Five Things Every Revenue Manager Should Be Doing
By Paul van Meerendonk, Director of Advisory Services, IDeaS Revenue Solutions
According to attendees at this year's HSMAI Revenue Optimization Conference (ROC), revenue managers wear a lot of hats these days. When asked to define their roles before the keynote address, just a few of the many answers included "forecaster, analyst, strategist, system designer, marketing guru, talent manager, social media expert, data miner, sales support and, channel manager." With this many labels, it can be challenging for revenue managers to navigate the arena and decipher the best use of their time and energy. On top of this, faced with a seemingly endless amount of data to collect and analyze, it can also be easy to overlook the big picture, which is developing comprehensive, innovative revenue strategies that maximize profitability.
In order to help revenue managers stay on track and better position their organizations for long-term success, below are five high-level tips for raising the bottom line.
#1 - Collect the Right Data
Amid today's high-speed, interconnected nature of business, one of the most important things revenue managers should be doing is collecting and analyzing the right data-particularly data that is both historical and futuristic. For example, from a historical perspective, data should be collected on booking patterns for various market segments, market conditions, room types, and more. Revenue managers can then look at this information and use it to forecast future booking pace-typically about 90 days ahead. By doing this consistently, revenue managers can more easily compare current and predicted activity levels to the historical data and make adjustments to pricing strategies as needed.
However, collecting all of this data manually takes a significant amount of time and energy. Amid a flurry of flash sales, mobile marketing, and online travel agencies (OTAs), it can be tough for revenue managers to quickly recognize changes in demand and react in time to make a profit. In order to remain competitive, many hoteliers turn to revenue management software, which automatically provides executives with the data they need when they need it-often cutting their daily workload in half. Through a series of high-speed, complex algorithms, revenue management software automatically assesses hotel performance on a daily, weekly, monthly, and annual basis, allowing revenue managers to quickly compare rooms sold and revenue against data at the market segment and total hotel level. Automated revenue management systems also free up revenue managers' time for making more strategic, proactive decisions for their hotels.
#2 - Deepen Customer Intelligence Processes
A key part of collecting the right data also includes customer intelligence. Hal Rosenbluth, former president of Walgreens Health and Wellness, once said about business, "There is only one boss - the customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else." As Rosenbluth points out, catering to the customer is critical to staying in business, and it isn't just for marketers and customer-facing staff. In order to truly optimize revenue amid today's uncertain and competitive economy, revenue management professionals must take the time to understand their organizations' customers in order to keep them.
One way revenue managers can do this and acquire increased customer intelligence is by working closely with their organization's marketing team. According to a white paper from SAS, "Competing on Customer Intelligence," marketing has historically been guided by the four P's: product, price, promotion, and placement-and in that order. However, SAS states, "this product-centric business model reflects a company that is inwardly focused on what it wants to sell, rather than outwardly focused on what customers want to buy." By paying more attention to the wealth of data marketers collect on customer demographics, segmentation, and preferences, revenue managers can use it to predict future consumer behavior and put together better packages and prices that will attract people to the hotel. In doing so, revenue managers transform choreographed customer data into insights that lead to better, more informed decision-making and profits for the hotel.
#3 - Think Creatively
As pointed out above, the line is blurring between revenue managers and marketers. Increased transparency in business today-including unbiased customer reviews and prices displayed on internet websites-requires that revenue managers exercise creativity and innovative thinking to get ahead.
For example, many revenue managers panic during times of weaker bookings and start slashing rates in the hope that it will drive up demand. However, research has proven (over and over) that this technique rarely works. In fact, one of the worst things a hotel can do is offer a discount to beat out a competitor and then reduce one of their services to help accommodate for the price reduction-something that may differentiate the hotel from the competition in the first place.
To overcome periods of weaker bookings instead of focusing solely on price, revenue managers should approach the lapse as an opportunity to reiterate what makes their property stand out for guests. This can be done by working closely with the marketing team to offer room upgrades, complimentary services-such as a spa treatment, an exclusive gift, or free Wi-Fi in rooms-or another package that attracts customers.
#4 - Start Learning 'Total' Revenue Management
There is little doubt about it-the future of revenue management is 'total' revenue management-optimizing revenue from all of a hotel's available revenue streams (including rooms, food and beverage, spa, golf, retail, etc.). This has been repeatedly emphasized by several organizations and experts in revenue management, including The Cornell University School of Hotel Administration and, more recently, a panel of experts at HSMAI ROC.
Although it's not a new concept, hotels and resorts are spending more time and energy today refining their tools and processes in order to optimize total guest spend. And because it won't be long before technology evolves to accommodate this new approach, it's a good idea for revenue managers to begin familiarizing themselves with 'total' revenue management and communicating its importance to senior leaders.
A good place to start is moving away from a "room-centric" approach and tracking revenue contribution by market segments. In an article titled "Optimizing Total Revenue Management," Bonnie Buckhiester notes that "hoteliers believe they know instinctively what segments produce better flow-through, but often this information is anecdotal in nature and, at best, is confined to the rooms and/or food and beverage divisions, not ancillary revenues." She notes that by tracking profits on a segment basis and really drilling down to understand each segment's revenue contribution, hoteliers can then better manipulate their business mix to drive profitability.
Ultimately, by taking steps now to prepare for this shift in revenue management mindset, revenue managers can better ensure that their organizations will remain competitive later on.
#5 - Serve as a Revenue Management Ambassador
In addition, as the industry shifts towards total revenue management, it's important that revenue management professionals be not only skilled mathematicians, but also effective communicators for their field. During his keynote address at HSMAI's ROC, Craig Eister-VP of Revenue Management for InterContinental Hotels Group-addressed this issue, saying, "We haven't told our story as powerfully as we need to tell our story to create a really strong revenue management discipline."
Although many general managers and senior leaders understand the importance of having a formalized revenue management process and culture in place within their organizations, still many others do not. And as revenue management continues its domain at the corporate and individual property level, revenue managers must work closely with the executive suite to build and instill a strong culture of revenue management to drive profitability. In addition, in order to practice 'total' revenue management and optimize profits from all hotel assets, revenue managers must obtain executive buy-in across multiple departments; including sales, catering, spa, food and beverage, and more. To do so, they must not only accurately forecast and analyze data, but also effectively communicate revenue management strategies and principles to senior leaders.
The New Face of Revenue Management
In summary, it's an exciting time for revenue managers. The industry is rapidly evolving, and revenue managers that are strategic, forward-thinking and entrepreneurially-minded can take the science and art of revenue management to new heights within their organizations. In addition, equipped with the right tools and data, revenue managers can serve as strategic partners to their organizations-driving up the bottom line through enhanced customer intelligence processes and a greater culture of revenue management.
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...
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