Respecting the Revenue Management Quartet

Identifying the Impact of Fragmented Revenue Management

By Gary Isenberg President, LWHA Asset & Property Management Services | October 15, 2017

Consider the potential quartet of revenue managers holding a stake in a single hotel: OTA market managers working for Expedia and Booking.com; brands employing their own revenue managers for their flagged hotels; third-party management/revenue management companies overseeing the day-to-day property operations; and an asset manager serving as ownership’s fiscal watchdog. And in some cases there may be other revenue management influencers who take an active role.

Ideally, all of these parties strive for the same end game of enhancing a property’s revenue and profits. Occasionally they can work in tandem toward that goal. Yet each also vies fiercely to protect its own revenue fee streams. Unfortunately, these turf battles sometimes come at the expense of the other revenue managers, and, quite possibly, the hotel’s profits and ROI.

There is nothing inherently wrong about the different revenue managers safeguarding their respective financial interests. They’re simply doing their job. Ultimately, however, all must work together to ensure revenues push profits to the highest possible level at the hotel.

OTA Influence

OTA market managers works closely with the onsite revenue managers and/or reservations manager in order to ensure a hotel is maximizing all the OTA has to offer. Such contributions are designed to increase room night production and yield management for that specific family of OTAs. In today’s consolidated OTA environment fewer players control several booking sites. Expedia, for example, owns over 15 different brands of travel companies and booking sites. Therefore, without the guidance of an Expedia market manager, the hotel revenue manager may not be aware of all the sites and how to utilize them. This guidance sometimes creates a false sense of security, and is quite costly in terms of commissions paid to the OTAs by the hotel. The goal and objective of an OTA market manager is to increase the volume of bookings through its sites, period. This goal can only be obtained if hotels continue to dedicate room inventory to the OTAs.

Market managers grab as many available hotels room nights as they can in a particular market. If the territory is a 24/7 urban market, for example, a market manager may aggregate 20 rooms at a Sheraton, another 50 at a Hilton, 50 more at a Marriott, in addition to any rooms they can gather from a well-known independent property. The OTA’s sole goal is to amass as much inventory as it can and then sell that inventory through the OTA’s channel. If the market manager stockpiles a 1,000 rooms for a Tuesday night, he or she wants to bump that number to 1,500 so the OTA earns more revenue. Essentially, market managers revenue manage hundreds, and in many case thousands of available hotel room nights, spanning a variety of lodging products.

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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.