6 tips on Hotel revenue management for non-revenue managers

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By David DeMoss

With the sudden and devastating nature of COVID-19 and its effects on the hospitality industry, came the overwhelming task of downsizing and consolidating company workforce across the board. This necessary move by most, if not all, hotel properties plans to merge positions and responsibilities of hotel departments including but not limited to: sales, marketing, customer service, management, front of house, and back of house staff. 

Different hotel companies have taken different approaches to their consolidation strategy. Some companies have chosen to restructure their staff at the property vs regional level and other companies have chosen to restructure by the function of the position. Simply put, the job functions of the sales, marketing, and revenue managers pre-COVID-19 were consolidated into one role, often referred to as a commercial director or chief revenue officer.

With the consolidation and reshuffle of responsibilities, some staff members may be saddled with revenue management concerns they took for granted pre-COVID. Revenue management is more important than ever as each hotel fights to get a healthy share of the greatly reduced rooms sold each night. Having a general idea of revenue management is a good idea for all hotel staff and in the article below, written by Gayle Ehrean, she lists 6 quick tips to better understand the role of revenue management. 

For general managers, sales and marketing staff, and others now tasked with taking a more active role in revenue management, it can be a daunting proposition. But revenue management doesn’t have to be mysterious or intimidating. If you’ve unexpectedly found yourself in the realm of revenue, or if you’re just exploring it, here are six ways non-revenue managers can master the basics of the discipline and join the club.

1. Know the History

The role of revenue management is an underdog tale if there ever was one. When it first gained a foothold in the hotel industry in the 1990s, it was a disruptive and misunderstood practice. It still is today, in some respects.

Like other revenue managers, I started out in F&B and hotel operations before crossing over. In the early days, I helped implement revenue systems for branded hotels; later, I worked with smaller groups and independents.

Everywhere I went, I encountered resistance. “You want to sell rooms like airline tickets?” people asked. Well, sort of. But hotels take a kinder, gentler approach, engaging in fair pricing tactics and staying true to their values. This earns trust from travelers and respect from colleagues, and in today’s world, that’s essential.

2. Understand the Purpose

Today, revenue management is almost universally accepted as powerfully profitable and competitively essential. But many still wonder, “What exactly does the revenue manager do—aside from decline my requests for special rates and comp rooms?”

The discipline is built on two fundamental principles. First, room inventory is perishable. If a room doesn’t sell on a given night, that opportunity is lost forever. Second, consumers are willing to pay different prices for the same product provided there are rational reasons for doing so, such as scarcity or greater flexibility.

Guided by these principles, the revenue manager strives to maximize revenue by managing demand, striking the optimal balance between rate and occupancy. This involves a combination of forecasting, monitoring internal pickup and external market activity, managing pricing and restrictions, analyzing data, and reporting results.

No sweat, right? But wait, there’s more. Today, revenue management has evolved beyond guestrooms to all revenue streams and beyond revenue to total profitability.

3. Recognize the Impact of the Pandemic

A more holistic, total-property approach to revenue management is critical at a time when demand is at record lows. Hotels must squeeze every possible dollar of revenue and cost savings to generate enough cash flow to survive until the travel industry recovers.

The pandemic has disrupted typical travel patterns, temporarily obliterating group, corporate, and wholesale segments, which normally provide a base on which to build higher-rated business. Further, travelers are demanding more flexibility, and restrictions designed to protect hotels from cancellations and lost business are on hold.

As a consequence, forecasting is more challenging—and more important—than ever. Hoteliers must be especially agile and responsive to market conditions, seeking new revenue sources and business opportunities.

4. Welcome Diverse Perspectives

In spite of its outsider reputation, revenue management is an inclusive club, having expanded across the modern hotel organization. While revenue managers do the majority of the groundwork, revenue strategy is a group effort.

The best decisions come from information-sharing and alignment across sales, marketing, food and beverage, and operations, drawing from diverse skills and expertise.

My background in operations made me a better revenue manager, more in tune with the impact of my decisions on frontline staff and their need for information and guidance. Likewise, your own background will bring added value to the team.

5. Understand What Makes Revenue Managers Tick

Success hasn’t come easy for revenue managers. From the beginning, they’ve had to fight for their place at the table. This can make them territorial and sensitive to perceived threats to their authority.

Revenue managers’ work and decisions are primarily data-driven, which explains why they turn down requests for comp rooms. This requires focus, discipline, and attention to detail.

When it comes to collaboration, the best approach is humility and respect. In turn, revenue managers must play their part by being forthcoming about sharing knowledge. The greater the mutual understanding, the better the results.

6. Harness Technology

Behind every great revenue manager is a great revenue management system (RMS). With constantly shifting market conditions, wily competitors to spy on, and multiple distribution channels to manage, it’s easy to get bogged down by tactical work. Through intelligent automation, the RMS does the heavy lifting, driving improved performance while freeing up time for strategy and enabling today’s skeleton crews to do more with less.

Despite having a large stake in the outcomes, many revenue team members have little or no idea how the RMS works. This is problematic at a time when the revenue manager can’t always be there. And while the built-in machine-learning capabilities of advanced platforms are designed to adapt to any market conditions, a hotel’s RMS needs more human oversight than usual during this volatile time.

Take the time to learn the basics of how the hotel’s RMS works, along with tools for rate shopping, forecasting, and analyzing market performance. Reach out to the RMS provider for training, learning materials, and support.

The hoteliers who adapt to these times will stand the best chance for survival. In a profession that’s been in constant flux from the beginning, revenue managers are well conditioned to rise to the challenge. You can be, too, by committing to learning the essentials of revenue management.

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