Revenue Management Impacts: How do you measure them?

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | December 18, 2011

While revenue management professionals devote significant effort towards advancing strategies and tactics to optimize revenue, many revenue managers still lag when it comes to establishing and measuring agreed success criteria. This often leaves revenue management professionals to defend their actions to a skeptical audience with insufficient means.

Crucially, many revenue management professionals struggle when it comes to measuring and articulating the impact of their initiatives to senior management. Industry professionals should spend time considering the methods they use to measure the impact revenue management is having on their hotel so that steps can be undertaken to provide a compelling value proposition to their key stakeholders. In order to be truly effective in the job, revenue managers need to understand that devising, implementing and agreeing on "what success looks like", in many cases, is as important as the activities themselves, and will ultimately go a long way towards supporting their success story.

There are however, key challenges that all revenue managers face when looking to measure their success. These challenges include information overload, over analyzing data and unclear or conflicting objectives.

Gone are the days when a business manager had to scramble to get their hands on data. The reality today is that data is often too easy to obtain and the difficulty lies in trying to see through the deluge of data, to be able to translate it into information, then transform that information into measurable strategies. With the ever increasing amount of data available, a revenue manager can easily become overwhelmed and unfocused when looking at what to measure and – more importantly – what not to measure.

With huge amounts of information easily available – and with revenue managers being naturally inclined to love charts and tables – too many revenue managers attempt to understand, analyze and measure every bit of data available and, in the process, lose focus on the critical success factors for the business. "Analysis Paralysis" often results, with a revenue manager rattling off an overwhelming amount of data, tables and charts to a non-data driven and potentially tuned out audience.

While many sophisticated hoteliers set clear objectives and critical success criteria, a surprisingly large number of businesses measure success based on criteria which are unclear, or, in the worst case, conflicting across different business lines. A typical example is the desire by a hotel to drive performance as measured in RevPAR or profitability; while at the same time setting corporate sales objectives, which are purely focused on volume and do not take into account profitability and displacement. Often a big (room night) volume account is considered a "good" account, even though it might not be the optimal business to ultimately support the overall goals of the hotel.

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