Confronting Expectations: How to show the value of Revenue Management

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | July 08, 2012

Revenue management is not a new concept, yet some are still struggling with its uptake, while others are reveling in the ongoing success it has brought to their organizations. Two recent conversations with global clients have stood out in highlighting very contrasting approaches to adopting revenue management principles.

The first: a conversation with the CIO of one of the world's largest hotel organizations, on how revenue management could continue bringing innovation to the organization and drive value for its stakeholders. The most striking comment from this CIO was: "Revenue management is in our DNA. It is what we know needs to be done. We embrace it, understand the value it brings to the organization and want to do more of it."

The second: a meeting with the project group of another leading global hotel organization, a similar size to the first. While it was apparent the corporate revenue management team understood its benefits, many in the organization doubted the long-term value of revenue management. In an ongoing project our organization has been helping this client demonstrate the value of more sophisticated real-life revenue management capabilities, with so far, very positive results. This conversation centered on whether the project's success to-date was scalable, extensible and repeatable and if more sophisticated revenue management practices would really bring sustainable value to the business.

Two very similar organizations, two very different conversations.

Does it surprise me that after almost 20 years since the advent of revenue management, some companies are still struggling with the value proposition and the return on investment of revenue management processes? No. As with any complex business process, not only is revenue management often misunderstood, but there is always more to be done to educate, teach, create awareness and raise adoption. We work with companies around the world on a daily basis, helping them instill these capabilities.

What does surprise me is that two organizations with a very similar business model, operating in the same space, with similar stakeholders have taken two very different approaches to adopting revenue management principles. The first organization has clearly demonstrated the value of revenue management in a way that it is no longer questioned. It is now part of the intrinsic fabric of the company's operations. While the second is yet to articulate what value revenue management can bring. What has made the difference between the two? These three key strategic viewpoints can help companies successfully demonstrate the value of revenue management on a daily basis.

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Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.