Background
Revenue Management has been around for a while in the hospitality industry, and allowed many hoteliers to maximise their revenue and profits, by dynamically controlling the price and quantity offered by the distribution channels. This is indeed a science, but also an art where revenue managers predict real time customer demand and optimise the price and availability of the products to match the demand.
In other words (and the most popular definition) revenue management is the process of selling the right product, at the right price, to the right customer, at the right time and via the right distribution channel.
While most of the Revenue Management processes done in the past were done manually, today we have many more tools and technology available allowing us to reach a new level of revenue optimisation. We will explore below the evolution of the discipline as well as some recommendations to help you increase your revenue, profits and market share.
Revenue Managers Need To Adapt And Evolve
When we think of a hotel revenue manager, we think of a data geek behind their computer crunching thousands of data and reports day and night, and while this may be still applicable in certain hotels, the position has dramatically changed in the last few years. Good revenue managers are now in the field making sure the entire hotel team is on board and that the revenue culture is developed to make sure targets are achieved and that the hotel is heading in the right direction.
Revenue management used to be very descriptive focusing on historical data (“this is what happened…”), then evolving to a more predictive approach (“Here is what we are going to do…”) and is today much more prescriptive (“Here is how we will achieve our goals…”). With the explosion of new distribution channels available, thousands of new data to analyse and a market becoming more and more competitive, the revenue optimisation discipline has become significantly more complicated in order to meet the new demands it faces.
Automate The Revenue Tactics To New Technologies
The complexity and the fast pace of the market changes make it nearly impossible to continue operating in a traditional manual environment. New technology and tools powered by Artificial Intelligence are now helping hoteliers reach a new level in the discipline. Some of the new technologies available today that were not available a few years ago are:
New technologies are much more efficient and accurate than us at optimising tactics such as pricing, demand forecast, yield restrictions and reporting. You should take advantage of this to help you focus on another particularly important part of revenue management: the revenue strategy.
Focus On The Revenue Strategy
Once you have all the tactics automated and optimised daily (almost in real time?), revenue managers can now focus on the strategy. In other words, focus on the plan that the revenue manager and the team have come up with to reach a specific goal, based on the trends and analysis identified in the automated reports.
A revenue management strategy could include anything from identifying a shift of segmentation and making sure the hotel is taking the right step rectifying this, or looking at ways to increase your website reservations. Start by auditing your revenue management operations. This will help you identify areas of improvements and goals. Anything that helps your hotel go towards it’s goals must be included in your revenue strategy. As a rule, here are a few areas to help you get started:
More importantly focus on developing the revenue culture at any level of the organisation. Revenue management is and should be at of central importance for everyone working in your hotel.
Front office should know the RevPAR targets for this month and what are the actions taken to reach it, similarly they should know the upsell targets and why this is important for the hotel profitability. Restaurant staff should be aware of the F&B targets this month, how much they need to pick up per day to reach the objectives or how many coffees they need to upsell to reach their targets. Revenue management should not be in the hands of the hotel executives only and should be a shared responsibility across all departments and staff.
Thibault is hosting the next Institute of Hospitality webinar on Tuesday 5 May 3pm BST: From Revenue Management to Revenue Strategy. As always, this webinar is FREE for our Members. Book your webinar place now.
About the author:
Having graduated from Glion with a bachelor’s degree in Hospitality Management – specialising in revenue management and finance – Thibault worked as a revenue manager for various hotel groups in Paris, Lisbon and Singapore. Today he’s running his own specialised revenue management consultancy firm in London; Catala Consulting, where he combines his broad knowledge of the subject with a passion for his work.
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