I believe there is still a human angle needed that AI / GenAI cannot replace, and that the experimentations and communication/influence elements.
So to answer the question straightforward: Is Artificial Intelligence going to replace Revenue Managers? Yes. Is Revenue Management at a tipping point and need to evolve to remain relevant? YES!
First thing I've done - of course- is ask Chat GPT. AI itself "believes" that it will not fully replace humans as It can not match human insight and intuition or adaptability to crisis scenarios, neither has interpersonal and leadership skills.
Besides this humble approach from AI itself, my personal view is that revenue managers, as we know them, will definitely disappear.
Why? because with the full implementation of AI, there will be no need to manually extract data from excel, or read and interpret Power BI graphs. "All" a revenue manager will have to do, eventually, is decide the strategy, and supervise it's done correctly.
This is a change that has been happening for millennia: machines replacing manual work because they are more efficient.
The big change happening with computing is that it replaces not manual but mental labour. And there is where the change of paradigm lays: Coping with the fact that an AI can take better decisions, faster, than any human. Embracing it, and being able to make the most out of it.
Those who fully comprehend how AI can support their strategic efforts, will be the winners in this scenario.
I would word it differently. Let's ask ourselves what the future of AI revenue managers in the "age of human co-pilots" will look like. IMHO, AI is expected to handle most revenue management tasks in the next few years, with humans contributing their unique "magic touch." Consider the U.S. stock market, where approximately 70% of all trading volume is conducted through algorithmic trading—even amidst the market's vast complexities. By comparison, the hospitality industry presents a much simpler landscape. Currently, the main challenge is that most data are compartmentalized within property management systems. However, this barrier is likely temporary. As soon as AI models become seamlessly integrated into our technological frameworks, the role of revenue managers will evolve predominantly into overseeing these AI systems. Or, to borrow a phrase from Kurt Cobain of Nirvana, we'll soon, whether we like it or not, "serve the servers."
The right way to think about AI for the near future now is as a co-pilot, enhancing and enableing humans so they can focus on human-centric tasks, like reasoning, extrapolating, and hypothesizing. I don't see AI replacing a human revenue manager, but I do see it enabling a dramatic change to the tasks the revenue manager must do today, and probably even job description itself. Remember, AI is largely a black box. Given the volume of data and the complexity of the algorithms, it can be very difficult to understand where recommendations or outputs have come from if you don't have some expertise in the domain. This will increasinly be the role of the revenue manager.
AI systems effortlessly perform tasks associated with human cognitive functions, and rather than reducing jobs, AI applications seek to enhance employment opportunities. The hotel industry is one of the most promising business sectors that can leverage the power of AI. This is due to the ongoing processing of vast amounts of data to better understand the underlying demand patterns. AI is also a growing opportunity to improve business practices and enhance myriad touch points throughout the guest journey.
We need to remove the mystery of a technology that has been a part of our daily lives since the evolution of the internet and the smartphone. The development teams at IDeaS created a system that could not only withstand the intricacies of the hospitality business but also deliver statistically proven results. Their mission was clear: to optimize automation with the right type of user interaction, eliminate user error, and create a framework where the RMS can dynamically respond to changing conditions.
It's an exciting time to be at the forefront of revenue science, providing our users with more confidence in the system's decisions and more time back in their day while driving a better customer experience in their hotels.
Every RM will have a companion!!! here is the deal. Staffing is the new luxury. Owners will check: Human or AI? If human they will ask: Which human? A human that can do AI or USES AI to their advantage. But not just any AI. An AI that works for the human, enhacning their own capabilities - ie replacing their weakneeses as strength and supercharging strength. It will be conversational based...this also means, many RMs will not be standing anymore as those that embrace it, will make it in the long run. .... My advise: You are good at excel, Now get good at AI!
A predictive AI-powered Revenue Management System (RMS) with real-time market, travel demand and comp set analytics, website and digital marketing analytics, and online reputation/consumer sentiment data feeds to optimize performance can achieve a near-perfect real-time pricing in response to market dynamics. The question is: will such an AI-powered RMS become a collaborator or a displacer of human revenue managers?
Collaborator: Full-service 3-5 star hotels make roughly five million pricing decisions every year (IDEAS), it is not humanly possible for human revenue managers to do their job without the support of an automated RMS system. Due to the complexity of the hotel product and marketplace, an automated RMS cannot handle the revenue management without the strategic input by human revenue managers.
Displacer: Budget, economy and lower midscale properties can entrust their revenue management to a fully automated AI-powered RMS, fully integrated with the property PMS and CRS, plus use of an outside RM consulting firm to provide the strategy and periodic tactics, corrections and analysis.
Now is the time to convince management and ownership that only a cloud AI-powered revenue management system (RMS) can help the property maximize revenues and successfully compete in the super complex post-crisis marketplace.
I do not anticipate the demise of human Revenue strategists soon. The daily activities of a RM may change and many entry-level positions will be eliminated.
Even the fastest Formula 1 car needs a driver. The AI will still need human input to configure the system and provide input. The RM is also the person translating the decisions of the RMS for the other stakeholders.
AI is not at a point to make decisions based on empathy or feelings. Output is stricly based on logic. Customers of hotels are not other computers, but humans and the emotional connection with customers is still very much relevant in high-end properties. (
people will not remember what you said, but how you made them feel) - and humans will have the advantage in this area for a considerable time. After all, that is why Captain Kirk and not Mister Spock was in charge of the Enterprise.With the advances of AI, the RM will be freed from manual aspects of the job and the required skill set will tilt towards more of a technical background with a solid business expertise. The focus will shift towards strategic distribution and the creation of a Commercial Strategy discipline.
On the other hand, I think revenue managers need to be closer to people, much like the commercial departments are. Let me ask you a question: Is anyone considering replacing sales directors with AI? No, and why not? Because AI cannot replace human-to-human interactions. So, if you want to sleep well, please add a strategic layer to your Revenue Manager role and become more sociable.
I remember the potential threat posed by Business Intelligence to Revenue Managers was a hot topic at the first industry event I ever attended 6 years ago. Back then Revenue Managers spent a fair share of their time manually compiling data from various sources into a single, giant, Excel sheet that could be analysised for optimisation. As BI solutions became more widespread, some feared that their roles would become redundant.
Fast forward to today and it's clear that BI solutions have actually become the Revenue Manager's best friend by automating the mundane, freeing up valuable time for the more strategic work.
In the next few years, I expect AI to have a similar impact on revenue management. With the ability to analyse vast amounts of data and identify patterns, AI-powered tools can make accurate predictions about future demand. At Lighthouse, we have introduced "smart summaries," a popular feature that utilizes GenAI.
The role of the Revenue Manager is ever evolving, lately I'm starting to see more Commercial Strategists and Total Profit Managers on LinkedIn. With the help of AI applications, "Revenue Managers" will be able to drive success for the hotels they manage in a more efficient and effective manner.
As you may be aware, AI has been utilized in data analysis for decades. AI algorithms are best used to quickly sort through large amounts of data and draw important conclusions for optimal decision-making but human input and human decision-making are still required.
RMSs are inherently using AI since their inception so it's really nothing new for them. And lately, they have been experimenting with the adoption of GenAI for contextualizing. While some RMS vendors are still struggling with adopting LLMs for this purpose, others have made significant progress in that direction.
I'm convinced we have witnessed ample evidence of the necessity for collaboration between humans and machines in the area of revenue and profit optimization, and this is unlikely to change anytime soon. AI is not yet powerful enough to completely displace revenue managers.
AI can quickly analyze large amounts of data, generate unbiased decisions and explain them, suggest possible outcomes of different strategies, etc. However, for AI to be of any value, it must have quality historical, forward-looking, and real-time data about specific hotels and markets. Let's face it: currently, hotel data is spread between old and new PMS, RMS, BI systems, Excel spreadsheets, notes from revenue meetings, etc. Let's assume AI has relevant data; revenue managers will still make final decisions because they know what kind of data was fed to AI and how and what to ask. AI needs good data and quality prompts to be useful to revenue managers.
Let's also remember that revenue managers build relationships with clients and suppliers, negotiate deals, and handle the human side of the business in a way that AI simply can't.
AI is just a tool and should be viewed as such. The future of revenue management involves a combination of AI tools and skilled revenue managers who can use them effectively.
Without question, AI is destined to reshape revenue management. It will empower every revenue manager to make faster, more informed pricing and distribution decisions, uncovering new opportunities in real-time – outside of mere rate changes. For non revenue-experts, it will also contextualise suggestions, removing the need to justify every decision to management. And, of course, it will automate the repetitive and take personalisation to a new level as properties seek to grow guest satisfaction, loyalty and returns.
In spite of these advancements, however, accommodation businesses will remain deeply rooted in HI – human intelligence. We're a people-driven industry and SiteMinder research shows that travellers prefer hotel experiences that involve genuine human connection.
While AI can enhance data processing, it lacks the essential human qualities of intuition, ethical judgement, creativity, empathy and deep contextual understanding – the traits of our industry's leaders. Human revenue managers not only need to make data-based decisions, but consider the broader impact of those decisions on their brand – and communicate them, too.
Yes, AI will make revenue managers more effective, and make revenue-driving capabilities accessible to all, but as to who will be making tomorrow's final decisions, hoteliers are set to keep their hands placed firmly on the wheel.
There has been much speculation and concern about whether AI will take away jobs from human employees, including in revenue management. At Oracle Hospitality, we believe AI and other technological tools work best in conjunction with humans.
A critical difference between machines and humans is that machines aren’t yet particularly good at creating strategies. What machines do well is to create predictions and probabilities. They can enhance our human efforts by doing what the human brain cannot, such as real-time pricing and demand management, but the human component - especially when it comes to setting and executing a revenue strategy - is essential.
For instance, AI can provide real-time information and related recommendations using guest data such as previous purchases, room and dining preferences, and personal interests. Staff can then efficiently offer the presented, targeted upsell offers at check-in and provide a more tailored service for guests.
While AI has the power to replace tactical pricing and demand management with real-time forecasting and predictions, it can’t replace executive functions like execution, measurement, and strategy management. Successful revenue executives will know how to work with and harness AI, and they will be in demand for hospitality companies for some time to come.
AI is a powerful tool that revenue managers should be harnessing. It will allow them to see patterns and solve for things that may have been hiding in the data. It will also enable them to analyze larger and more complex data sets easily. We think that the gold in revenue management lands in the nexus of a larger view of the traveler, which includes loyalty. In recent years, ancillary revenues and loyalty programs have become a cornerstone of hotel financial health. Rather than making a revenue manager obsolete, AI will make them more valuable and influential, but every instance should be designed with a human at the helm.
That's what we do at Plusgrade – we use AI to help us compute better, make better and faster decisions, and weave it through all of our solutions, from room upgrades to early check-ins, stay extensions, and service add-ons. AI can guide revenue managers to make data-fueled decisions at a large scale to drive even more revenue for hotels.
By leveraging AI as a co-pilot, revenue managers can elevate their role to become strategic partners in guiding pricing strategies throughout the entire traveler's journey, from planning to rebooking, ensuring a seamless and personalized experience for guests.