Mr. van Meerendonk

Revenue Management

Is Your Organizational Structure Maximizing Your Revenue Potential?

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

The evolution of the revenue management industry has been one of 2016's top trending topics. From the onslaught of big data opportunities to the drastic improvements in the life of the revenue manager, the benefits of revenue management practices and its sophisticated technology have been far-reaching in leaving virtually no revenue stone unturned. However, advanced technology has been accommodating far more in this industry's evolution than high consumptions of complex data and the bolstering of on-the-job productivity. As the industry continues to propel forward with better insights and more informed strategic opportunities, we've also seen a distinctly marked shift in how the role of revenue management is positioned within the organizational make-up of hotel(s) and hotel companies.

Looking closely at the revenue management industry's past organizational structure, it's clear to see that revenue management roles within a hotel's ranks have evolved significantly over the years. From departmental role reversals to critical new job functions to how technology can supplement hotels with limited head counts, there has been no shortage of organizational changes within revenue management. So what exactly does the organizational structure look like now, where is it headed in the future and what are the opportunities for hoteliers to use the industry's technology and resources to fill their organizational gaps?

Revenue Roles Through the Looking Glass

  • Revenue Management and Sales & Marketing - One of the largest organizational structure shifts to date can be observed by evaluating the dynamic relationship between the revenue management and the sales and marketing departments. While the revenue management department may have directly reported to sales and marketing in the past, they may now find themselves reporting to the hotel's general manager or a hotel companies chief operating officer instead. This organizational shift can be considered quite telling in terms of how the hospitality industry has strongly embraced the practice of revenue management for not only boosting bottom line profits, but for encouraging its revenue culture to permeate throughout the entire organization.

    How else has the relationship between revenue management and the sales and marketing team been changing? Many organizations have also been experiencing a role reversal between the two departments. Rather than revenue managers reporting into the sales and marketing department (which has historically been the case), the sales and marketing organization is now seeing their reporting structure shift under the umbrella of the revenue management department. The sales organization itself has also been experiencing its own evolution over the recent years - and it has been interesting to observe the changing role of the hotel sales manager and sales team. With the complexity of distribution and digital marketing commanding a larger precedence than before, hotels are beginning to see their revenue and digital teams growing and their traditional sales teams starting to shrink.

  • Revenue Management and Distribution - One could argue the role that distribution holds within the practice of revenue management has experienced one of the most explosive upsurges in the recent past. Having evolved significantly with the influx of new data sources, technology and channels over the past few years, the distribution function could be considered big enough to be on its own - and in some cases, it is. Given the increasing complexity of prices, restrictions, add-ons, channel usage, technology and distribution costs, many hotel organizations have already increased head counts that focus primarily on developing and executing the hotel's distribution strategy.

    However, what exactly does the future of this complex distribution landscape hold? The hospitality industry has never been a stranger to consolidation, and recent industry merges such as Booking.com & Priceline, Expedia & Orbitz and many others, are prime examples of this. How will the continued consolidation in the channel industry affect the complexity of distribution? With the distribution landscape having exploded from simple to complex in a relatively short time frame, will future consolidations eventually begin to simplify the distribution landscape again? If so, what will happen to the strong distribution roles hotels and hotel groups have built up? A change from tactical channel management to strategic channel partnerships will likely unfold.

  • Revenue Manager vs. Data Scientists - For today's top hotels, leading innovation in hotel industry analytics has become a critical component to measuring their success. To become an effective leader in innovation, hotels need to focus heavily on evaluating and improving their people, processes and technology. With advances in technology aiming at the right targets - and the processes following right behind it - today's hotels are critically evaluating their people now more than ever. The role of the revenue manager has increasingly gone under the microscope, with industry experts weighing in heavily about the qualifications necessary for this role in today's highly dynamic industry. Leading experts agree that the revenue manager role has quickly morphed beyond that of a numbers-orientated reservations manager, or analyst of finances into something of a much higher caliber to set them apart in a competing marketplace of industry analytics.

    Hotels are looking progressively at the development of this role as an animated mash-up of three diverse profiles: a mathematician, computer scientist and trend-spotter. This new set of requirements has been driving many leading hotels to replace or supplement the revenue manager by acquiring a hotel data scientist - a position previously dubbed by the Harvard Business Review as "the sexiest job of the 21st century," and a position heavily employed through the likes of Google, LinkedIn and Uber. When it comes to retaining the people necessary to drive innovation forward, the role of the data scientist is quickly helping hotels rise above the fierce industry competition.

Support Through Technology

While many hotel groups are well-equipped with employing the necessary head counts to maximize their revenue management organizational structure, what about the independent hotels or hotels without the capacity or portfolio of properties to command a variety of revenue management positions, let alone data scientists? How can hotels with a single revenue manager compete with larger chains that employ a more expansive and sophisticated revenue team?

Today's advanced revenue technology helps hotels fill organizational gaps and streamline the tasks that, in an ideal situation, may have otherwise been delegated to an alternative position. While technology cannot possibly replace each revenue management role in and of itself, it can help hotels ease the burden of manual processes and increase their strategic focus. For example, revenue managers operating without a traditional revenue analyst role can look to their technology solution to automate and generate various reports that help reduce manual and tactical administrative duties - allowing them to be more strategic in their revenue, promotional and marketing initiatives. Roll-up reporting capabilities, which allow revenue managers to view multiple hotels in one report, can assist regional or multi-property DORMs in quickly spotting market trends with different properties under their remit.

The Opportunity for Outsourcing

For other hotels, it might be cost-prohibitive to retain an onsite revenue manager or centralized revenue management team. One highly effective way to support revenue growth when faced with organizational roadblocks is to outsource revenue management needs. This type of outsourcing works well with hotels that have a high degree of standardization but are not equipped with the most advanced tools, technology or people. For these businesses, there are three main considerations when implementing a revenue-management-for-hire model: financial benefits, performance management and cultural influences.

  • Financial Benefits - Cost benefits are the main motivating factors for many owners and management groups. Outsourcing revenue management means gaining valuable experience at a fraction of the cost of other options. The insights gained help the hotel to reduce payroll, turnover and shortage concerns. This also helps maximize the investment of hiring and training staff. The benefits to payroll affect other areas of the business and the money saved means increased financial flexibility and excess cash flow for sales, marketing or property maintenance. Additionally, a for-hire model allows new properties to immediately benefit from revenue management analytics and strategies rather than waiting to hire and train an onsite revenue manager.

  • Performance Management - It can be common for hotels to worry about not having a revenue manager in house, but fortunately, performance management can often be done just as effectively via outsourcing. In some cases, it's even more effective when considering the professional quality of automated and extremely accurate reports and the invaluable insight they provide. Hoteliers can work with a virtual revenue management team to produce complex analytics, summary dashboards and benchmark reports. The robust historical and forecast data is used to create an automated strategy that helps ensure their hotels keep up with demand, changing market conditions and competitor pricing.

  • Cultural Influences - The revenue-management-for-hire model offers many benefits to the company culture. An onsite revenue manager may be less knowledgeable and embrace a traditionally reactive approach. The for-hire model, on the other hand, offers a proactive, objective viewpoint with detailed forecasts reaching 365 days into the future. If there is one industry expectation that remains constant, it is that revenue management's evolution will never stop progressing. As we continue to see new types of data sources, new distribution channels and new revenue management skill sets, hotels will continue to demand the latest and greatest from their technology, processes and revenue management talent. This means that thoughtfully re-examining the hotel's organizational structure to meet its rapidly increasing demands has become one of the most critical aspects of maximizing revenue potential.

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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