It Takes Two to Tango: Sales Management and Revenue Management
By Mario Candeias General Manager, Espinas Hotels | October 16, 2016
Revenue Management (RM) has taken a lead role in the generation of an optimized top line. As it is technologically based and technology has taken over the world, RM benefited from those tailwinds in its rise to supremacy. Such, that most literature, research and general writings have been almost exclusively focusing on it. That is not a problem per se. But RM is merely a fraction of the top line. Sales is the "big picture" and RM is a function of it, not the other way around. Sales must recover its leading role, as without it, RM is nothing but a one-legged body. Yes, it's all about Revenue Management nowadays. This, so to say, discipline has pretty much surfaced to the limelight of Hospitality Management, even being considered now critical in the job description of hotel leaders.
It became mainstream, rather than just the task of young "nerdie" folk getting some pricing and distribution insights and targets from leaders and implementing it through Excel and other dedicated software that most wouldn't understand. Revenue Managers certainly conquered centrality within hotel organizations, after doing the same in the airline business.
It is obvious that, in an ever fiercer and faster business world, optimizing revenues became the do or die for many organizations, especially the ones operating with fixed inventory (thus, highly perishable). Mathematicians and statisticians were also brought to the scene, to add science and automation to software that would increase intellectual capital levels and would ease achieving that edge, that extra-mile and, also, that "feel good factor" that comes with the notion that one is at the forefront of things and doing more than all others to extract that extra buck from them and from the market. We were and still are operating under the perception that Revenue Management increases the market.
While it may do so, the dimension of it is in my view very limited. In its role of optimizer, Revenue Management operates on top of something that already exists. So, we need to satisfy some conditions ex-ante in order to be able to optimize.TThose conditions, so to speak, are Sales. Yes. Good old school Sales. We need to sell first, to be able to optimize sales afterwards. If we don't first sell and bring occupancy levels and rates to a certain level, Revenue Management won't on its own cut it. It will be good for almost nothing.
So, the argument is that we must bring Sales (and Marketing) to its previous glory days or else we will not be able to optimize anything much and, while Revenue Managers will tell us that they are doing their best and will still be optimizing something, the base for optimization is small or low and nothing optimal will come to fruition in the end.
Confused? Well, we're talking about a sensitive topic which, as many others, has been under the so called "herd mentality", where everybody thinks more or less the same about everything. Even if it is wrong. In this case, the real value generating mindset will be the one that thinks differently from that and actually capitalizes on the reality of facts, not on the perception of facts.