Top hospitality executives clearly understand the impact that the discipline of revenue management can have on their operation. It's also no secret that revenue managers today must successfully navigate through an increasingly complex environment in order to effectively drive performance. Much is to be gained if they get it right - results will be less than stellar if they don't. As 2012 begins, the HSMAI Revenue Management Advisory Board has taken a critical look at several important initiatives for the revenue management community. Throughout the year, the board will explore these and other topics through a series of articles and webinars designed to provide valuable insights for hospitality practitioners. These issues will have an impact on sales, marketing, and operations in addition to the practice of revenue management.
1. Shore Up Your Team's Core Competencies.
With revenue management's recognized contribution to the industry, now is the time to shore up your team's skills - integrating both strategic and tactical skills and initiatives on the revenue management front. Vital to ensuring you are set up to achieve revenue and profit potential are:
· Including core revenue management competencies as part of your company culture.
Having revenue experts able to be strategic and tactical, understand technology and business processes, understand consumer behavior, set direction and influence others across the organization.
· Taking full advantage of the technology that allows revenue professionals to process vast amounts of information and take revenue management to a whole new level.
· Setting goals and understanding the right metrics by which to measure your hotel's performance.
2. Adopt Pricing Strategies that Preserve Asset Value and Allow You to Manage Risk.
Economists often reference the "downward rigidity of wages and prices" as one of the widely accepted tenets of their field. They obviously have not spent time working in the hotel industry. Experience has taught us (three times in the past 2 decades) that when demand drops, ADR declines soon follow.
Revenue managers and marketing directors understandably are focused on the top-line impacts of revenue decisions - including pricing. Owners and most general managers are more keenly focused on figures further down the P&L statement including Net Operating Income (NOI), since performance at this level is most often tied to the value of their hospitality asset. Fortunately, a simple pricing formula has been created that will help clarify the impact of a given pricing decision on NOI - before that pricing decision is implemented. While risk tolerance may vary considerably from one property to another and from one personality to another, at least all parties involved can now have a common starting point from which smart pricing decisions can be made.
3. Use Your Forecasts to Impact Results.
Forecasting is an essential part of effective revenue management. Not only is a forecast a prediction of potential and outcomes, but a valuable tool to set strategies and tactics to improve on the expected results. Although forecast accuracy is an important goal, it is more important to take actions to impact results based on the valuable information your forecast provides. Think about:
· What happens once your forecast is completed?
· What do you, and what can you, learn from the forecast?
· What decisions are you using your forecast to support?
· What steps can you take to positively impact results?
· What needs to communicated regarding the forecast to other members of the hotel team?
4. Think Differently.
We've all been encouraged to "think out of the box," but what does that really mean when it comes to revenue management today? It means thinking differently, being willing to do different things, and doing things differently...all while focusing on creating value in new ways.
Is your hotel operating according to habit? If so, are those habits relevant and effective today? Are you using old or ineffective tools to set, monitor, and change course? Have you run into "icebergs" because you can't see what's ahead?
It's time to evaluate what you are doing and how you are doing it, refining your leadership, communication and strategic processes at the same time. Move your revenue management culture forward, break out of the proverbial box and ride the wave of demand to better days, more success and growth for both you and your hotel.
5. Follow the Road to Total Revenue Management.
The concept of Total RM is not a new notion; hotels have always endeavored to maximize the entire asset. The difference today is the sophistication in the approach to profit maximization on the part of hotels and resorts. In essence, Total RM is simply about optimizing revenues and profits from all revenue streams (rooms, F&B, parking, spa, golf, retail, other activities, etc.). It is about finding the most profitable mix of business for the hotel asset.
There are a number of characteristics that define the Total RM phenomena and hotels that take charge of these components will discover a distinct competitive advantage in otherwise fiercely competitive markets. In 2012 the extent to which a hotel is practicing Total RM will define bottom line successes.
Regardless of the point at which your hotel may be on the journey to total revenue management, it will take serious commitment to finish the trek and benefit from a more sophisticated approach to profit optimization. And that commitment means the revenue management professional must lead, communicate and be strategic.
6. Understand the Distribution Landscape and Leverage Emerging Channels.
Online selling continues to evolve as consumers look for deals as well as methods to simplify and enrich their shopping and purchasing experiences. Similarly, hoteliers have to navigate a myriad of opportunities to offer their properties and determine which channels truly drive revenues.
Before jumping into them, be clear on which channels are the best fit for your operation. You will want to consider:
· Historical production from existing channels
· Emerging channels - both new online selling formats as well as mobile enabled
· International opportunities
You will also want to know the impact of consumer behavior in these channels since search and booking patterns vary greatly between those running on desktops and mobile devices.
7. Streamline Your Structure.
The debate of whether revenue management should be based at a single property, clustered in the market, or run remotely from an out of market location is one that has been ongoing for many years. With the advancement of technology, it is possible to run revenue management for any hotel from anywhere someone has access to a computer and the internet. But just because you can, should you? The answer to the question is not simple, and there is no one answer that works for all hotels, or even similar hotels with different extenuating circumstances.
Explore how you and your company can determine the most streamlined, yet effective revenue management structure possible. Consider the role of technology, the hotel type, the mix of business, competition, geographic location, brand make up, revenue management career path and bench strength, costs (of course!)...just to name a few.
In the end, all situations do not have the same answer, but there is a right answer for every situation.
8. Put Data In. Get Data Out.
In our industry, the term Garbage In-Garbage Out has become so common place that in some hotels and management companies it actually yields its own acronym - GIGO. Turn that sentiment on its head and focus on Data In-Data Out - DIDO! For revenue managers in today's hotel climate, you must translate the multiple data files you receive each day into a comprehensive executive summary for actually understanding your business rather than just crunching numbers. Know which reports help you tell what stories, and find out what you might be missing. Remember that while we can get caught in the day to day of our competitive sets and hotel specific information, DIDO also means watching the news and staying in tune with more global information.
9. Build Your Revenue Management Pipeline.
The discipline has evolved significantly over the years with the advent of multiple distribution channels, technology and increased stakeholder management. Today's revenue management professionals have to be much more strategic and decisive, combining their knowledge in ecommerce, sales, marketing and distribution to make the optimal revenue decisions in a cross-functional environment.
Now is the time to strengthen your key skills - leadership, impact and influence, business acumen and strategic competencies - necessary to be successful in the revenue management discipline, now and in the future. At the same time, you must deliberately and systematically build, recruit and retain talent.
10. Improve Your Business Acumen.
The fast pace of work sometimes creates a narrow focus within departments and job functions, and it can be a struggle to make the link between individual actions and the hotel's overall success. Multiplied by multiple managers, a lack of true business acumen means that too many decisions could be getting made that may not align with true business objectives. This reality, combined with the continued need for revenue improvement, creates the need for professional training in business acumen, which is one of the most valued leadership skill sets in hospitality today.
It wasn't all that long ago that you would be hard pressed to find hotel managers who understood terms and concepts like GOP, demand based pricing, RevPAR, and market share. Hoteliers have become adept at managing labor costs and maximizing efficiencies as well as measuring how these efficiencies impact overall customer service. Revenue management handles driving the top line, while accounting maximizes efficiencies and thus the bottom line. By handling these two disciplines in isolation, neither can be fully optimized. Those in revenue management have the aptitude to be the pioneers in this type of merged analysis, and it only makes sense that these are the people that lead the industry down this path to overlooked opportunities.
11. Translate Math to English.
How often have you been in a revenue meeting with a chart of important numbers presented on a screen and only one or two participants are responding to what they see - and nary a murmur from the rest of the team? How many forecasts have you seen presented to sales teams that go in one ear and out the other - resulting in mistakes like quoting prices over sold out dates?
Revenue managers have a unique, valuable skill set - they gather data and metrics to understand the best ways to maximize revenue. However, translating this data into easy to understand and actionable messages to diverse audiences - from hotel owners to housekeeping staff - is often challenging for revenue managers. This "Math the English" translation skill is a known challenge across the discipline. So what's a revenue manager to do?
Successfully demonstrating leadership in revenue management requires this translation skill. Start with your audience, understanding their frame of reference and their need for the information you are sharing. Break down the math into clear metrics to persuade the audience to act for positive revenue development in the hotel. If you can do this, your value and the value of revenue management will rise, the understanding of revenue principles will increase along with team involvement, and positive outcomes will be the norm.