Assessing the Performance of Your Revenue Performance Initiatives
By Paul van Meerendonk, Director of Advisory Services, IDeaS Revenue Solutions
While revenue management professionals devote significant investments and efforts towards advancing their hotel's revenue resources, many hotels still struggle with assessing the actual performance of these revenue management initiatives. Namely, how can hotels ensure they are squeezing all the juice out of the proverbial revenue management orange?
The hospitality industry has been using revenue management successfully for decades. However, for many organizations, the greatest revenue management challenge is not necessarily of a technical nature, but often organizational. Confronting hotels today is an essential need to align their people, processes and technologies around achieving maximum revenue performance.
This means that hotels (and their revenue management professionals) have been dedicating significant time, resources and financial investments into the development and advancement of their revenue management strategies, technologies and talent, to embrace more strategic and holistic approaches that capture the right guest at the right time - and at the right price. This also means that today's hotels are putting a heavier focus on defining the value of revenue management, the importance of benchmarking for success, performing routine and thorough assessments, and collaborating with professional advisors for unbiased approaches to long-term, sustainable revenue success for their hotel organization.
The Assessment Struggle is Real
Not only is it challenging to determine how to properly measure and assess the performance outcomes of a hotel's revenue management initiatives, but articulating its value proposition and return on investment within the company is easier said than done. Like any complex business process, it's not surprising to find that revenue management is still often misunderstood - with plenty of opportunities to further its understanding through better education, awareness and adoption. Hotel groups around the world are working with revenue management advisory leaders on a daily basis to instill these types of proficiencies within their organization because of the greater perspective they can bring.
What is often surprising, however, is that two organizations with an extremely similar business model, operating in the same space, and with similar stakeholders will often take two very different approaches to the adoption of their revenue management principles. While one hotel organization may successfully amalgamate revenue management into all of their operational practices, the other may have yet to even determine the value that the practice of revenue management can bring them. So what is it that drives such disparate behavior?
Providing a compelling value proposition to key stakeholders can be an overwhelming task. Industry professionals should begin by considering the methods they are using to measure the impacts of revenue management on their hotel. This will help ensure that any appropriate steps in preparing and communicating these measurements can be considered and undertaken.
Revenue management professionals also need to recognize that devising, implementing and agreeing on what their hotel's idea of success looks like is just as important as the actual assessment activities themselves. This understanding will ultimately go a long way towards supporting their hotel's overall success story.
Benchmarking for Success
The practice of benchmarking is an extremely helpful process in today's industry because it allows hotels to measure their performance, analyze their competitors' performance and set specific goals that will help them to meet - and exceed - the industry's top standards. Simply put, benchmarking is a business process used across many different industries that discovers insights and identifies the gaps where organizations can improve to achieve their best possible revenue and operational performance. For hotels, this process typically involves comparing themselves to other hotel groups (as well as the industry's standard practices) to determine which hotels are the best, which hotels set the standard and what that standard actually is.
It is critical that hotel organizations fully understand the purpose of benchmarking, the difference between benchmarking and competitor research, and align their benchmarking practices in conjunction with their hotel's overall management objectives. The latter is extremely important because some organizations may have guidelines on the inclusions of different types of data, or may retain an arsenal of data that is already available for the hotel to use. There are three main objectives of benchmarking. These include determining where a hotel can make improvements, analyzing how others are achieving their high performance and using these insights to improve a hotel's own performance. Without benchmarking, it is nearly impossible to fully understand industry standards without a comparison against them, or retain a comprehensive awareness of where their competition stands. While benchmarking may be a singular activity for some hotels, it should be recognized as a continuous activity for organizations looking to routinely improve their practices and performance.
Competitor research, on the other hand, is another important practice that many hotels find valuable insights from. However, this type of research tends to focus more heavily on the "now" - reporting short term outcomes and performance measures, rather than focusing on the core principles for sustainable, continuous improvement. While competitor research can be extremely helpful from a general awareness standpoint, and for sales and marketing initiatives, the focus that benchmarking places on driving long term improvements becomes more of a significant asset for hotel organizations focused on the future.
No matter the size or structure of a hotel's organization, successful revenue management requires routine performance assessments. These assessments should thoroughly evaluate all of the hotel's current capabilities while also identifying opportunities to promote a wide-reaching revenue management culture across all of the hotel's teams and revenue streams. Implementing performance assessments into the hotel culture is beneficial for a variety of reasons. In addition to measuring the impacts of revenue management initiatives, it is extremely helpful for hotels looking to grow their revenue management capabilities and get more out of automated revenue management. Performance assessments will provide the insights needed to amplify revenue management capabilities and commitment going forward.
Revenue management is all about data and performance. Performing an in-depth audit should be the first step and include a deep dive into many of the different areas of a hotel's revenue management strategies and practices. Typical evaluations include a thorough analysis of a hotel's revenue performance, positioning, forecasting, rate structures, pricing controls and revenue management processes. The second step involves the gathering and analysis of the data, reports and business performance indicators. This data can then be turned into actionable graphs and charts that allow detailed insight into the hotel's current performance and revenue opportunities.
If the assessment is completed by a third party advisory partner, these data and performance findings are then presented in a clear, detailed report for the organization to review. These reports include actionable steps for organizations to capitalize on short-term opportunities, along with recommended structural improvements that will position their business for long-term revenue success. A hotel will typically receive a personalized overview of all aspects of their revenue performance, including (but not limited to): identification and quantification of lost revenue; a cause/effect analysis detailing process and structural challenges and opportunities; segmentation, room type, pricing structure and inventory recommendations; and strategic and tactical optimization roadmaps - prioritized by both impact and effort.
Success in Today's Hotels
Professional advisers bring a fresh perspective to business planning by providing insights and facilitating the development of a new vision. A recent example of advisory success is the Kaiserhof Wien, a privately-owned hotel located close to the heart of Vienna. Having worked with external advisors in 2014, the hotel kick-started the process of creating a new revenue management culture.
Alongside the evaluation of their internal resources, their performance assessment focused on topics such as market re-positioning and pricing to identify any areas that would provide Kaiserhof Wien with market opportunities. This discovery process uncovered the hotel's main challenges, their significant pain points and enabled their team to establish the appropriate competitive set for price comparison. It also provided tactical guidance on best practices to handle promotions. After their initial goals were achieved, the hotel could then accelerate their revenue management capabilities to the next level.
Another excellent example of the success of consultative services in hotels is with Jin Jiang hotels, who also worked closely with professional advisors to build on their existing revenue management program. To face intense market competition, Jin Jiang worked intently with their partner to identify three top-level goals: the development of a strong team of revenue management talent; building and strengthening their revenue management culture throughout the organization; and encouraging and facilitating their hotels to carry out revenue management based on automated data analyses.
Jin Jiang also collaborated to organize annual workshops that would continue the strengthening of their revenue management culture. These workshops addressed key revenue management concepts, in addition to covering strategic insights into how to improve their revenue management strategies.
Going outside of the internal hotel organization for advice on how to grow business does not signal defeat. On the contrary, it shows that a hotel is ready to take an honest and unbiased look at how their business is performing and truly take an "outside-in" perspective to determine what it means, what it should be doing, and the steps they need to take to get there. Advisory professionals give hotel groups around the world fresh perspectives without any self-imposed limitations. These perspectives are grounded in proven tactics and strategies that can properly align a hotel's personnel with their organization's processes and technology to drive maximum overall success.
Regardless of whether a hotel takes the approach of enlisting the support and advisement of a third party professional service, or assumes the performance assessment process internally, it remains critical that the definition, measurement and articulation of their revenue management initiatives remain at the forefront of their ongoing revenue activities. Instilling a thorough, routine and well-rounded practice will enable hotels to confidently assess where their revenue performance is today - and where and how it needs to grow in the future.
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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