What's the right price? For your hotel company, that fundamental business question is particularly important in an industry where the answer changes by the hour. Setting the right price for your 13,000 rooms requires a delicate balance between tracking inventory, predicting demand, and learning from previous pricing and customer behavior.

A revenue management system will help you with that balancing act. These systems have proved their value in the airline industry for nearly two decades by finding the optimal price at any moment. A revenue management system includes a suite of applications that integrate tasks such as demand forecasting, inventory tracking and data analysis into a system that lets managers model different pricing schemes and broadcast a final price plan to all distribution channels.

The software and hardware to run the system will be your main investment. Some customization will be required, but implementation, not development, is the name of this project. Expect to have the system up and running in six months. Once up, the system will be refreshed with new data each night. Plan to check and tweak prices at least once an hour, or more often when the market dictates. Successful revenue management systems have been shown to increase revenue by 5% to 10%; if yours is one of them, you'll recover your investment in a matter of months.

Training your staff and managing a change as fundamental as the way you set prices will be your biggest challenge, says Andy Boyd, chief scientist and senior vice president at PROS Revenue Management, a Houston-based revenue software specialist. "It just takes believing that science and informed decision-making are better than seat-of-the-pants decisions," Boyd says. "Even when you prove this to people, they can find it difficult to make the conceptual commitment."

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