Moving from Tactical to Strategic Revenue Management
By Stan van Roij Managing Director, Easy (Ez) Revenue Management Solutions Ltd | September 23, 2012
As the revenue management discipline continues to evolve, industry professionals must continue to look at the transition from tactical operations to strategic deployment of their systems and processes. The industry as a whole needs to step up to the plate and maximize total hotel revenues from existing demand by setting both short and long term strategies. To increase revenues, it is not enough to only "play with" the non-contracting individual demand - in many cases, this is less than half of a hotel's revenue. Not moving to a strategic revenue management model will only leave money on the table.
Back in the early days of hotel revenue management, it became obvious that there was a need to manage the perishable inventory in a better way, to balance supply and demand in a more mathematical approach, and to sell the inventory, or rooms, at different price levels, with the sole objective of maximizing revenues. And, although the concept of "I'd rather sell my last room to someone who stays 3 nights at $100, than to someone who stays only one night at $195," was valid then, there was really no one in the industry focusing on the essence of revenue management -- selling the right product at the right time to the right client at the right price. This realization resulted in the birth of what we now refer to as revenue management.
In those early days, the task was typically given to a Front Office Manager, as he or she was responsible for selling transient hotel rooms, and was responsible for hiring a dedicated person to do so. There was really no thought given to whether this person had the right skill set, or whether the discipline would need to also look at group rooms and other revenue streams.
The industry has come a long way since then, and, over the years, a variety of titles have come and gone for those responsible for revenue management. To name but a few -- Space Controller, Director of Reservation Sales, Room Revenue Analyst, Revenue Manager, Director of Revenue Management, and, in more recent years, Director of Revenue Strategy.
The change in titles actually reflects the ever evolving change revenue management has and is subject to. The hierarchy and reporting lines went through an evolution as well. Years ago, individuals would report into the Reservation Manager or Front Office Manager, then they would report into the Director of Sales (and Marketing), but recently we have been seeing that the Director of Revenue Strategy sits at the same level as the Director of Sales and/or Marketing, reporting into the General Manager. Likewise, in head offices and /or regional functions, the position has transitioned from reporting to the sales discipline and now reports into a COO or CCO, sitting at the same level as the sales and marketing heads.
Slowly (very slowly) but surely the hotel revenue management discipline is growing from a tactical 'let's open and close some rates' to what it should be -- a strategic department that sets both short and long-term goals in order to maximize revenues and profit over a longer period of time.