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A Revenue Management System
Of all the skills needed to run a hotel, one of the most esoteric is forecasting demand, figuring out when business is likely to peak and fall and maximizing incentives to keep rooms full. A single hotel can generate 200,000 transactions a day -- everything from ordering room service to renting a movie -- while convention bookings can affect occupancy rates five years down the road. Revenue management is what it's called.
"Revenue management was a people function," White says.
Automating that task is one of the company's biggest projects. Last year, Outrigger launched a pilot program to try a revenue management system (RMS) from Houston-based PROS. The hotel shipped the vendor four years of occupancy data to create an algorithm to chart demand. Other inputs included a calendar of events (high and low demand expectations) and a synopsis of all the hotel's guest data. The latter is key to determining booking patterns, demographics, responses to advertising and repeat booking trends.
White says the project, which is scheduled to begin rolling out later this year, promises to save the company a high single-digit percentage in costs.
"We're crunching the last year's data and building the forecasts now and training all the revenue managers on operations and what to expect, how to read results and which areas they will need to fine tune every day," he says. "PROS is helping us better refine our advance booking windows. We had a good handle on the macro views of high-demand weeks and low-demand weeks, but PROS is helping us find the high-demand days and the low-demand days far enough in advance to make a difference in hotel occupancies."
Knowing the Business
Walking out of Outrigger's headquarters, White heads toward the beach a couple of blocks away. Passing a number of the company's properties, White talks about occupancy rates, real estate costs and retail synergies as he strolls down to Beach Walk, an eight-acre hotel/restaurant/entertainment complex the company opened this year. The $535 million project was the largest development in Waikiki's history and demonstrates the diversity with which Outrigger is expanding its business. Today hotels account for only half of Outrigger's revenue, with retail making up a quarter, followed by management fees for running other people's property.
"We just had the best year in our history," White says -- $474.9 million in revenue.
White clearly knows the company's business. In 2004 he decided that the company needed to know exactly what IT was doing for that business, so the department switched to zero-based budgeting: Every year, every budget item is recalculated and nothing is taken as a given.
White came up with reports showing cost per guest and breaking out detailed reports of services for the company's 900 users. After seeing what computers actually cost, one hotel cut its number of machines from 85 to 55.
"I was tired of hearing the [complaining] in the budget sessions," White says. "They saw the allocation in their budgets, but they had no idea what they were getting. Now almost all of our services are metered and transaction-based. The managers know exactly what everything costs. They can get their minds around that."
White introduced service-level agreements (SLA) and began charging 40 cents per occupied room for IT. Over beers with his tech colleagues from other hotels and resorts, White benchmarks Outrigger's service costs against the competition.
As IT became more central to Outrigger's business, White found himself needing to sharpen his own skills. He took an online finance course -- "a mini MBM," he calls it -- so he could participate more thoroughly in the company's aggressive expansion plans.
In 2005, as Durocher was getting ready to retire, White was invited to a board meeting to present a five-year IT plan. Afterward, CEO Carey offered him the CIO job.
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