The Revenue Management Business Process, Designed to Produce Results

By Trevor Stuart-Hill President & Founder, Revenue Matters | August 10, 2014

The unique aspect of the hospitality industry when compared to many others is that lodging establishments come in all sorts of shapes and sizes. Some have extensive resources at their disposal while others simply don’t.

In smaller lodging establishments and in a vacation rental management setting where margins are often razor thin, individuals often perform several roles simultaneously. In cases of larger hotels and resort properties, specific individuals are dedicated to the role of revenue management. Despite these apparent differences, there are some core best practices relating to revenue management that are universal.

What is Revenue Management?

“Revenue management is a business process that is designed to optimize the revenue performance of an asset through all market conditions.” – Trevor Stuart-Hill

In order for revenue management principles to apply, four criteria must be met:

  1. Constrained Capacity: fixed inventory (or resources) available for sale
  2. Perishability: revenue producing potential of inventory (or resources) diminishes rapidly or instantly
  3. Customer Segmentation: different customers are willing to pay different prices
  4. Predictability: ability exists to forecast demand for future points in time

Given the above set of criteria, it is easy to comprehend how revenue management principles can apply in a variety of settings including, parking lots, apartment housing, advertising, restaurants, golf courses, spas and even surgery centers.

Coming up in April 2018...

Guest Service: Empowering People

Excellent customer service is vitally important in all businesses but it is especially important for hotels where customer service is the lifeblood of the business. Outstanding customer service is essential in creating new customers, retaining existing customers, and cultivating referrals for future customers. Employees who meet and exceed guest expectations are critical to a hotel's success, and it begins with the hiring process. It is imperative for HR personnel to screen for and hire people who inherently possess customer-friendly traits - empathy, warmth and conscientiousness - which allow them to serve guests naturally and authentically. Trait-based hiring means considering more than just a candidate's technical skills and background; it means looking for and selecting employees who naturally desire to take care of people, who derive satisfaction and pleasure from fulfilling guests' needs, and who don't consider customer service to be a chore. Without the presence of these specific traits and attributes, it is difficult for an employee to provide genuine hospitality. Once that kind of employee has been hired, it is necessary to empower them. Some forward-thinking hotels empower their employees to proactively fix customer problems without having to wait for management approval. This employee empowerment—the permission to be creative, and even having the authority to spend money on a customer's behalf - is a resourceful way to resolve guest problems quickly and efficiently. When management places their faith in an employee's good judgment, it inspires a sense of trust and provides a sense of higher purpose beyond a simple paycheck. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.