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What to Look for in a Hotel Revenue Manager

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June 18, 2018
Revenue Management
Mark Haley
MarkHoare
MonicaXuereb

The degree to which hotel operators rely on revenue management to drive successful business operations has grown incrementally over the past 30 years. It has become high profile over the last decade to 15 years. We can track this back to two factors. First is the advent of mature revenue management technologies that allow us to intelligently analyze huge amounts of transactional data. Second is the recognition and formalization of the revenue manager role as a key resource within the hotel industry’s overall management structure.     
 
The job descriptions, responsibilities and reporting lines of hotel and resort revenue managers differ among brands and from one property type to another. But all revenue managers perform multifunctional roles that reach well beyond generating forecast reports, optimizing transient and group room rates and managing room inventory. Revenue managers are the professional business drivers who lead pricing strategy committees, generate rate and selling strategy training curriculum for property managers, and direct sales and marketing teams to optimally position marketing strategies and campaigns. Every decision they make impacts hotel revenue and profitability. Accordingly, this position requires an ability to influence people as well as to impact revenue and profit.
 
What makes a successful hotel revenue manager? How do you evaluate their effectiveness?
 
Two primary skill sets coalesce to form the perfect candidate. First are hard skills associated with a deep understanding of hotel industry revenue management techniques. Equally important are soft skills linked with how the hotel revenue manager integrates and conducts himself within the larger management team. 
 
Soft skills can be applied to the role across many industries but motivation, leadership, influence, negotiating, organization and possessing a team player mentality are of particular importance and relevance to hotel revenue managers.
 
Under hard skills, hotel revenue managers must have a detailed understanding of the strategies of pricing and demand management for perishable inventory. 
 
This is fundamentally different from non-perishable inventory industries. Perishable products include hotel rooms, hospital beds, airline seats, sports event tickets, theatre seats, etc. The fundamental difference is that if you don’t sell the hotel room tonight, it’s gone. You can’t sell tonight again tomorrow.
 
Hotel Revenue Manager – Soft Skills
Soft skills can apply to many professional roles across many industries. Those selected below are of particular relevance to hotel revenue managers. 
 
Motivated:
Determined and committed with a strong drive to meet goals. (Augmented with mutually agreed upon performance-based goals/rewards)
 
Leader and Influencer:
A leader at the peer level. Possessing a keen ability to influence and manage up (the revenue manager will likely have no direct reports)
 
Team Player:  
Works effectively as a member of the management team  
Communicates well with peers 
Articulates revenue management strategies, ways to execute those strategies, and expected results 
 
Technically Savvy: 
Detailed understanding of how applications support and augment the revenue management function
 
Observational: 
Good listener with strong observational skills
Can anticipate business needs
Able to read situations, identify change events, understand environments and respond accordingly
 
Influencer:
Can convince management teams to take action based on data
 
Negotiator:
Able to develop and maintain business relationships with third-party distribution partners
 
Organized:  
Capable of prioritizing between revenue-generating actions and time-consuming tasks with low-yield impact
Sound ability and knowledge to develop operations standards and strategic processes
 
Hotel Revenue Manager – Hard skills These aren’t unique to the hotel industry, but they are of paramount importance. As noted earlier, revenue managers must have a concrete understanding and familiarity with perishable inventory and the pricing strategies and demand management required for this unique set.
While non-perishable inventory examples include cars, consumer electronics and many other items without a specific shelf life, perishable inventory creates other challenges. A deep understanding of the perishable set is highly important for the hotel revenue manager as once a hotel room night passes, it’s gone.  
 
This roles and responsibility manifest includes tasks that will draw upon the revenue manager’s hard skills.
Deep and broad analytical skills are a must for an effective revenue manager. But he will also need an equal 
understanding of all areas of a hotel and resort operation, especially all of the property’s revenue generating functions:
  • Produce property-level business reporting of all relevant performance KPIs on a daily, weekly, monthly and quarterly basis.
  • Provide periodic dynamic forecast of expected results, variances and budget comparisons
  • Analyze overall monthly hotel performance and provide summary report with recommendations to improve long-term strategies.
  • Set best practice standards for: competitor analysis, environmental scanning, market modeling, distribution yield management, business mix yield management, length of stay yield management, inventory availability by channel, pricing control and new pricing concepts
  • Monitor overbooking levels and opportunities daily
  • Continually monitor booking pace; respond to unexpected variances
  • Perform competitive benchmark studies and follow market trends
  • Create and maintain a 12-month rolling demand calendar
  • Manage and oversee tactics and strategies for all third-party distribution channels 
  • Manage and oversee tactics and strategies for branded distribution channels 
  • Assess, analyze and price group business strategies, including function space and group room contribution to food and beverage
  • Regularly check the input and the quality of data points such as segmentation, denials tracking, etc.
  • Conduct quarterly property performance review and develop strategic and tactical action
  • Evaluate performance of distribution partners and contracted rates (OTA, transient, leisure, tour operator, corporate, consortia, crew, groups, etc.)
  • Monitor the cost of distribution by channel and adjust channel mix where necessary
  • Promote and measure upsell revenue
  • Where appropriate, monitor and factor non-room revenues into the overall revenue management strategies and practices. This includes meeting and banquet space, restaurant, bar, spa, golf, etc.
Experience To complete the optimal profile of an entry-level hotel revenue manager, we must also address experience, qualifications and ancillary skills. Some examples include:
  • Two to four years of hands-on hotel operations experience with some responsibility for forecasting and pricing
  • A bachelor’s degree, preferably in hotel management, ideally with significant coursework in a quantitative discipline 
  • like statistics, operations research, economics or computer science
  • Highly computer literate with an outstanding command of Excel
Knowledgeable of hotel technology including: 
  • RMS, CRM, PMS, CRS, distribution channels (OTA, metasearch, GDS, channel managers, etc.)
  • Familiar with integration models and business models for the above
For a revenue management director that oversees a team of revenue managers, we would suggest increasing the experience level to four to eight years of hands-on revenue management experience.
 
Reporting Lines and Incentives Each are important to attract and effectively oversee development of a revenue manager.
Reporting Lines Once you find a revenue manager who has most of the hard and soft skills outlined above, their ability to reach their potential depends heavily on how well they are placed within your organization, and just as importantly on their reporting line. 
 
There is no one hard recommendation. It depends on the type of organization. However, for a property-level revenue manager, the best reporting line is directly to the general manager (GM). Most clients cite this as the most frequent arrangement. For multiproperty organizations, one revenue manager may be assigned two or more hotels. In this case the ideal reporting line is to the area GM. Individual general managers would be second choice. Another common arrangement is a dotted line reporting to the hotel GM, with a more formal line to a regional director of revenue management. 
 
INCENTIVES Incentivizing your revenue manager may be more important than incentivizing your sales teams. Both functions need to be highly motivated and passionate about moving the hotel’s business forward. Making reward commensurate with performance means the revenue manager must be measured over time from a start point. Logically that’s when they took responsibility for your hotel’s revenue and profitability. After that it’s between periodic performance reviews. 
 
Revenue managers can be evaluated against a select number of KPI metrics. Which metrics to use depends on the objectives and strategies senior management set for the hotel or the enterprise. Some organizations are primarily revenue driven. Others measure occupancy or ADR. More forward-thinking organizations now align behind RevPAR and Net RevPAR. The important thing is that the revenue manager can bring to bear his or her soft and hard skills to influence any or all of these metrics. In short, has the revenue manager improved the hotel’s performance on these metrics?
 
Summation A revenue manager can’t be effective if he or she is working in a vacuum and spends days pawing over spreadsheets. Heads-down analytics gurus and data scientists can certainly uncover many interesting insights, but that makes them analysts, not revenue managers. 
 
Successful revenue managers all need to work in close collaboration with GMs, heads of finance, directors of operations, marketing and food and beverage. It follows that the revenue manager must have a solid working knowledge of each of these functional areas. A full working knowledge of the challenges and business drivers for each business function head is ideal. Seek candidates with broad hotel operations experience (in addition to education) who can interact with leaders of other hotel departments. 
 
Revenue manager recruitment criteria from just five years ago may already be outdated, not in terms of soft skills, but certainly in terms of hard skills. Data volume (Big Data) and the high-powered tools now available to analyze it (from rules-based to AI) have increased exponentially. We see both the volume of data and power of the analytics tools continuing their ascent, driven by ever-falling costs. 
 
Given this, new alternate pricing models which were previously too complex to design and fulfill – even with sophisticated revenue management systems and rate and selling platforms like PMS and CRS – are beginning to emerge. Examples include open pricing, which does away with historic tiered-rate fencing models. Just understanding how a 10-tier BAR structure with automatically derived rates for conditional discounts works isn’t going to cut it moving forward. Revenue managers will have to become experts on the merits and mechanics of BAR rates, open rate, mixed rate, LOS-based rate and even in-line rates, where every rate and availability request is assessed and quoted in real time. 
 
Revenue managers will also have to improve their technical savvy. The days of centering all things revenue management within Excel workbooks and manually updating rates and inventory controls into the PMS or CRS are gone. At a minimum, a detailed knowledge of how the RMS (which generates the rate and selling strategy), CRS (which fulfills the rate and selling strategy) and PMS (which reports actualized business) interact will be essential.
 
The revenue manager role is a highly specialized profession within the hotel industry. It is well integrated into the organizational structure of any successful hotel or hotel chain. The identification and selection of top performing hotel revenue managers will continue to be challenging for some time. They are not – and will not become – a commodity resource.
 
Monica Xuereb is chief revenue officer of Loews Hotels & Resorts, https://loewshotels.com. Mark Hoare and Mark Haley are members of The Prism Partnership, a boutique consultancy serving the global hospitality industry, https://theprismpartnership.com.

Key Metrics

Here are some key metrics, with comments on the relative KPI benefits of each. Prism generally recommends the use of Net RevPAR and RevPAR index over ADR and/or OCC, with the other noted KPIs being adopted for revenue manager performance measurement as required: 
  • RevPAR: Simple, easy to understand and readily available. Not sensitive to distribution cost, so RM strategies that drove OTA use of agency model transactions would look great under RevPAR, but terrible under Net RevPAR.
  • Net RevPAR: RevPAR net of distribution costs, including TA commissions, reservations and system fees, etc. This requires some time and investment to set up and can be done together with the hotel’s finance team.
  • GOPPAR (Gross-operating profit Per Available Room): This KPI takes Net RevPAR down a level to factor in other operating costs over and above just the booking’s cost of acquisition.
  • ADR and Occupancy Percentage: Simple and readily available, but generally inferior to RevPAR or Net RevPAR.
  • Market Share and Market Penetration: Requires output of STR competitive-set reporting.
    • Market share is the number of rooms in the hotel as a percentage of the rooms in that hotel’s competitive market set. 
    • Market penetration is the percentage of demand for rooms actually accruing to the hotel.
  • Top-line Revenue: Simple and effective, but does not reflect the market or competition. If you grow room revenue 5 percent year over year (YOY), it looks good – unless your competitors are also growing revenue 12 percent YOY.
  • RevPAR Index: Calculated by STR and readily available. Requires an accurate and truly competitive set to compare against.  



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