Mr. van Meerendonk

Revenue Management

Confronting Expectations: How to show the value of Revenue Management

By Paul van Meerendonk, Director of Advisory Services, IDeaS Revenue Solutions

Revenue management is not a new concept, yet some are still struggling with its uptake, while others are reveling in the ongoing success it has brought to their organizations. Two recent conversations with global clients have stood out in highlighting very contrasting approaches to adopting revenue management principles.

The first: a conversation with the CIO of one of the world's largest hotel organizations, on how revenue management could continue bringing innovation to the organization and drive value for its stakeholders. The most striking comment from this CIO was: "Revenue management is in our DNA. It is what we know needs to be done. We embrace it, understand the value it brings to the organization and want to do more of it."

The second: a meeting with the project group of another leading global hotel organization, a similar size to the first. While it was apparent the corporate revenue management team understood its benefits, many in the organization doubted the long-term value of revenue management. In an ongoing project our organization has been helping this client demonstrate the value of more sophisticated real-life revenue management capabilities, with so far, very positive results. This conversation centered on whether the project's success to-date was scalable, extensible and repeatable and if more sophisticated revenue management practices would really bring sustainable value to the business.

Two very similar organizations, two very different conversations.

Does it surprise me that after almost 20 years since the advent of revenue management, some companies are still struggling with the value proposition and the return on investment of revenue management processes? No. As with any complex business process, not only is revenue management often misunderstood, but there is always more to be done to educate, teach, create awareness and raise adoption. We work with companies around the world on a daily basis, helping them instill these capabilities.

What does surprise me is that two organizations with a very similar business model, operating in the same space, with similar stakeholders have taken two very different approaches to adopting revenue management principles. The first organization has clearly demonstrated the value of revenue management in a way that it is no longer questioned. It is now part of the intrinsic fabric of the company's operations. While the second is yet to articulate what value revenue management can bring. What has made the difference between the two? These three key strategic viewpoints can help companies successfully demonstrate the value of revenue management on a daily basis.

Culture

While it sometimes seems odd talking to the rational and numbers-driven revenue management community about culture, in my opinion it is one of the key ingredients in making revenue management a success. Culture is important in any organization and in any department. I believe it is especially so when it comes to revenue management, because although much progress has been made, its purpose is still poorly understood in many organizations. Defining the culture, the shared attitudes - values, goals, and practices - that characterize revenue management sets the tone for what the discipline "feels, tastes and smells like" in an organization, and essentially allows staff to understand its purpose.

Ask 20 people in your organization what they think the objective of revenue management should be and you will probably get 21 different answers. Surprisingly, we find very little time is spent in many organizations determining what revenue management should "be". There are often no clear objectives or common goals defining what revenue management is supposed to do, leading to conflicting priorities, misalignment of goals and frustration when sophisticated revenue managers spend their time producing reports instead of adding value to the business.

At the start of building revenue management capabilities for a new client we often find ourselves spending time developing a "revenue mission statement", if there are no guiding principles already in place within the organization. We spend time with our clients, setting clear expectations on what can and can't be achieved, and subsequently ensure the mission statement is embraced by all key stakeholders - including general management and/or the executive team. When everyone is aligned and moving in the same direction, it is much easier to reach the goal. We also ensure any subsequent development of standard operating processes and training, etc. supports the agreed upon mission.

Obviously, as the business changes, the goals and mission statement change and frequent revisions of the "game plan" are critical. Revenue management looked very different even five years ago and even organizations which are at the top of their revenue management game today risk falling behind if they are not focused on keeping up with the pace of change.

Dedication and focus

The most successful revenue management "believers" are those who have shown a clear dedication to making revenue management part of their organization's DNA. This is not achievable overnight - it requires commitment, resources and, ultimately, funding. Today's leaders in the field do not have to spend time "selling" the discipline to the rest of the organization. The organization understands the value and return associated with it. Why? Because as the organization has grown its capabilities, it has made sure any revenue uplift achieved has been measured objectively (and often independently) and the results and return on investment clearly communicated across all key stakeholders.

It is no longer a question of "if" revenue management can provide value, rather a question of "how much". Yes, it might seem costly to get started; however, it is a very small price when you consider the payback can often be measured in months, not years. It is not uncommon for organizations doing only a little to see very significant, double digit, percentage revenue increases in a very short time - even when only basic revenue management capabilities have been implemented, such as standard operating processes, training and simple tools.

In many cases the returns are such that any enhancement project becomes essentially self-funding. At the same time, the most innovative companies are continuing to push the envelope, working towards fully automated dynamic price optimization systems and total revenue (and profit) management, creating significant incremental value at every step.

The tool/system/software is only a small (but important) piece of the equation:

When talking about revenue management, many hoteliers believe adopting the right system or software will solve all of their problems. It is true these systems are critical to a thorough revenue management approach for companies who have the appropriate culture, people and processes in place. It is only when revenue managers work with the system every day that the maximum benefits and return on investment will be achieved. On the other hand, when the organization fails to be adequately prepared to optimally use the technology, the system will quickly become underutilized, misunderstood and finally uninstalled.

Great revenue management organizations understand that the system is only a small (but important) piece of the equation. They understand the system needs to be supported by the right people, who need to be equipped with the knowledge to properly utilize the tools, and challenge decisions and recommendations where necessary. These organizations also understand that any revenue management system needs to be continuously adapted to the ever-changing business environment. Where a few years ago, simple yield management techniques were sufficient, in more recent years the wide adoption of best available rate and dynamic pricing, the advent of internet distribution and the increased availability of cheap data have driven significant enhancements. The most innovative systems take into account price as a function of demand, are fully integrated with the key operating systems and consider market and/or competitor information when making decisions.

While there are many areas where an organization can cast its focus to improve revenue management, concentrating on these three key areas will help companies become a success story in the revenue management space. Creating an all-encompassing culture, having a dedicated and focused approach to ingraining revenue management within an organization's DNA and utilizing the right tools, supported by the right people, are all part of a formula that makes leading companies succeed.

As Director of Advisory Services for IDeaS Revenue Solutions, Paul van Meerendonk leads a global team of revenue management advisors focused on hotel revenue optimization projects. Mr. van Meerendonk is responsible for global development, management and operations of the Advisory Services team. He oversees the hiring, training and management of industry-leading consultants located in London, Beijing, Singapore and Atlanta. Mr. van Meerendonk also represents IDeaS on industry thought-leadership initiatives related to trends and best practices within revenue management, including authoring a number of white papers, conducting public speaking engagements, as well as leading key client webinars with an average audience of over 200 global representatives. Mr. van Meerendonk can be contacted at +44 (0) 118-82-8100 or Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
RESOURCE CENTER - SEARCH ARCHIVES
General Search:

JUNE: Sales & Marketing: Who Owns the Guest?

Emanuel Baudart

Social media opens the doors to conversations about experiences – good or bad. Twitter gives hotel guests the option to air their grievances while Instagram gives them the bragging rights on their best days. Customers are giving out their feedback and it’s up to the industry to take it seriously in how hotels engage with their guests. A guest’s social media is an opportunity for hotels to work better and more efficiently to target and enhance the guest experience. Coupling the data that guests give through social media with the data we have from years of growing AccorHotels, we are focusing on using the right tools to best access the guest. At AccorHotels, we are moving away from the transactional model of hospitality and focusing on building relationships through social engagement and bolstering the benefits of our loyalty program. In order to do both, we’ve invested in building better tools for our hotels to succeed on the promise of hospitality – great service, attention and comfort. READ MORE

Wendy Blaney

In a world where almost everything is done digitally, it is important to remember how impactful a two-way conversation can be for consumers interested in booking travel. There is no denying that it has become easier and easier to plan trips online, and purchase products almost instantly – yet there are still many customers who want the personal touch and assurance that they truly understand what it is that they are buying. They want someone to provide direction, answer questions, and give them “insider” information. This is especially true for a dynamic destination like Atlantis where there are an abundance of options. Our guests aren’t just interested in a resort, they are seeking a coveted, catered experience. READ MORE

Mustafa Menekse

Though it seems that online travel agencies have been a part of the hotel booking landscape for eons, the reality is that just 25 years ago, brick and mortar travel agencies were the norm. Travelers would visit an agency for trip planning advice, printed brochures, and to speak with actual travel agents to assist in booking airfare, hotel accommodations and rental cars. Travel agencies had the knowledge and information about the destination and, of course, the tools and connections to book hotels and flights to begin with. The support these agencies provided put traveler’s minds at ease, especially for international trips. This was the foundation of why OTAs are in existence. READ MORE

Scott Weiler

A guest of a hotel or chain books with an OTA. Terrific for everyone, right? The OTA is grateful for the transaction, and hopes to get a nice share of that customer’s travel bookings for years to come. The hotel is happy to get a (let’s say) first time guest. Sure, they paid a commission for that booking, but the GM and their team is ready to do their stuff. Which is to say – deliver a great stay experience. Now what? Now it’s a battle of the marketers! READ MORE

Coming Up In The July Online Hotel Business Review




{300x250.media}
Feature Focus
Hotel Spa: Measuring the Results
As the Hotel Spa and Wellness Movement continues to flourish, spa operations are seeking new and innovative ways to expand their menu of services to attract even more people to their facilities, and to and measure the results of spa treatments. Whether it’s spa, fitness, wellness meet guest expectations. Among new developments, there seems to be a growing emphasis on science to define or beauty services, guests are becoming increasingly careful about what they ingest, inhale or put on their skin, and they are requesting scientific data on the treatments they receive. They are open to exploring the benefits of alternative therapies – like brain fitness exercises, electro-magnetic treatments, and chromotherapy – but only if they have been validated scientifically. Similarly, some spas are integrating select medical services and procedures into their operations, continuing the convergence of hotel spas with the medical world. Parents are also increasingly concerned about the health and well-being of their children and are willing to devote time and money to overcome their poor diets, constant stress, and hours spent hunched over computer, tablet and smartphone screens. Parents are investing in wellness-centric family vacations; yoga and massage for kids; mindfulness and meditation classes; and healthy, locally sourced, organic food. For hotel spas, this trend represents a significant area for future growth. Other trends include the proliferation of Wellness Festivals which celebrate health and well-being, and position hotel spas front and center. The July issue of the Hotel Business Review will report on these trends and developments and examine how hotel spas are integrating them into their operations.