Revenue Management Health Check: How Does Your Hotel Measure Up?

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | September 25, 2016

It is commonly accepted today that revenue management is critical to the successful operation of any hotel. However, while the adoption of this strategic approach to pricing - and the advanced systems that support this - are becoming more widespread, there is still no industry standard for how to evaluate revenue management outcomes. This lack of universal criteria around how to assess revenue management can pose challenges in trying to sell the success of a program within a hotel, as well challenging how to accurately benchmark a hotel's revenue performance against its competitors.

A key challenge revenue managers face when developing a detailed, accurate assessment of their property's performance is sifting through an overload of information. With huge amounts of information available-and with revenue managers naturally inclined to love charts and tables-too many revenue managers attempt to understand, analyse and measure copious amounts of data, losing focus on the critical success factors for the business in the process.

Revenue managers also face major challenges in assessing performance in organisations where there are unclear or conflicting objectives. While many sophisticated hoteliers set clear objectives and critical success criteria, a surprisingly large number of businesses measure success based on more ambiguous criteria, or, in the worst case, conflicting measurements across different business lines. A typical example is a hotel's desire to drive performance in profitability; while concurrently setting corporate sales objectives, which are purely focused on volume and do not take profitability and displacement into account. A high volume room night account is often considered a "good" account, even though it might ultimately not be the optimal business to support the overall revenue goals of the hotel.

Although there may not be one set industry standard for assessing a hotel's revenue management performance today, hoteliers should consider three key objectives when evaluating their properties:

  • Financial objectives – Are you meeting your investment objectives?

  • Competitive objectives – Are you outperforming the competition?

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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.