Revenue Manager: Data Scientist, Profit Manager or Inventory Manager?

By Ally Dombey Managing Director, Revenue by Design | October 01, 2017

The hotel industry is no stranger to change and one of the most dynamic areas of hospitality, revenue management, looks due for a correction. Revenue management is an established practice in most hotels today, with an armoury of systems now available to support effective demand management and price optimisation. However, the playing field for revenue management is changing; traditional metrics are being challenged. Top line revenues are no longer recognised as sufficiently robust to reflect the performance of an asset. The relevance of static competitor sets is being challenged in the wake of shifts in customer buying patterns. And Big Data is history, with data science being high on the agenda.

Revenue managers are now tasked with the role of profit manager, customer experience engineer and data scientist. There are serious questions being asked about the relevance of the role of the current revenue manager which is set to increase in complexity as it expands to manage data from multi- dimensional sources. In the light of this shift in complexity of the role and the new skills being asked of revenue managers, does outsourcing revenue management to revenue specialists become a more meaningful option? What are the risks and benefits of outsourcing the revenue function to a third party? How will the outsource revenue function evolve?

Why Outsource?

With outsource services coming as a standard offering for owners adopting the services of management companies or brands, what drives the decision to outsource? Cost savings, turbulent economic market conditions and a lack of skills are cited most frequently by operators. Hilton Hotels, one of the pioneers in provision of outsource services, cites the key challenges faced by hoteliers today as difficulty in attracting and retaining robust revenue management talent, the increasing complexity of revenue systems and processes, and increasing costs attributed to the distribution environment.
Kristie Goshow, Senior Vice President, Commercial, Viceroy Hotel Group, comments on the potential economies of scale and potential for enhanced service delivery “A third party with an assumed ‘multiple’ of resources can ensure continuation of support 365, 7 days per week. They can leverage learnings and best practice in real time. Depending on the location of the outsourced partner and their scope, an hotelier may also be able to achieve a degree of cost savings too. I think we all agree that highly competent (and progressive) revenue management professionals are few and far between. In certain cities and countries, the price tag of a DORM may outrun that of a DOSM or GM”.

For many hotels, the initial decision to outsource is driven by a critical shift in business strategy, frequently requiring skills beyond the scope of the day to day revenue function, and often followed by continuity of the service recognising the opportunity to tap into the high level of skills on offer.

Shaun Bowles, General Manager of Eynsham Hall, an independent country house hotel offering a complex mix of rooms and conference services located near Oxford, UK, explains the reasoning behind their decision to tap into external skills. “As an independent business looking to compete with larger groups and brands, revenue management is key to the success of the hotel. Without the ability to afford and retain an established, proven and highly skilled revenue manager, outsourcing is a very viable option. Outsourcing revenue management allows a smaller business access to the broader perspective and a team of experts that is looking at the bigger picture rather than the ‘now’ problems. Outsourcing can appear costly but when the hotel is operating an industry standard revenue function the financial benefits to the bottom line can be realised”.

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.