- RMS: Continued Competition from ‘Gut Feel’ and Excel
- Subscription Revenues Take Prominence
- Market Share Concentrated Around a Few Top Vendors
- Vendors Differentiate Themselves in Several Ways
- Some Hotel Brands Hold On To Proprietary Systems
- IDeaS in a Class of Its Own
- Hotel Tech Benchmark Methodology
- Full Vendor List
Revenue Management Systems (RMSs) generally analyze a combination of historical room rates, competitor rates, and market demand by predicting consumer behavior, to provide rate recommendations.The sector faced some challenges when Covid hit, as much of the historical data became useless to forecast future trends, but it has also clarified the need for strong revenue management software to many hoteliers.
The RMS vendor landscape is diverse. While there are a number of companies that are fully focused on offering revenue management tools, there are many other vendors which at their core are not RMS vendors, but offer some pricing or rates tools. Also, in terms of the philosophy around how pricing should be managed, vendors differ considerably. Some RMS vendors focus heavily on auto-pilot features which require no input from the hotelier, while others only make recommendations which still need to be actioned by the hotelier or revenue manager.
More discussions on the most important trends and developments in the RMS space can be found in our report The Revenue Management Systems Landscape 2019. This report, instead, provides a discussion of the vendor landscape, providing insights into the penetration of RMSs in hotels, the total market size and potential of the space, and an extensive list of vendors.
Data in this report is accurate as of December 2021. For the latest updated information, Skift Research subscribers can access our Hotel Tech Benchmark dashboard, which is updated periodically as we collect more data from hotel tech vendors.
What You'll Learn From This Report
- Total annual revenues for the RMS tech category
- Growth potential for the category, expressed in U.S. dollars
- Market shares for 31 RMS vendors, based on the amount of hotels and rooms they service
- Market share split by third party and hotel brand proprietary systems
- Breakdown of revenue streams for third-party vendors
RMS: Continued Competition from ‘Gut Feel’ and Excel
Revenue Management Systems contribute to the sophistication of effectively and efficiently distributing room inventory. Many large hotel chains have invested in RMSs considerably over many decades to provide this sophistication to its hotel owners, offering one of the strongest draws towards brand affiliation. Smaller chains and independent hotels have often lacked sophisticated rate and channel analysis, but an influx of affordable revenue management systems boosted by cheaper cloud storage and advancements in artificial intelligence tech have opened up these tools to a much larger market.
As revenue management evolves and starts to take on a more prevalent position within the hotel, it is expected that technology will start to play a bigger role. Today, however, the number of hotels which use revenue management systems is still limited. Our analysis shows that 28% of hotels utilize RMS tools, but that a large part of this is made up by Expedia’s free and limited RM tool Rev+. Only 10% of hotels purchase revenue management software.
If we translate this into rooms, we see that 50% of rooms are priced using a RMS tool, which highlights that, at present, RMS tools are predominantly used by larger and more complex hotels, whereas owners of smaller hotels might not see the need for advanced pricing tools just yet.
According to Skift Research calculations, the total revenue generated by RMS vendors was $260 million in 2019. This includes both third-party vendors and hotel brand proprietary systems, which hotel owners need to pay fees for.
As the services provided by hotel chains tend to include more hands-on consultations compared to third-party software offerings, the hotel proprietary revenue management service tends to be in a much higher price bracket. Proprietary systems account for 63% of the total revenues generated, even when these systems only account for about 3 million hotel rooms which is a third of the total rooms managed with an RMS.
The unused market potential is $1.34 billion, highlighting the major expansion opportunities that are available here for incumbent and new entrants into the revenue management software space.
Subscription Revenues Take Prominence
Revenue streams in the RMS landscape gravitate towards subscription fees, which make up around 71% of all revenue, according to data collected from third-party vendors. RMS vendors tend to operate with a SaaS (Software as a Service) model, where a set subscription fee includes the use of the software.
Integration fees make up most of the other revenue generated. Integrating the RMS into a hotel’s Property Management System (PMS) is of vital importance to the proper functioning of the RMS, with a two-way integration (where the RMS can pull rate and availability data from the PMS, and push its rate proposals back into the PMS) as the gold standard. Other integrations are also possible, including with Central Reservation Systems (CRS), mostly used by larger hotel chains, Rate Shoppers, Upselling Tools, Event and Catering Systems, etc. Many RMS providers will include the connection to the PMS into their subscription fees, but additional integrations often incur extra costs.
Market Share Concentrated Around a Few Top Vendors
Our analysis covers 31 of the largest RMS vendors, but we are seeing new entrants entering the market regularly. A main distinction to be made is between hotel proprietary systems and third-party systems.
Furthermore, for third-party vendors we distinguish between what we call Full Stack RMSs, which offers a complete revenue management solution, and Limited RM Tools, which tend to be add-ons offered by PMS or Channel Management vendors that offer some pricing and channel insights. These limited tools often don’t need to be connected to the PMS, and are more a way for hoteliers to understand the market conditions, rather than pushing very specific rate plans to different channels like a Full Stack RMS does.
One group that is excluded from our analysis is the many revenue management consultancies which do not provide RMS software, but offer a more hands-on revenue management service for hotels that look to outsource these tasks to a specialist. These specialists might use third-party software, but they are not directly included in our market sizes and vendor lists.
When looking at the market share (in terms of rooms), the top 10 largest RMSs account for 47.4% of the total market, with a very steep drop off after that. The next 15 vendors making up the top 25 only contribute a combined 2.6% in market share.
Vendors Differentiate Themselves in Several Ways
When looking at the top players in the RMS landscape, there are three players that really stand out for their size: Expedia Group as the largest vendor with its limited and free revenue management tool Rev+, IDeaS as the largest vendor with a full stack RMS product, and Marriott International as the largest hotel company with its proprietary OneYield product. proprietary OneYield product.
All in all it is hard to directly compare one RMS vendor to another, without considering the approach of each vendor. Not only do vendors differentiate in terms of the hotels they focus on, but also in how they operate and the services they provide. An adapted overview that we put together for our The Revenue Management Systems Landscape 2019 report continues to provide a clear picture of the differences between vendors.
Some Hotel Brands Hold On To Proprietary Systems
The RMS, often integrated into a tech platform which also includes a property management system, distribution, and marketing, forms part of a proprietary software offering that many major hotel brands offer their owners.
Most hotel companies oversee rate management at a regional level. Some hotel companies have proprietary software to help them manage this process, like Marriott’s OneYield system or Best Western’s BestRev. Most companies, however, are increasingly using third-party software, with especially IDeaS and Infor utilized by the larger chains. One major exception is Hyatt, which uses Maxim RMS.
We estimate that the four major proprietary systems manage more than three million rooms, or just over 10% of available rooms worldwide. OneYield is the largest system with almost half of that room count.
IDeaS in a Class of Its Own
IDeaS is the clear leader amongst third-party vendors, and in general in the RMS space, even though it still only has a market share of around 9% in terms of room count. Duetto and Infor are the main competitors for IDeaS, with many other vendors focusing predominantly on smaller and less complex hotel companies. Beonprice is a leader in this segment, with a player like Pace Revenue seeing strong growth over the past years.
Hotel Tech Benchmark Methodology
The Hotel Tech Benchmark by Skift Research is based on a mix of information provided by hotel tech vendors and proprietary data calculations.
Participating companies have provided extensive information about their operations, including:
- Historic and current revenues
- Revenue streams
- Historic and current employee count
- Geographic coverage
- Product breakdown, including software functionality, launch date, pricing models, and integrations
- Number of hotels and rooms per product
Market sizes and market potential are calculated bottom-up, using information from vendor input as well as publicly available information on company websites and in franchise disclosure agreements.
The total size of the hotel industry, which informs our ability to calculate market sizes, is a point of contention in the industry. We have used industry sources and our own estimates to determine the size of the hotel industry in terms of hotels and rooms.
There are many estimates of the number of hotels in the world, ranging between half a million and a million. We collected information from different sources to estimate the total number of hotels worldwide at 600,000.
This is much higher than the often quoted STR figure, which is below 200,000. The STR estimate excludes properties with less than 10 rooms, and while known for its strong coverage of highly branded markets like the U.S., struggles to capture more independent markets in Europe and Asia.
Therefore, other sources were taken into consideration. Euromonitor International, a market research company which includes coverage on independent and chained hotels for 100 countries, estimates the market is just short of 600,000. Expedia asserts it has more than 600,000 properties on its platform, although this is likely to include more than just hotels.
Data on the number of rooms also shows extreme differences between sources. STR asserts that the average hotel has 92 rooms, while Euromonitor International puts this figure at 55. As both disregard small properties to different degrees, with STR particularly having limited coverage of independent and smaller hotels, we estimate that the average hotel has 50 rooms, to total 30 million rooms worldwide.
Revenue streams are calculated using input from participating vendors, taking into account the size of each vendor and their revenue breakdown. As participation increases, this data is expected to change.