The Role of the Guest in Total Hotel Revenue Management
By Kelly McGuire Vice President, Advanced Analytics, Wyndham Destination Network | July 19, 2015
For the past decade or more, when speaking about the future or a vision, revenue management has been focused on two terms: total hotel revenue management and customer, or guest, centric revenue management. While we have spent time and energy discussing these concepts, neither has been widely implemented. I believe there are several reasons for this. First, the siloed organizational structure of most hotel companies makes it difficult to organize the coordinated effort necessary to implement initiatives that span departments and functional areas. Secondly, the data and technology required to support the successful implementation of these initiatives is not readily available for most organizations. Finally, and perhaps most importantly, I am not convinced, despite how much we talk about these concepts, that as an industry we fully understand them, and we definitely have not yet taken the time to think through how to actually execute.
A lot has been written about the problem of siloed functions within the hotel. Recently, there have been some encouraging movements towards breaking down these silos. Many hotels companies are starting to combine sales, marketing and revenue management into broader commercial functions, and incentives are starting to line up accordingly. Technology vendors have also begun to deliver solutions that address these areas as well, from robust food and beverage reports that transform POS data to actionable insight, or forecasting and optimization solutions for alternative revenue sources like function space. This is great progress, but it needs to be taken in the right context. In this article, I will attempt to build this context - helping us as an industry to better understand what these concepts really mean and how to properly implement them.
It's not that we are not trying. Many organizations have embarked on initiatives that are putting them on the path to either total hotel revenue management or guest-centric revenue management. Some hotel companies are already expanding revenue management practices to restaurants or function space. Some in the casino industry offer specialized hotel room pricing (or other kinds of packages) based on a patron's value, derived from their gaming behavior. Hotels are conceptualizing personalization efforts to put the guest in the center of marketing, and pricing, efforts. These initiatives are driving additional value for these organizations, whether through better management of capacity and price in non-traditional areas, or ensuring that the most valuable patrons have specialized access and differentiated pricing.
Bringing Total Hotel and Guest Centric Efforts Together
The first problem to overcome is that total hotel revenue management and guest-centric revenue management should not be thought of as two separate initiatives. In fact, I believe that when total hotel revenue management is executed properly, it actually is guest-centric revenue management. Total hotel revenue management will never be successful if the revenue generating potential of guests, or guest segments is not taken into account. Further, for hotels, guest-centric revenue management on its own will likely not generate the level of profits to justify the investment. Total hotel revenue management, however, has the potential to significantly impact revenue and profits. Let me first describe why I believe guest-centric revenue management programs alone will not prove sufficiently profitable to the hotel, and then I will explain how the guest plays a central role in total hotel revenue management programs, allowing these two concepts to merge.
Guest-Centric Revenue Management, Explained