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The Making of a Revenue Manager

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October 01, 2013
In the Rearview Mirror
David B. Chestler

Perhaps as far back as when Mary and Joseph had to stay in the stables there was a recognized need for yield and revenue management at the property level.  It’s been said that the best idea in the hospitality business is selling out all your rooms and getting as much revenue as possible. Now how do we do that?

In the 80s when I started in the industry, updates were made with less velocity and the buying and selling of rooms was largely based on the location and timing, and the history of the property or what the property had previously sold by month and season.

I learned of a different methodology outside of the hotel business, from airline friends and co-workers coming into the technology side of hospitality.  It has been said that real change began when Robert Crandall and his team were changing the face of dynamic pricing distribution using aggressive sales techniques with data driven analytics to promote yield management.  Dealing with economic challenges, American Airlines needed to battle lower fares from competition coming into the markets as low cost carriers.  American Airlines used fares discounted and optimized by inventory with frequent updates when availability was at its highest.  By using non-refundable advance purchase restrictions the airline carrier was able to compete in the era of deregulation with new airline competitors and sound financial judgment.  While books, blogs and articles can give us the historic input on the evolution of yield management promoting Robert Crandall and Bill Marriott as the visionaries, it is clear to me that it was the business that was driving change and the evolution of enhanced profit was created using science to manage the details.
By 1992, technology was just entering the business world while the small resort properties still worked with registers, ledgers and note cards sometimes that appeared in the key boxes for the rooms.  Call center directors received microfiche for their respective call center agents to review when calls came in.  There were not many room types, rate codes, hurdles, BAR or similar rules to manage.  And the term free sale really meant something to an agent.

My first real encounter with a fiscally savvy and efficient manager of details was a client, Mrs. Leona Helmsley, famous from her management style of Helmsley Hotels. She gave me my first lesson on managing by occupancy alone and the effect it had on a hotel.  The wear and tear on the furniture, the staff, the elevators and the other guests was all balanced against cost and revenue, yet my thoughts of selling every room every night might not have been the ideal.

These early reservation managers worked on spreadsheets blocking availability by months and calling surrounding hotels for their rates and availability. Many had to dial competitive properties in the neighborhood or even several towns over to determine what the rates would look like. This was the story for group business as well.

One could reflect and think how easy business was back then especially when one considers how systems are handling rates and inventory now.  Today revenue managers are asked to go through specific training, testing and certifications for their new skill levels (CRME).  Algorithms are sexy, and hospitality gurus ridded of pocket protectors and graph paper has been replaced with iPads and smart phones enabling real-time reporting and revenue assessment tools.

As titles and responsibilities continue to grow, so do demands for tools to support the science needed to manage the increased distribution of rates and inventory.  No longer does the revenue management team reside solely in the front office department, it is now an analytical role managed by marketing or sales leadership determined by their ownership of revenue generation within the company.

The new holistic revenue manager is now looking at many factors to determine how to optimize their revenue per available room, guest or operating profit. While the process of revenue management has evolved over the decades the ultimate goal remains the same.  Technology and science should be implemented to help the supplier achieve all of the above – and provide for the operating profit the shareholders and investors seek.  At the end of the day this is the hospitality business and it is to be run for profit.  Revenue management as a practice enable the business to maximize that yield from its inventory product including ancillary services.
What really counts in this industry is providing the ultimate customer experience for your guest at the price they want to pay. And while our industry continues in this guest service endeavor, we’ll continue to redefine distribution.

David B. Chestler is the executive vice president, Americas with SiteMinder.

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