Mr. Mourier

Revenue Management

The Importance of Getting Sales and Revenue Management Systems and Teams in Sync

By Jean Francois Mourier, Founder & CEO, RevPar Guru Inc.

It’s easy sometimes to think of hotels as static monoliths or simple factory; after all, with a relatively large and expensive physical plant (a building with rooms) and a straightforward, time-tested core business practice (renting the rooms), this is how hotels appear on the surface. But industry insiders- owners, general managers, the readers of this publication- know that nothing could be further from the truth.

The truth is that a modern hotel is more like a symphony, drawing its dynamism from making several unique systems and processes work in concert with one another. Just as an orchestra generates rich harmony from a wildly diverse array of musicians and instruments, a hotel relies on a myriad of specific systems and teams to generate revenue and perpetuate a healthy operation.

But also just like a symphony, without a conductor to get them working together, a hotel’s systems and teams can descend quickly into a chaotic mess. Hotels face this challenge every day, coordinating the F&B department with the front office and sales, all while making sure engineering keeps the place running right. It’s a tough job to be a GM!

One of the greatest challenges facing hoteliers and hotel managers in terms of getting their symphony well-tuned is synching their sales and revenue management systems. Though it may seem like these two systems in particular would be naturally linked, often these two systems do not work together in an optimal fashion. Too often, in fact, will a hotel have two distinct systems for revenue management and sales, with little to foster interaction between them besides the good intentions of the respective department heads.

The disadvantages of this common situation are obvious, and they are magnified by the very nature of sales and revenue management systems. If revenue management is all about getting the best rate for an available room while maximizing the usage of room inventory, then the process by which these rates are distributed and presented (sales) is clearly of the utmost importance. The worst case scenario, representing total breakdown of the communications process between these two systems and teams, is rooms either going unsold because the sales team is quoting a price too high relative to demand, or leaving money on the table in the form high occupancy obtained by granting too-low rates. Extrapolate these misfires over the course of a fiscal year and, well, the curtain’s going to come down on a hotel mighty quick.

There are other, less dire shortcomings born of the lack of sync between sales and revenue management systems. Rates should change constantly, as the basic supply and demand economics governing the sale of rooms changes constantly. Unfortunately for standalone sales and revenue management systems, adjusting and implementing rates in real time can be next to impossible. This is not a failure of the individual systems or teams- revenue management systems and professionals are capable of adjusting rates based on inventory factors, and sales systems and professionals are certainly capable of presenting given rates to willing customers. Rather it is unrealistic (and inefficient) to expect sales and revenue management personnel to commit the amount of time (all of their time!) to making the small, minute-by-minute adjustments in rate that are necessary to achieve the highest level of rate optimization possible. Yet this is what unrelated sales and revenue management systems implicitly demand; sales systems will not automatically adjust the rates offered across the spectrum of sales channels, and revenue management systems will not automatically implement the optimal rates based on inventory availability and demand. Most of these standalone systems require manual updating for these individual tasks, and the limitations of that process limit the effectiveness of these systems.

Of course, for every problem of process there is a technological solution. There are systems available that do function as a conductor, governing all sections of the sales and revenue management symphony, and provide the very cross-platform communication needed to get the right rates at the right time, every time.

In today’s operating environment, the need for such systems is great, but the adoption of holistic revenue management and sales systems that integrate their functions and work together with one another is far from universal. This will change over time. The use of these systems should increase dramatically as hotel owners and operators realize their potential for simultaneous occupancy and RevPAR maximization.

Hotels need heads in beds more than ever, so much so that they have been willing to sacrifice ADR for higher occupancy over the past year. This year, which is not necessarily shaping up any better than last, the luxury of either-or decision making like this is disappearing.

This is encouraging hotels to examine their systems, to find where the inefficiencies are and implement solutions to squeeze every dollar of revenue from a persistent low-demand environment. The cost of implementation, in terms of both time and capital outlay, of a system that enables seamless rate optimization integrated with sales channel management is miniscule in comparison with the revenue generation and savings incurred by the efficiencies such a system can create. The ancillary result of this process is the implementation of more harmonious system integration across the industry.

This, more than the rate-slashing of 2009, is a good thing for lodging in general and getting sales and revenue management teams and systems to work in sync is one of the most important goals hotel owners and general managers can aspire to this year. The revenue potential that exists trapped just beneath the small (in the best case) or large (in the worst) inefficiencies inherent to separate sales and revenue management systems represents the very salvation of hotels in competitive marketplaces. More than sheer occupancy-seeking strategies, or ambitious ADR-maximization strategies, a systems integration strategy can pay dividends for hotels across the globe.

After all, orchestrating these critical systems to work in concert with one another is the key to increased harmony in the dynamic symphony that is most hotels. With a little forward thinking, these central systems and teams can make beautiful music together.

Jean Francois Mourier arrived in South Florida in 2003 after a career in Europe as a trader, financial analyst and director for a number of firms including Merrill Lynch and ING Barings. He joined a small Miami Beach hotel management firm as a financial analyst. he revamped the company’s revenue management methods, with dramatic results. In 2007, along with his colleague Bruno Perez, Mourier founded RevPar Guru to provide the Yield Dynamic Price Engine, an integrated revenue management and pricing solution, to others in the hospitality industry. Mr. Mourier can be contacted at 786-478-3500 or clientservices@revparguru.com 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.