Thinking Differently About Your Revenue Strategy - Practicing Total Revenue Performance
By Sanjay Nagalia Chief Operating Officer & Co-Founder, IDeaS - A SAS Company | October 18, 2015
The competitive landscape in today's hospitality industry is more intense than ever. Hoteliers need new ways to differentiate themselves in the eye of the customer to provide world-class service, while still driving profitability across every segment and business unit. But despite the fact that almost every hotel manages multiple revenue streams, team members within each stream still tend to make pricing decisions based on the impact of their line of business only, which is a losing strategy. This article will discuss the benefits of holistic revenue management and the strategy of Total Revenue Performance.
Businesses in virtually every industry recognize the need to take a more holistic approach to their forecasting and revenue optimization. Despite the fact that most businesses now manage multiple revenue streams, team members within each stream still tend to make pricing decisions based on potential impact to their line of business only. Minimal attention gets paid to how a decision might impact other revenue streams, or how the decision aligns with overall business goals.
There is perhaps no clearer example of this scenario than in the hotel industry, where it is now the norm to provide not only rooms, but also function space, restaurants, spas, golf and other guest experiences. A holistic approach to forecasting and revenue optimization would look beyond rooms to consider all revenue streams, shedding vital insight on how a pricing action in one area will impact revenue performance in all of the others, as well as overall business performance. Hoteliers would be empowered to make more informed decisions that drive higher-quality revenue on an ongoing basis.
Technological limitations, high costs and data complexity have historically delayed the introduction of a holistic revenue optimization solution to the marketplace. But now the barriers are being removed and the time has arrived, ushering in a new era in which all hotels can begin adopting this big-picture perspective. For the first time, automated revenue management has moved beyond rooms alone. Hoteliers can now factor their function spaces into decisions regarding who to grant a room, who to grant function space or both and at what price.
But this is only the beginning. Sophisticated analytics technology is now capable of aggregating and transforming large, disparate data sets into actionable intelligence for making accurate demand forecasts and strategic pricing decisions, with potential applications that extend to practically every industry. It is no longer a stretch to imagine a day where all revenue streams can be quickly and systematically factored into demand forecasting and pricing decisions, creating the greatest value possible for the asset as a whole. This is Total Revenue Performance.
At such a pivotal time for our industry-one where technology is informing process and driving profitability like never before-it is crucially important to understand the differences between the current data-driven approach to optimizing revenue performance, revenue management, and the emerging approach of Total Revenue Performance. Simply put, revenue management optimizes revenue performance for rooms only. Total revenue performance builds upon that approach to add automated revenue management capabilities to other critical hotel revenue streams, like function spaces, enabling hoteliers to make the best revenue decisions for their entire asset.