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A Game Plan for Revenue Managers at HITEC

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June 01, 2010
Revenue Management
Tim Coleman

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Revenue management is changing as we speak. First of all, the discipline is becoming more sophisticated with a broader definition of what it means to manage revenue in the hospitality industry.  Secondly, as revenue managers adapt to this change and increase their use of data driven techniques and algorithms, more complex problems and critical hotel property issues are landing in the lap of the revenue manager these days. Lastly, the recent market slump has forced revenue managers to shift from wringing the maximum dollars out of demand, to actually promoting new revenue sources while still attempting to yield whatever old sources are still viable.

So, for better or worse, revenue managers have plenty of problems these days. Fortunately, the annual HITEC confab is a great place for solutions. This year, revenue managers need to take a broader view of the HITEC exhibitor and vendor list, and they will need to take a longer walk through the exhibit hall; because it is no longer enough to just review the latest offerings from the traditional revenue management system vendors.

Ask 10 hoteliers what they mean by revenue management and you will probably get 10 different answers. This used to be true because many of us were not very familiar with the science and art of revenue management. Also, it involved the analytical side of the business, rather than the warm and fuzzy concepts of hospitality that had initially drawn many of us to the industry. Although all hotel management teams are more analytical these days, there are still many definitions of revenue management. These differences are no longer the result of unfamiliarity, but are now due to the dynamic new requirements placed on the revenue management function as hotel managers are using the data-driven skills of the revenue manager for solutions to other complex problems.

Today’s revenue managers play a variety of roles in the hotels and because of their positions in the hotel decision making process. Revenue managers are in a unique position to add data and critical thinking to many hotel issues and problems. They are the first ones to see the big picture on ADR, occupancy and RevPAR, which are the main determinants of property success in 2010.  With that perspective, they are being drawn into all of the key hotel management decisions and are more often found on the hotel executive committee to weigh in with the overall revenue point of view.

More and more hotels are looking for revenue managers with key analytical and communications skills, as well as persuasive talents. Many management companies and ownership groups are providing their own revenue management expertise to oversee and recheck the management company decisions regarding their assets. Indeed, revenue managers play a key role and a common language in communication among the hotel stakeholders of asset manager, owner, management company and franchisor.

But there is an unmistakable trend taking place in the revenue management arena as the discipline goes through a metamorphosis not unlike the caterpillar and the butterfly. If the person handling your revenue management is still a clerk in your reservation office, you may need to take note.  Before going any further, let me say that I have nothing but utmost respect for whomever is taking on the mantle of revenue management for your company whether they be a clerk or a senior vice president. They are all my brothers and sisters in crime. We all hold that no win position where, if you filled last night, your rate was too low; and, if you had even one empty room, your rate was too high.  But, let’s go back to the caterpillar analogy. If your definition of revenue management is to set the rates for the next week, you may not be keeping up with your competition. On the other hand, if your revenue management function is becoming more vital to the hotel executive team, they are most likely taking on added roles. And to get the most out of HITEC this year, they will need to seek solutions for all these roles.

My definition of HITEC is an annual meeting of the same people in different booths. This year, with the economy still recovering, I am sure I will see all my friends using their experiences and knowledge in the hospitality industry to serve up new solutions from new vendors once again. For me it makes walking the aisles not only an educational experience but also one big continuous reunion. It’s amazing how close I feel to people that I usually only see once a year.

This year, the exhibit hall will have many of the usual subjects with their automated revenue management systems; but they will have a little more functionality in their latest and greatest releases. But, the new roles of revenue managers at the property will impact their search for solutions at HITEC.
Let’s take a look at these roles.

Distribution and Channel Management
The distribution and channel management role has been shifting to the revenue manager for several years now. Revenue managers do not just set prices, but coordinate those retail and net merchant model prices in all their channels. In order to achieve the optimum profit revenue managers must create scenarios where they can charge higher rates to each market segment or distribution channel based on the value of the hotel products for that particular customer group and their needs. To best accomplish this objective, they need intimate knowledge of the buying behavior or the customers in these various segments. For example, they need to know when they book, how price sensitive they are, and what competing products make sense as a substitute for them. Armed with this information, the revenue manager can pick and choose battles where they have the highest odds of winning at the right price. For this, they need to slice and dice their customers into ever more discreet groups. As they add this level of complexity, they increase average daily rate; but they also exponentially add to their analytical needs.

Revenue Enhancement and Promotion
Although they are certainly in no way replacing the sales and management team, in the current recession, revenue managers have taken on a revenue promoting role. In contrast, I recall when one of my colleagues used to refer to the revenue manager as part of the sales prevention team. This year more than ever, the challenge for revenue management is to generate new revenue sources; so managers must spend time with all vendors that can bring ancillary revenues and new revenue streams. Spending creative time with the ubiquitous Internet, entertainment and e-mail marketing companies may spark an idea that could add incremental revenues that would stream directly to the bottom line.

Planning and Coordination
Revenue managers today have become a key player in the overall management of the property. They have impact on so many areas, that they must have a seat at the management decision table to bring all their knowledge and reporting acumen to bear on the key strategic issues. For example, in the new world order, the revenue manager must provide planning and historical data for all departments, like arrivals and departures for front office,  occupancy figures for food and beverage and other outlets, group statistics for catering, and projected market segment occupancies so that all property departments can properly relate to their clientele every day. Most importantly, they need to provide revenue projections for financial planning and expected peak and valley periods so the sales team can move quickly from an allocation mode to an all out promotional mode, based on facts and best estimates. This role can be supported by visits to the statistical vendors and new start-ups that can provide forecasting and analytics in the absence of a true revenue management system. Also, time spent with the system vendors will open your eyes to areas that should be getting more emphasis.

Now that you are armed with a broader game plan, take to the aisles and before you bypass a vendor that you don’t think has an impact on your position, think of your broader roles and responsibilities. Your profession demands it and your hotel company and fellow employees are relying on you. I will see you in the aisles.

Tim Coleman is a revenue management consultant and chairman of HSMAI Revenue Management Special Interest Group.

©2010 Hospitality Upgrade
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As you walk the aisles at HITEC put on your distribution hat and attend the vendor sessions and do the following.

  1. Look for software solutions that will enable you to focus on more segments without staying up until midnight each night. This will result in better decisions and marketing approaches that will increase your RevPAR and profit without impacting headcount and costs.
  2. In addition to the key distribution players (like TRAVELCLICK, EZYield.com, Rubicon, etc.), make sure you are looking at the RMS vendors, as well as your PMS provider (and the strategic partners sharing their booth).
  3. Also, there are usually some start-up analytical vendors that may just have a solution that will open your eyes, save your frustrations, and actually pencil out to a profit to pay for the application.

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