The Modern Hotelier #259: The Evolution of Hotel Revenue Management and Pricing Strategies | with Chris Anderson
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David Millili: Welcome to The Modern Hotelier. You're the most engaged podcast in hospitality. Don't forget to follow, like, and subscribe and let us know in the comments what you think about today's episode. Steve, who do we have on the program today?
Steve Carran: Yeah, David, excited about today we have on Chris Anderson, Professor at Cornell University. Thanks for joining us, Chris. How are we doing today?
Chris Anderson: Great. My pleasure. Thanks for having me.
Steve Carran: Appreciate.
David Millili: All right. So Chris, we're gonna jump in. We're gonna go through a lightning round. We're gonna get to know you better, and then we're gonna dive into some industry topics. Sound good?
Chris Anderson: Sounds great.
David Millili: All right, here we go. What did you want to be when you were growing up?
Chris Anderson: I think early on I wanted to be a chef. I was in Four-H, part of the club, and I thought it'd be really cool to be a chef. Then I joined the Canadian military and things just went off, got totally derailed.
David Millili: God. All right. What's something that you wish you were better at?
Chris Anderson: I wish I had more hair, obviously.
David Millili: All right. What's a luxury you can't live without?
Chris Anderson: The thing I miss the most if I don't have it is getting a chance to exercise and go to the gym. I'm a classic routine person—get up, have coffee, go to the gym. If I don't have that routine on a regular basis, my day is disrupted.
David Millili: Got it. All right, so who's a person, dead or alive, you'd like to take to lunch?
Chris Anderson: Of course, the real Mr. Anderson. I'd like to go out with Keanu Reeves. That would be great.
David Millili: Okay. All right, cool. If you could have a superpower, what superpower would you like to have?
Chris Anderson: A superpower would be to stop time. I never seem to have enough time. If I could stop time here and there, finish one thing, and move on to the next, that would be great.
David Millili: Okay. Last one. What's something that's on your bucket list?
Chris Anderson: I guess things I want to do that I keep putting off. Probably to travel more. I still do a fair bit of traveling, but I would just like to do more of it.
David Millili: Okay. Got it.
Steve Carran: Well done, well done. So now we're gonna dive a little deeper, a bit more about what makes you tick. You mentioned the Canadian military. You grew up in Canada, is that correct?
Chris Anderson: Correct. Yes. I'm originally from Canada. I've been in the US since 2006.
Steve Carran: Awesome. Where did you grow up in Canada?
Chris Anderson: All over Canada for the most part, but the majority of my youth was spent in southwestern Ontario, about an hour and a half from Detroit, if you need an American reference point. I grew up as a Detroit Red Wings and Pistons fan.
Steve Carran: Jon will be very happy to hear that he's a Michigan guy as well. So how did growing up around Ontario shape you into who you are today?
Chris Anderson: I guess interesting in that a big chunk of the Canadian population lives near the US border. I'm still very much a Canadian, but I've spent the last 20 years in the US. That’s been pretty comfortable for me because when I grew up, we had so much US media, so it didn’t feel like a foreign country. It feels a little more foreign today, but yeah.
David Millili: All right, so you got your bachelor's and master's in engineering at the University of Guelph, then your MBA and PhD in Management Science at the Ivey School of Business at the University of Western Ontario. What led you down that path to those schools and majors?
Chris Anderson: Yeah, that's a great question. Both my dad and my brother went to the University of Guelph. It's kind of a Canadian analog of Cornell—the big Ag school in Canada. I went there, did engineering, and quickly did my master's right after undergrad. Then I was doing consulting and software development, more environmental modeling. I was doing computational modeling of really exciting things like mine tailings and air pollution. For engineers, you kind of do the same thing over and over, because you get proficient at it and it’s easy to bill. I got really annoyed with that, so I went back to business school. Management Science is a combination of operations research and statistics—basically using math to tackle business problems. I could use the same engineering tools but tackle different problems. That’s why I went back to school. I started out in airline pricing and then naturally moved into hospitality.
Steve Carran: That's very cool. I'm curious about your military background. You mentioned that earlier. What did you learn in the military that you still take with you today?
Chris Anderson: The first thing I learned is I don't like having a boss and I don't like listening to people. That’s part of why I ended up in academia. If I had to have a boss and listen to them all the time, I probably wouldn’t succeed.
Steve Carran: Very cool. So now we'll dive into your career and how you got to Cornell. You started your academic career at Ivey Business School at Western University. What were some early insights or lessons from those days that you still take with you today?
Chris Anderson: I was mostly teaching MBA students and I had a love for analytics and statistics. Back in the nineties, analytics wasn’t as sexy as it is now. I had a hard time convincing MBA students to be excited about analytics. Today, so much has changed—students can’t get enough of analytics, especially in today’s AI world. That’s a huge change in how executives, managers, and students view data compared to 30 years ago.
David Millili: And you joined the Cornell School of Hotel Administration in 2006. What attracted you to Cornell?
Chris Anderson: That’s a great question. I found myself really excited about analytics, specifically working with airlines and rental cars. There was a big separation between the things I was consulting on, the things I was researching, and what I was teaching. The MBAs really weren’t excited about that space.
What attracted me to the hotel school was the chance to bring all those worlds together. I could be in the classroom talking about hospitality, airlines, rental cars, and pricing, still research that, and engage with industry on a regular basis. It made sense to be at an institution where all those parts could build off each other instead of being separate pathways.
Steve Carran: Very cool. At Cornell, you were the director of the Cornell Center for Hospitality Research. For those unfamiliar, it connects academic research with industry leaders in hospitality. What were some interesting insights that came out of that work dealing with real-world hotel operations?
Chris Anderson: That was probably close to 10 years ago. It was a great opportunity to spend time in front of industry professionals and understand the problems they were facing. As academics, we often focus on problems that matter in the future, sometimes 10 years out, or even never. The CHR gave faculty a chance to tackle problems that really matter today. That was the most interesting part.
David Millili: Over the years, your work has focused heavily on revenue management, pricing, strategy, and analytics in hospitality. Can you explain how revenue management has evolved over the last couple of decades and why it’s become such a critical function for hotels?
Chris Anderson: It’s very different than when I started my doctoral dissertation working with Air Canada and US Airways. Airlines were closer to monopolists than hotels, so we didn’t pay much attention to competition. We focused on our data and how things materialized. Then the internet exploded. I remember when Travelocity launched and Microsoft spun out Expedia during my PhD. Things changed quickly.
Today, for a hotel, how you generate demand is probably more important than the actual price. Good pricing might move the needle 2–5%, but poor demand management can cost 15–20%. Hotels need to integrate demand creation, transactions, and pricing, which blends marketing and analytics, unlike airlines where most business is still direct.
Steve Carran: Absolutely. I heard someone say that hotels are in the hospitality industry and airlines are in the service industry. Do you agree?
Chris Anderson: It depends. Economy hotels versus luxury hotels are very different operationally, as are Emirates versus Spirit Airlines. Economy is different than luxury, and Spirit is different than Emirates. There’s a lot of heterogeneity, which is great for consumers and interesting for operators.
Steve Carran: Not a one-size-fits-all approach. Now we’re moving into the industry thoughts section. You’re one of the leading academics studying revenue management analytics. Revenue management has evolved far beyond yield management. What do you think is the next frontier for hotel pricing and demand management?
Chris Anderson: We’ve spent decades improving pricing—pulling in more information, better views of markets and competition. We’ve become efficient at that. The next short cycle may involve regulatory intervention. There’s ongoing litigation in the US about pricing, what information is used, and whether it’s public or private. Changes in California’s Cartwright Act and legislation around algorithmic pricing are emerging.
The challenge now is finding the right balance: are we using information too fast to drive revenue, potentially disadvantaging consumers? The multifamily housing space has had hundreds of millions in settlements for pushing revenue management too far. For hotels, the goal is finding that sweet spot.
Steve Carran: Yeah, and it's funny, we just actually spoke about how there's not really many $150 room hotels anymore, right? It's gone up quite a bit. Those bigger markets we're looking at two to 300 are kind of those mid-scale hotels.
Chris Anderson: Yeah, it's really fun to see how the industry evolves. I remember 10 or 15 years ago when we're talking to developers. Everyone's building select service hotels, right? Let's just build a whole bunch of Courtyards. Really easy to operate, easy to price. We fast forward to today and everybody wants to build differentiated luxury because I can push prices higher. It's much easier to price a differentiated product than one that's more homogeneous to its competition. The space is kind of fun to be in because even the boxes that we're building are evolving. Unfortunately, revenue management is always not a part of the box building. It would be better if somebody asked me my opinion before they built the thing versus after it's built and now we have to set prices. But maybe that's one of these parts we'll see where the market demand moves into the asset construction part. The asset has a very long life, whereas revenue management can adjust in a very short timeframe.
David Millili: So when I ran hotels, we didn't have revenue management. We had basically, we're getting close to selling out, raise the rate and call all the hotels in Midtown Manhattan and see what they're selling at and try to get what they're selling for. So what's the one belief about revenue management that the industry still gets wrong some 20 years later?
Chris Anderson: I think a lot of revenue management is foundationally built on what you talked about, yielding. As capacity gets constrained, should I increase prices to maximize scarce inventory? I think we're slowly getting better where we're not really focused on the rooms we have left, but on who's in the market and what they are looking for. What's their willingness to pay? What's the value of my asset? Revenue management systems have got better at setting prices independent of capacity. As capacity gets tight, yes, I want to be more restrictive on prices, but in the last four or five years, people will pay a lot of money for things and experiences that they enjoy. Maybe we should price all hotels the same way we price luxury hotels—not so much focused on how many rooms are left, but on the customer who's in the market now. What's their willingness to pay? What are the alternatives? How do I maximize the revenue rate coming in? Yes, I want to yield if it gets tight, but I should be yielding all the time.
Steve Carran: Absolutely. So we've made it to the third question of industry thoughts without talking about AI. I have to bring it up now. With AI becoming even more popular in hospitality on the operations side, what parts of pricing and demand forecasting should stay human-driven, and what parts should we look to automate more?
Chris Anderson: AI is super fun. There are two parts. One is the cognitive labor part. I can use AI to streamline things I'm already doing—do them with less labor, quicker, and more repetitively. That's the automation part. The other side is the role of AI in demand capture. We've seen announcements this week about OpenAI closing the door on AI commerce. What does that mean for connecting with customers? All the OTAs are launching AI travel planners—not to change the experience at the online travel agent, but to help the OTA figure out how agent-to-agent commerce is going to work. The exciting part is that platforms are preparing for agents to connect with other agents. Right now, the agent is connecting with consumers, but eventually there will be a big chunk of commerce that is agent-to-agent. That will help revenue management because then we have mathematical beings working with other mathematical beings, which is more rational than working with humans, who can be irrational.
Steve Carran: That's great.
David Millili: Yeah, so the large brands have this huge data advantage over independent hotels. Without those resources, what tools or strategies do you suggest to help them level the playing field?
Chris Anderson: That's a great question. Historically, big brands and even platforms have not really capitalized on the richness of their data. We've all been at that big brand. The first thing they ask you is, is this your first time staying with us? We've all experienced that. You should probably know that. One of the things about AI is it makes connecting all that disparate stuff much easier. In the near term, big brands are going to extract more surplus from that data because it's much easier to connect all these disparate sources.
Yes, there's a Chris Anderson, a Christopher Anderson, a Chris K. Anderson, and my spouse, my kids—that's all one entity in the near future. The disadvantage to an independent hotel that doesn't have that breadth of exposure to consumers is probably going to get bigger—not because they're not doing it well, but because platforms and brands are going to do it better. That said, AI is going to dramatically reduce that advantage because instead of searching for "pet-friendly hotel," people are going to search with intent. When a customer types a sentence into AI or a travel planner, they are expressing intent—what they want, where they want to stay, what kind of experience they want. I no longer have to guess; they're telling me.
This is another force that will reduce the advantage of a big data-rich brand. The brand can estimate intents, but now anyone can interact with intents because consumers are changing how they search and express what they want. Once we get the agent part figured out, the data advantage may go away due to the expression of consumer intent.
Steve Carran: I like that point. One thing we talk about a lot, and we primarily work with independent hotels, is driving direct bookings, specifically through video content. But when hotels are getting more data about their guests, how should they start rethinking their relationships with OTAs?
Chris Anderson: I've always been a huge fan of OTAs. Some of my early research at Cornell looked at the impact of OTAs on transactions in general. I did a lot of early work that probably wasn't well received by some hotel friends because it was pro-OTAs. I do think there will always be value for the platform in this ecosystem, and that's not going away with AI. In the near term, OTAs may even have more power.
Third parties, especially voice interfaces, make it easier to access information directly. Those third parties can show more options. The assortment and variety that OTAs offer will always be an advantage to consumers. Even a great destination property will have to be in the consideration set.
I also own a small boutique in Ithaca with only 10 rooms. It's easier to manage that space as I get more people because I only have to yield 10 rooms. The size of the property and the role of the OTA are critical. As boutique luxury becomes more prevalent, that smaller footprint reduces reliance on OTAs.
David Millili: One of the most rewarding things in my career was being a professor at NYU. What advice would you give someone looking to get into academia?
Chris Anderson: For starters, I won't hold that against you. Academia is great. I view it as being a conservative entrepreneur. I get to do what I want while having a paycheck. As long as I do other parts of my job reasonably well, the dean won't fire me.
You need an entrepreneurial mindset to really enjoy academia. You have to be creative and willing to do things differently. I've reinvented myself many times over my academic career and taught myself new tools because of the entrepreneurial nature of the field. If I were teaching organizational behavior or leadership, it would be different because those disciplines have longer legs. In technology and analytics, you have to reinvent yourself all the time. If someone is looking to get into academia, I would say have that entrepreneurial mindset and be willing to try different things regularly.
David Millili: Yeah, good advice.
Steve Carran: Chris, I wanna get your opinion on kind of the future of travel. One thing we're seeing is oil prices are doubling, but we have the World Cup coming this year as well, and there seems to be a lot of opportunity on the luxury side of travel, but it seems to be getting a little bit more expensive. What do you think is the future of travel maybe for 2026 and beyond?
Chris Anderson: Yeah, I mean, there's a lot of different forces coming together right now that are really conflicting sort of travel, right? So we've had prices that have increased steadily across all the things we consume. I think we see oil, we see especially here in the US, we see some partial government shutdowns, which are changing capacity at the airport. And so that makes longer delays. It takes me longer to get from A to B. There's more uncertainty of when I travel. So I think the uncertainty associated with travel, combined with prices, is really going to be some headwind for consumers in the short term. Right. And World Cup has been a great example where the World Cup had this kind of innovative approach to ticket pricing.
So I don't know if you're a soccer fan, but they had this multi-step process that they put in place to kind of limit the secondary market, to make it harder for people to buy tickets and resell them. And I think they had really good intentions, but the net result of this was when the uncertainty around who was playing where and could I buy a ticket for that game was resolved, and I got access to tickets for that individual thing, they were crazy expensive. So they had this model where prices were lower, but there was uncertainty on who was playing. Once the uncertainty got resolved, prices skyrocketed, and I think that's because we have a subset of our population who has the financial means and interest in these things. And so I think that's what's pushed prices higher. And so for me, we're gonna see that in travel.
We've got high prices, some uncertainty around flights and travel, not to mention geopolitical issues. All those forces are going to make 2026 and 2027 not great years for hoteliers. I think that's what we're really gonna face.
Steve Carran: Do you have any advice for how hotels can increase revenue, make that up for this year or next year?
Chris Anderson: Yeah. And so again, like always, it's the experience. And I think part of this is going to be perhaps pulling back on rate. Even though I could have pushed rate because the demand was there, I have this unique property I own in Ithaca. You think about Cornell graduation weekends—prices can get insanely high because there's 10x demand.
And we have some big brand boxes that are gonna charge a thousand dollars a night for graduation weekend, whereas an experience-focused asset like I have, we basically don't set prices much higher than normal. Maybe put in a longer stay pattern, but we wanna make sure that person enjoys that experience and doesn't feel like we're taking advantage of them.
I think what we have now is this opportunity for firms to really double down on that experience and maybe leave some short-term money on the table in anticipation of filling in some of those softer spots down the road. And so I think this is a unique opportunity that we have right now.
Steve Carran: Great advice. Love that. So, Chris, we've been asking you questions this whole time. This is where we turn the tables. Let you ask David and me a question.
Chris Anderson: Thanks for that opportunity. So you're obviously connecting with industry professionals all the time. I guess for me, do you get the sense that our industry is sort of excited or worried? If you had to sort of gauge the excited and worried scale, where would you say the needle is moving right now?
Steve Carran: What are we talking—luxury segment or everybody else?
Chris Anderson: I think the industry as a whole, because everything ebbs and flows.
Steve Carran: Yeah.
David Millili: I can start with that one since I just got back from ITB in Berlin, so I have a slightly different perspective, having talked to a lot of hoteliers and tech companies from around the world. I think there is, to be honest, a lot of fear and uncertainty right now, and people are really nervous. There was a whole pavilion that couldn't even make it to ITB, which might be the first time that one pavilion couldn't go. So the whole Middle East region could not travel. I think we're a resilient bunch. Everybody's always optimistic and hoping for the best.
But right now, there is kind of this fear about what's going on in the world. So I think that's where we're at. Hopefully that improves.
Chris Anderson: Yeah, I think that's 100% on point. As an industry, we see that uncertainty impact things like conferences and meetings. And we have to imagine how the everyday consumer interacts with that—not just work travel, but leisure travel. How is that going to impact their decision-making? To me, that's key. And in the last two weeks, the world has changed so much compared to a month ago. It's crazy how things happen so quickly. These events can have short-term ramifications, but they could also be long-term.
Steve Carran: Yeah, I agree with David. There’s uncertainty, but I love that you said we’re a resilient bunch. It’s not gonna be as bad as COVID, when hotels were shutting down and people weren’t able to travel at all. I always look back at a conversation I had with Anthony Moer. I was kind of like, what is gonna happen? And he said, this happens. Like Chris said, it ebbs and flows. Bad things happen. We always come back. We stick around. We’re not going anywhere.
But this is definitely a character-building time for the travel and hospitality industry, especially as we see the CEO of United Airlines come out and say airline prices are gonna go way up soon. We’re going to have to be smarter about travel and much more strategic. Hotels, as Chris said, are gonna have to get creative with bringing in additional revenue and work through these tough times.
Chris Anderson: Yeah, and the airfare is just a real unfortunate thing for the lodging part. Short-term prices go up because of fuel, and if consumers resist those price increases, airlines are great at changing routes and restricting capacity, because they need those prices to support their costs.
They restrict capacity, and once the airline space restricts capacity, it takes a long time for us to get back to prices that really induce travel. I hope this kind of fuel price shock is short-term, because if it’s long-term, airlines have to respond and push prices through. Historically, airlines push about 50% of a fuel cost increase into fares. It’s slower, not everything, but long-term, they need those prices to sustain their cost structure. And the way they do that is revenue management—they restrict capacity.
Park that plane down in Arizona for a while. If they restrict capacity or make network changes, space recovers much slower. Prices can go up on the cost side quickly, but they come back down to Earth really slowly. It will take a long time to get travel back into our ecosystem if there are restrictions in capacity from trying to support higher prices. I’m really hoping that doesn’t happen. I don’t mind United Airlines saying they’re gonna raise prices to cover costs. But if consumers stop traveling because of prices and uncertainty, and there are capacity restrictions, then it’s a different can of worms.
Steve Carran: Yep. It’s funny, I just had a notification from Facebook, a memory popped up: “Who wants to come to Denver?” It was a plane ticket round trip from Washington, DC to Denver for under a hundred dollars. It’s amazing how things have changed in the past five or six years. I love that insight, Chris.
We have one more section here. We’re gonna bring in Jon, our producer. He’s been listening in on this.
Jon Bumhoffer: You talked about the property in Ithaca that you own, and I think that's really interesting and I'm curious one. Why did you make a decision to go in on that, and how long have you owned it for?
Chris Anderson: That's a great question. So obviously, I'm an academic, I've been an academic for like 30 years, but I do enjoy the other part of the world. I've actively engaged with lots of startups. I've had a couple of failed startups of my own, that's why I'm still an academic. A couple years before COVID, this kind of iconic building in town went on the market that had been a. I just said, this place is super cool. And I went in, partnered with another local ichan and she sort of operates the property. Since that time I've got engaged in a couple other properties in the area, both economy and select service. I've always loved the space and being an owner is actually even more fun. Kind of like my own Petri dish sometimes to play with things, but yeah, it's great.
Jon Bumhoffer: One follow up on that. Being on the revenue management side, maybe more the analytical brain and the numbers. When you're looking at something like that, maybe this will help the audience. What are the things you're looking for, especially on a smaller property like that? Sometimes the numbers don't bear out. But what are some of the boxes that you had to hit?
Chris Anderson: A lot of that is trying. Ithaca is a really interesting market, crazy seasonal. When I was thinking about a proforma for this, I said, well, I'm just gonna close this thing for like six or eight weeks a year. Can I make the numbers work? A lot of people want to travel to Ithaca when Cornell is not here and it's in the winter, so it's very quiet mid-December through the end of January. For me, the first thing that came to mind is, do I always need to be open? What if I close the door? If I close the door, what does that mean for cost structure? What does that mean for how much I have to pay my employees when they're actually not coming to work, but they still need to cover their bills? That was a whole new way of thinking about a business that says, sometimes you don't always have to go to work, and so how do we sort of make that economic story?
Jon Bumhoffer: This is not a question, but I wanted to just say one thing. You mentioned with the revenue management side, a lot of times you're maximizing the amount you can get. But I loved your point about, what does the end consumer feel like? Do they feel like they're taking advantage of, even though you maybe forced their hand and you can get that revenue? Is it a good decision to do that? I thought that's not something we hear about often because it's all based on when they pay that bill. What is their view of the experience they had? A lot of it is on that last transaction and the amount they paid—did they feel like they were taken advantage of? So that's important.
Chris Anderson: Yes, especially as we get into more differentiated upmarket luxury inventory, where we always have pricing power but don't often have capacity constraints. How do we take a different view of pricing in the absence of capacity constraints to really think about the long-term value of customers? Historically, revenue management has been a myopic view of revenue. It's not been a customer lifetime value approach to pricing. One of the downsides of traditional revenue management is it's just myopic—it's really about tomorrow and the revenue I can get tomorrow. As our industry shifts from select service to experiences to luxury, all that is going to make even more tacit parts of our decision-making process.
David Millili: Well, that does it for another episode of The Modern Hotelier, Chris. This is where you get to let people know how they can get in touch with you and find out more about Cornell.
Chris Anderson: That's great. My email's just c Anderson at cornell.edu. Pop on over to cornell.edu. If you're interested in the university, of course you should be thinking about Nolan for your educational experiences, for your kids, or for executives. I'm also the director of our Executive Master of Management program, for mid-career hospitality professionals who are looking to ramp up their career on a part-time basis. I would love to talk to you about that as well. Education is exciting, especially in a time where things are changing so quickly.
David Millili: Right.
Chris Anderson: Answer.
David Millili: That's funny. That's great. Well, that does it for another episode of The Modern Hotelier, the most engaged podcast in hospitality. Whether you're watching or listening, we appreciate you. Hope to be with you again soon. Thanks for joining us, Chris.
Chris Anderson: My pleasure.