Revenue Management: Getting it Right

Revenue Management has evolved into an indispensable area of hotel operations, chiefly responsible for setting forecasting and pricing strategies. Because the profession is relatively new to the hotel and hospitality industries, a clear-cut definition of what exactly Hotel Revenue Management is has only recently emerged - Selling the Right Room to the Right Client at the Right Moment at the Right Price on the Right Distribution Channel with the best commission efficiency. Though the profession can be summed up in a single sentence, that doesn't mean it's easy. In fact, it's an incredibly complicated and complex endeavor, relying on mountains of data from a wide range of sources that must be analyzed and interpreted in order to formulate concrete pricing strategies. To accomplish this, Revenue Managers rely on an array of sophisticated technology systems and software tools that generate a multitude of reports that are central to effective decision-making. As valuable as these current technology systems are, much of the information that's collected is based on past historical trends and performance. What's new is the coming of big, data-driven, predictive software and analytics, which is likely to be a game-changer for Revenue Managers. The software has the capacity to analyze all the relevant data and predict occupancy levels and room rates, maximizing hotel profitability in the process. Another new trend that some larger hotel chains are embracing is an emphasis on Booking Direct. For Revenue Managers, this is another new channel with its own sales and costs that have to be figured into the mix. The October issue of the Hotel Business Review will address these developments and document how some leading hotels are executing their revenue management strategies.

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Mario Candeias

In its multiple shades of brown, the Middle East is an enticing region. Its asymmetries, its complementarities, its heritages are host to proud nations and cultures. Tourism and Hospitality is a differentiated and peculiar industry, critical to build stronger, wealthier and more cohesive societies. Different phases of development, different strategies and visions equate to different levels of output, sophistication and development, both at social and at business levels. Also at the operational and sales level. How does the present look? What are we doing to improve it? Which challenges are we facing and which opportunities are we to capture? How may an optimized Tourism and Hospitality future be? READ MORE

Sunny Brewer

The pace of innovation and disruption is accelerating in our industry due to the significant changes driven by technology. The distribution landscape is more and more complicated, big data and prescriptive analytics drive efficiencies and improvements to revenue management software. The growth in technology over the last 10-20 years has significantly changed consumer's behavior and fundamentally changed how we do business. To be successful today and thrive in the future, the need for a holistic approach to demand generation, customer acquisition, channel strategy, and revenue optimization is vital. So what do we do about it? This article will endeavor to address that question. READ MORE

Breffni Noone

Revenue management systems are evolving to meet the challenges of today's dynamic market, using more sophisticated algorithms, more data, and a more dynamic user interface to generate pricing recommendations that better align with market conditions. As developers focus on enhancements to elevate the power of revenue management solutions, the challenge for revenue management executives is selecting a solution that fits their revenue management vision, the expertise of their revenue management team, and that is compatible with the organization's rate management systems. In this article, we outline some of the issues to think about as you "look under the hood" of revenue management solutions. READ MORE

Nicole Adair

Lately, it seems that all anyone in the hotel industry can talk about is the direct booking wars; who is winning and how are they doing it? As third-party marketing spend continues to increase, it is easy for hoteliers (especially independents) to feel like they are getting left in the dust with no way to compete. While a solid customer acquisition strategy is important for any hotel, maximizing profitability is not just about fighting with third parties for potential guests. It is about leveraging the data you already have to ensure you are prioritizing your most profitable guests. READ MORE

Yatish Nathraj

Hoteliers using Google Business Listing as a marketing tool increase their potential viewership of the hotel's online listing. Franchises like Marriott, Hilton, IHG and Choice Hotels International all use sales revenue management forecast tools that help franchisees maximize their potential. Independent Hotel & Motel properties have to do things the old school way by creating excel spreadsheets with forecasted P&Ls and data from STR Reports. Oracle Taleo Central Human Resource Management System has been helping the hospitality industry weaponized their HR by giving even the smallest operators the ability to run like a sophisticated company. READ MORE

Bram Gallagher

The current hotel cycle, well into its ninth year and what in previous cycles would be considered the late period, is acting differently from historical norms. Occupancy and real ADR are diverging to a degree unprecedented in the hotel market. The difference is present in varying degrees in most studied markets. Exceptional increases to hotel room supply may explain some of the difference, and the introduction of unconventional, short-term rental supply may also contribute to dampened real ADR growth. The two effects are estimated to be approximately equal in explanatory power and jointly explain over half of the occupancy gap. READ MORE

Mark Ricketts

Corporate travel comprises an extremely important component of any hotel's total room nights and overall revenues. Thus, the importance of the Rates for Proposal (RFP) for the corporate rates negotiation process each year. At its simplest, even if two entities commit to an equal number of rooms to be occupied, the value of those commitments varies based on a number of factors, including the days of the week or season involved, typical length of stay or, perhaps, even anticipated total room spend. Regardless, the best corporate contracts achieve a win-win-win partnership for a brand, hotel property and corporate travelers. READ MORE

Gino Engels

One obstacle revenue and distribution managers at hotels face is parity. This has become a major concern in the hospitality world, as hotels are losing valuable revenue, harming their business. Providing hoteliers with transparency on parity performance is key so they can create actionable insight as it could impact their properties. In this editorial written by Gino Engels, Chief Commercial Officer and Co-founder of OTA Insight, he takes a dive into the issues of parity and how you, the hotelier, can reduce your hotel's parity problems in order to better control your distribution costs. READ MORE

Wendy Stevens

The field of revenue management is evolving with breathtaking speed. While fundamental priorities remain unchanged, new tools and new technologies have introduced new priorities. Hotel owners and operators who want to remain competitive need to work to break down the traditional boundaries that have existed between revenue, marketing and sales. Making that happen requires a more engaged and versatile revenue management team and an organizational commitment to applying a keen revenue-management-driven eye across departments. But breaking down those departmental silos means overcoming inertia and institutional resistance, and building a resourceful, coordinated and collaborative team. READ MORE

Dori Stein

Modern hotel distribution is dominated by online channels, across both direct and indirect bookings. While the internet has increased complexity and created new challenges, it also brings a number of new opportunities. Activities and transactions in the digital world can be monitored, tracked and analysed. And unlike other disciplines, hotel distribution is uniquely positioned to work with forward-looking data. Hoteliers can get a true picture of how the hotel inventory is being sold and its impact on future bookings. Early wins are going to hotels that are recognising the opportunity to be more diagnosis-led and adopting an agile mindset. READ MORE

Klaus Kohlmayr

Humans and current hotel systems can't handle the complexity of big-data analytics alone. As the hotel tech stack of the future becomes a present-day reality, revenue managers and their leaders will depend upon automated systems, the most advanced artificial intelligence and revenue science to handle tremendous amounts of data and build innovative, customer-centric pricing and promotions strategies. In this article, we outline how hoteliers can drive their strategic future and build insightful, effective and agile pricing, promotion and distribution strategies to meet the ever-changing needs of their guests and enhance profitability. READ MORE

Sonny Kerstiens

In the era of Big Data, the importance of a strong relationship between a hotel's Director of Sales & Marketing and the Director of Revenue Management can lead to positive revenue results while also fostering a highly effective sales team with positive group morale - or it can fundamentally handcuff a property's ability to successfully navigate today's hyper-competitive environment. High-performing DOSMs and DORMs should absolutely challenge one another routinely, approaching every disagreement as an opportunity to learn from one another and leverage one another's viewpoints to generate the best solutions to complex problems. READ MORE

James Gancos

The discount vs. reward debate is finally finished. Wherever discounting strategies work, a strategy that includes rewards will always work better. James Gancos, long-time hotelier and CEO of The Guestbook and Gopher, discusses how easy it is to drive RevPAR and market share with guest rewards while at the same time improving the bottom line. Gain an understanding of the powerful concept of rewards breakage and how it drives superior results. Learn why it's easier than ever to implement a guest rewards component to your revenue strategy, especially in light of clearly established customer preference of what matters most. READ MORE

Bonnie Buckhiester

The discipline of revenue management in hospitality has evolved tremendously in the last 30 years. Rapidly changing consumer buying behavior has forced today's revenue managers to be extremely resourceful. The question though is whether your revenue manager is a first, second or third generation revenue management professional. And the answer is, if they are not third generation, your hotel is leaving money on the table. So how do you evaluate where your revenue manager fits in this evolution? There is one fundamental and pervasive element to examine, and that is the relationship between the revenue manager and the digital marketer. READ MORE

Harry Carr

The landscape of the hotel revenue management is changing, requiring a shift in training and choosing the next generation of revenue leaders and how they operate. One of the critical elements of efficient revenue management is sufficient communication between revenue leaders and those that aren't as interested in translating data. Another is getting into the habit of applying the concepts of revenue management to all revenue streams for maximum profitability. To achieve total success there must also be a risk taken, and if done correctly, Hotel Revenue Management could elevate the entire hotel industry to new heights. READ MORE

Jon Higbie

For years and still today, RevPar index is the accepted, and practically the only, metric for measuring Revenue Management performance. There is latency in receiving Smith Travel® data, and there are limitations on how granular you can dissect the data. What if you could mine your own rich booking data to develop much deeper insights into how your hotel is performing? These insights go way beyond how you stack up to the competition. It can also identify missed revenue opportunities for each hotel including where you are performing well, but it can uncover how much better you could be doing. READ MORE

Doll Rice

It's no secret that effective revenue management strategies are deeply reliant on increasingly powerful tools and technologies that yield big-data-driven insights. But even the most sophisticated technology only goes so far. The "secret sauce" of revenue optimization remains that human element. Understanding how and why people power is needed to get the most out of software and systems and take the critical next step to implementation includes appreciating the importance of things like data filtering, shifting schedules, unaccounted-for variables, market insights, group dynamics, relationships and other nuances-as well as the ability to recognize, hire and retain talented revenue optimizers. READ MORE

Kell Sloan

How do you define value? Can it be measured in a meaningful way? What are your hotel's products and services actually worth to customers? As customers increasingly turn to 3rd party channels as a way to save money and pressure hotels to lower prices. Understanding what customers value, and would value, gives marketers and revenue managers an opportunity to break the market pressure to continually sell only on price by demonstrating that a property's products and services have something different to offer – superior value. READ MORE

Calvin Anderson

As the commercial distribution landscape evolves, third parties continue to win the hearts of consumers by simplifying the booking process. In this article, we look at what it takes for hoteliers to get back in the customer acquisition game. We will explore the need for both organizational and skillset changes within our commercial teams. Additionally, we will learn that the key to innovation exists in how we see our own data. Through the use of data visualizers, hoteliers must cast aside the segmentation models of prior years in order to leverage the exponential potential of the lenses of commercial segmentation. READ MORE

Jackie Collins

Business interruption is a significant and ongoing concern for hoteliers. Restricted access to a property, physical threats or an unexpected closure can have a devastating impact on their revenues, reputation or even their viability. Hotels face a wide variety of risks-from natural disasters, to cyber threats to terrorism attacks to health-related threats like waterborne bacteria. Understanding the various exposures and insurance options available to address them is not only the first step to protecting guests, employees and assets, it can also minimize losses and reputational damage, and ensure a quicker recovery. READ MORE

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.