Fundamentals of Pricing: Price Management Before and Beyond Revenue Management
By Mario Candeias General Manager, Espinas Hotels | October 13, 2013
Given the automation, sophistication and globalization of the hotel and tourism industry, competitiveness levels have risen and, at it, Revenue Management (RM) has taken a key role in optimizing revenues, in reinforcing business performance and in defining who wins or loses.
It has become so central, that most tend to see it as a one-size-fits-all solution for competing, sometimes overlooking the bigger picture.
This is not just a shortcoming of revenue managers alone, but of business-level and corporate-level management and, even worse, of destination management organizations and leaders, who play a critical role in the positioning and meaning of the destination in which the assets under revenue optimization actually exist.
It's in fact somewhat daunting and value destructive to watch the global discussion on RM, mostly led by IT companies and hotel and airline sales departments, just focused around price points, ALoS(1), occupancy levels and booking windows.
The C-Suite(2) has some ideas about its fundamentals, but as most corporate executives still come from the pre-digital era, they are mostly followers to what revenue managers are doing, instead of providing them with economic and strategic context and instead of creating optimal business contexts so that revenue managers unleash the full potential of their businesses.
Our argument is that price (or revenue, if you will) must begin to be managed far before RM teams and techniques come in, as should the entire business context revolving around a given asset, which intrinsically affects price levels beyond revenue management delivery capabilities.