The Price Is Always Right

Marriott applied its business wisdom to building an IT system that has successfully tackled its greatest challenge -- maximizing revenue.

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The CEO had a point, says Williams, who is now Marriott's vice president of revenue management transformation and systems strategy, and is the business sponsor of One Yield. The concept is straightforward. But optimizing revenue for hundreds of thousands of rooms around the world can be, well, rocket science. When the airline industry introduced computer models to maximize revenue, "it was like a black art," explains Robert Goodwin, managing vice president for Gartner. "These pointy-headed guys with PhDs got paid lots of money to come up with complicated algorithms." After two decades, he says, Marriott has succeeded more than its competitors in the hotel industry at prying out the secrets of revenue management.

Shortly after the Marriott CEO's tutorial on the subject (and despite his good-natured ribbing of his gung-ho senior VP), the company was the first in its industry to make revenue management a C-level discipline. During the 1990s, Marriott developed two revenue management systems-the demand forecasting system (DFS) for Marriott's full-service hotels and the revenue management system (RMS) for its lower-priced, select service properties like the Courtyard.

John Whitridge, vice president of revenue management systems and a 14-year Marriott veteran, saw the birth of both systems. In the back of his mind, he knew that it would be better to have one revenue management system for the enterprise. Not only would IT support be easier and less expensive, but one system also could be integrated more easily with Marriott's central reservation system. Users who managed multiple properties could work more efficiently. In addition, the system would help senior managers to promote a single set of revenue management best practices across the company.

In 1999, Marriott saw its opportunity. RMS and DFS users were increasingly asking for the same functionality. Meanwhile, revenue and inventory management was becoming a regional-and clustered-discipline for Marriott. More and more, inventory managers were required to use both systems to manage multiple properties among its various brands. Furthermore, the Web was well on its way to becoming a proven platform for new systems. Whitridge knocked on Wilson's door to tell him. He left with Wilson's OK to go to Williams and Marriott's finance teams to start hammering out a business case for what would become One Yield.

A Case for Enterprise Value

Building the business case for One Yield was made simpler by the fact that Williams and Whitridge, as well as their staffs, had worked together previously on IT initiatives. All IT projects at Marriott must have a business sponsor and joint business-IT project management. In the area of revenue management, alignment between business and IT has been a necessity because of the complexity of both the discipline and the IT systems required to support it. "We're always going to conferences together, holding meetings, talking on the phone, e-mailing," Whitridge explains.

To get the green light from the executive committee, Williams and Whitridge and their teams knew it was critical to tie the business value of One Yield to Marriott's three goals: profitability, preference and growth. One Yield represented a convergence of all three. If it were successful, it would make Marriott as a corporation, as well as its franchisees, more profitable, because the hotels would keep more rooms filled at higher rates. As Marriott brands became more profitable, they would become preferred by attracting more franchisees. And that would lead to growth, as reflected in the total number of hotels and rooms operated under the Marriott flag.

Whitridge worked with Williams to describe even the technical aspects of the system in business terms. For example, Whitridge knew the J2EE platform the Marriott Architecture team chose offered the benefit of quicker, less expensive upgrades. The business audience knew that with the old systems, every new release took ages. "So when we talked about the benefit of the Web in the business case," says Whitridge, "we didn't say, Hey, the Web is cool. We talked about instantaneous, hassle-free upgrades."

That understanding of the business paid off in another way. Because the Marriott IT team worked arm-in-arm with revenue managers to develop One Yield's functionality and features, the risk of building a customized system was minimized. "What if the computer models don't work right? You risk giving away huge amounts of revenue or losing business if you do this wrong," observes Gartner's Goodwin. "But these guys at Marriott seem to have understood their business well enough that those risks were minimal."

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