Revenue Measurement Is Not Revenue Management

By Bill Kotrba VP of Industry Strategy, Leisure, Travel & Hospitality, JDA Software | August 14, 2011

In pricing and revenue management, hedging your bets with a tried-and-true process may actually be riskier than taking a chance on something different. It sounds counterintuitive, but the fact is that the conservative route to pricing practices is costing big hospitality firms millions in revenue, risking their future viability.

Over the past few decades most hotel chains have adopted some form of automated revenue management (RM) system. But there are still some medium and large chains that have not. Worse yet, as some of these chains churned through acquisitions and ownership changes, their RM systems were abandoned or shut down. During the last decade's brand consolidations, industry realignment and ownership changes, business intelligence (BI) tools were growing in maturity and sophistication.

Fifteen years ago, when I was a brand new analyst learning pricing at a major airline company, business intelligence tools were more humbly known as "reports." Woe to the analyst assigned to produce reports - it was an arduous and time-consuming task.

he old paper BI reports gathering dust in binders on an executive's shelf. Where there used to be a data warehouse, best-in-class companies now have a data "convenience store" that enables all manner of fancy, web-based, interactive, real-time dashboards showing every profit coming in the door, every cost, every price, every trend, every year.

In fact, the ability to track, measure and review revenue trends has become so timely and sophisticated that revenue managers have been wowed into thinking that pricing and revenue management systems aren't necessary.
Today, we find many medium and even large hotel chains have sophisticated BI tools and legacy revenue management systems that fall into two categories - disuse and misuse. The result is that revenue management departments lack RM systems, and instead maintain a robust set of BI reports and tools. At first glance, these reports resemble many of the screens one would find in real revenue management software. With scarce capital to invest in software systems the last few years, some users of slick, interactive reporting tools are talking themselves into believing these are just as good as automated RM - or at least "good enough." But at the end of the day, reports are reports, and while a sharper, crisper rear-view mirror might make the drive more pleasant, it's not much help in navigating what lies ahead.

Using BI tools as a primary means of revenue management, managers and analysts pore over dashboards and reports for hours, adjusting pricing or inventory based on recent trends and gut reactions to the measurements they see. If they are dedicated and work hard, they can certainly improve results, but the fact is that mental brute force is not a good way to position a multimillion - or billion - dollar enterprise for future success and growth. No matter what kind of rock stars are doing the heavy lifting, this approach to revenue management is not sustainable - and should not be confused with the true science of pricing and revenue management.

Choose a Social Network!

The social network you are looking for is not available.

Close

Hotel Newswire Headlines Feed  

Coming up in May 2019...

Eco-Friendly Practices: Corporate Social Responsibility

The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.