Taktikons Blog about Revenue Management

Taktikons Blog about Revenue Management

Revenue Management

In this blogg I aim to give a background on Revenue Management and Distribution. It discusses both organizational issues as well as lectures regarding Revenue Management and Distribution. Many of the blogs can be used as preparation to the Courses and Workshops in Revenue Management and Distribution that Taktikon organizes.

The power of Loyalty

SalesPosted by Annemarie Gubanski Jan 28, 2014 17:29:57

The power of Loyalty
In an article that Cornell University published recently, the implementation of loyalty programs for two groups of independent hotels showed a positive effect. Both ADR (between 1-5%) and number of room nights (nearly 50%), booked by the loyalty program guests, increased. Interestingly enough, the analysis included even the hotels’ best customers.

November 2013, I listened to Tom Savigar from The Future laboratory who held an excellent talk about the implications of a changing demography on the Hotel Industry. He predicts the end of Business-To-Business (B2B) and says that the hospitality industry should have a direct dialogue with the guest. This is even in line with the recent article from Bryan Kramer “There Is No More B2B or B2C: There Is only Human to Human (H2H)”, where he states that “Marketing increasingly strives to become one-to-one, with solutions to collect and wrangle the big data about us to serve up more personalized offers and experiences.”

In a world where direct contact with the guests is increasingly important, what is the most effective way to create loyal guests?

The impact of Loyalty
As Cornell University’s study shows; a loyal guest can be a profitable one and having a direct dialogue with each individual guest is a powerful factor to create loyalty. Loyalty is even an important factor in the negotiation process, as companies should and would like to offer discounted contracted rates to their most loyal corporate accounts.

In my role as a consultant, I often come across companies that would like to discuss the best way to increase loyalty and the need for a loyalty program is often raised. This is a very important question as not only such a program obviously can increase Total Revenue (as Cornell University’s study showed), it can also be used to encourage guests to book directly with the property. However, the cost of such a program should be taken into account as well, as the benefits to the guests come with a cost.

Karin Eriksson from hotel chain Scandic recently spoke on the first Hotel Market Seminars on Distribution and Social Media held in Stockholm. She says that especially Hotels and Restaurants have a big potential in using Social Media as many of their potential guests are using these types media and would like to tell that they are staying at a specific hotel and are eating a fantastic dinner. I would like to add that, in my opinion, this counts for the whole hospitality industry. Social Media offers a great opportunity to create direct contact with your guests and increase loyalty. Yes, it does mean a high level of involvement, but it is fun and offers the possibility to increase result.

To identify a profitable loyal customer
In a world where many of our guests carry a number of Loyalty Program Cards; how do we know which of these guests are really loyal to our brand? In a commercial world, it is important to identify the loyal customers that impact result positively, as many times these customers are usually the ones that are paying the lowest rate. I often hear hotels identifying their best customers by the number of times they visit the bar or restaurant, with which they see prove that their loyal guests also are profitable guests. This might be true; it might also be compared to my favorite clothing store. It has clothes that match my taste and is located within five minutes walking distance from home, which means that my husband and I visit the shop regularly. The shop owner identifies us as one of his most loyal customers and often gives us an additional discount when we do make a purchase. Though, I doubt that we are the most profitable customers, as we usually only buy the articles the shop offers on Sale.

The ultimate way to identify a profitable loyal customer is to have your statistics in order. This gives you the opportunity to not only calculate the Total Revenue per customer and per Market Segment, it also gives you the opportunity to match your offer to each individual market segment, right down to matching it to each individual customer. What does a certain group of customers value the most? What are they willing to pay for this? How can I make sure that I offer what they want?

Conclusions
Loyalty programs can be used, but make sure that these types of programs do give you the additional loyal guests and increased revenue you desire. Take into account the fact that there is a cost involved.

  • Involve your guests by using Social Media strategically. Do not only use these platforms to only inform your customers about your offers. Involve them by asking them questions and to encourage them to write reviews about all your products. Make sure to react on all reviews.
  • Make sure you have your statistics in order and find out how to create profitable customers.


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The art of Recruitment

RecruitmentPosted by Annemarie Gubanski Dec 12, 2013 18:02:58

The art of Recruitment

Recruiting is vital for the success of your business, it is not always too easy as you not only are looking for the perfect candidate; the perfect candidate will have to be looking for new challenges at the right time as well. Recruiting a Revenue Manager is extra challenging, as the image of what a Revenue Manager does can differ from hotel to hotel. Many recruiting companies find Revenue Management recruitment to be one of the most challenging requests they receive, as the job description differs from customer to customer. Also, a Revenue Manager should ideally be strong on four competences; Analytical, Commercial, Technical and Communication, though not all these four competences are vital for all properties

Your Revenue Manager’s Competences

Yes, the ideal Revenue Manager has a strong development on all four competences, depending on the property; your new employee could have a different Skill Package. The following factors can be taken into account

- Why are you looking for a Revenue Manager? Is it a new position or is it a replacement from a previous Revenue Manager?

- What are your expectations? Are you expecting to be able to increase your result and if so; what is your budget?

- What are the strengths and weaknesses of the rest of the teams your Revenue Manager will take part in? The four competences are vital for all members within the Management Team but each individual has his/her own strengths and development areas. Which competences should the new candidate have for the team to be in perfect balance?

- What is the level of knowledge you require from your Revenue Manager? Are you looking for an experienced Revenue Manager or would you prefer your new employee to be more junior and take care of his/her development yourself?

The personal skills

Anyone that likes their profession has the possibility to be great at it. In the recruitment processes I perform, finding this enthusiasm is one of the first things I look for. This usually is combined with connecting the right type of property to the candidates. Does the Revenue Manager want to work for a chain or a privately held property and which of these choices is best for his/her personal development? What is the atmosphere within the team and does this fit both personal skills as personal preferences of the new employee? What are the expectations does the new employer have and how do the candidates strengths and weaknesses correspond to these expectations? In order to make sure that recruitment is done properly, I find that an assessment is the best option to find the right candidate. This is an investment that usually makes sense as the candidate can be tested both on knowledge as well as on personal skills.

The Experience Level

Many properties choose a less experienced Revenue Manager or perform an internal recruitment as this might save expenses on wages as well as obtain the possibility to “form” the Revenue Manager and create a base of knowledge and experience that the Revenue Manager will benefit from. The Time Factor needs to be taken into account. Both time spent on personal training and development of the candidate as well as the time it takes to benefit from the full capacity of your Revenue Manager has to be seen as an investment.

Another factor is that properties often find themselves forced to look for a less experienced Revenue Manager is the fact that it is much more challenging to find an experienced Revenue Manager. The higher the level, the smaller the choice of candidates gets. Furthermore, from this small group of perfect candidates, the new employer should hope to find a Revenue Manager that happens to be looking for new challenges. Mostly these candidates are not found in the regular base of Recruitment Companies, but often come from personal networks and specialized Head Hunting’s.

The Role of a General Manager

The absolute best Revenue Managers I have come across in my career all have one thing in common; a great General Manager with a solid knowledge of what Revenue Management means. No matter how experienced a Revenue Manager is, they all need personal development and a sounding board from their immediate superior. As the correct place for a Revenue Manager is within the Management Team, this is most likely to be the General Manager.

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The Art of Pricing

Revenue ManagementPosted by Annemarie Gubanski Nov 29, 2013 16:35:42

The art of Pricing

Pricing strategies during low demand periods are about of the most usual requirements I receive. Usually followed up with the question on how low I consider the rate should be in order to attract any business.

In my opinion there is a general misconception on the power of increasing demand by lowering rates. It actually takes demand for these kinds of pricing strategies to have its full effect. Without demand, you risk of “simply” decreasing your room rate without the benefit of the effect of retrieving more occupancy. It is not easy to withstand the temptation of a quick fix when competitors in the market settle for aggressive pricing strategies, but it is good to take into account potential damage coming from pricing strategies.

As always, it is vital to first calculate the total demand in your market before making a decision on rate strategies and to analyze the full positive or negative effect in order to form a long term winning strategy towards your competitors.

Low Demand Strategies

Our rate strategy is increasingly transparent and our guests understand that it can be valuable to shop around for deals even after the reservation has been made. This means that hotels are faced with last minute cancellations and changes when the guest finds a better last-minute rate. This can have a short term positive effect, as you might be able to “steal” some of your competitor’s guests. The risk lies in the fact that you might face last minute changes on your existing reservations. Not to mention guest complaints when they find that the exact room they booked earlier now is for sale at a cheaper rate. Furthermore, as we previously stated; we need to be able to forecast the total demand on a specific period in order to determine our rate strategies and for us to make a good forecast, we need to have reservations. How are you ever going to teach your customers to book as early as possible? Especially when you punish the early bookers by offering cheaper rates to those that book last minute.


It is not easy to withstand the temptation when competitors in the market settle for last minute campaigns. This can be avoided by offering Early Book Rates instead. This way you will be able to maintain a high integrity level towards your customers and avoid last minute drop outs.

High Demand Strategies

As important, if not more important, as the focus on Low Demand Periods, is the focus on High Demand Days. This is the time when properties have the opportunity to really increase their result. This can be obtained through a combination of the optimal marketing mix and public rate strategies. Usually we see that the price sensitivity decreases when arrival date is coming closer. This counts for first point of booking. Guests that already have booked and continue to search for last minute deals still are considered to have a long lead time. The trick is to be able to offer availability when the less price sensitive guests start to book. For High Demand Days, your focus lies on Displacement Calculations. This means that you analyze the reservations you were not able to take because you already were fully booked. If the ADR of these reservations is higher than the ADR you have on the books, there is potential to increase your result.

Shoulder Night Strategies

Shoulder Nights are the nights where demand is reasonably high. With the right strategies in place, you have the chance to achieve 100% occupancy and focus on these nights can give you a good revenue growth. Also here, focus on Displacement is vital. Many properties find that their displaced reservations depend on the fact that high demand days, in conjunction to these Shoulder Nights, were fully booked at an earlier stage. Here rate strategies can be all about positioning correctly, set the right restrictions throughout the whole period and aim for 100% occupancy without losing sight on getting the right rate during these nights.

Four things to consider!

  1. Strategy! Think before you start. Determine the pricepoints you are going to use for which daytypes and for which roomtypes; Distressed, Low, Medium, Shoulder and High Demand.
  2. Forecast! This actually is the base to correct pricing. The core reason behind any last minute drops in rates actually is a bad forecast. When you expect low or medium demand; do not start out with your highest rates, choose the pricepoint you determined for this type of day.
  3. Competitors! Take care to maintain the correct positioning against your competitors but be careful when it comes to last minute drops. If you make sure you have a base of reservations, you might not feel the need for last minute panic strategies.
  4. Analyze! Make sure that your strategies have had the right effect and find out if you could have improved even more. This is the best way to make sure you find the best long term strategies and will beat your competitors most days of the year.

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The future of a Revenue Manager

OrganizationPosted by Annemarie Gubanski Nov 22, 2013 22:46:19
The Future Role of a Revenue Manager
After the first two articles in this series, we continue with the focus on the future role of a Revenue Manager. How will Revenue Management develop and how can a property adapt, so that the maximum result is acquired and they will keep ahead of their competitors? This is part three of a series of three articles, in which we will try to find an answer to the following questions:

- The current role of a Revenue Manager. In this article we defined that the purpose of a Revenue Manager is to use analytics in order to create the winning strategy.
- Forming a Revenue Management focused organization. After defining the role of a Revenue Manager, we used these findings to find the optimal organization
- The future role of a Revenue Manager. In an ever changing world, also the role of a Revenue Manager will change. In this article, we will find the answer to what implications these changes will have on the role of a Revenue Manager.


What do the experts say?
In Cheryl Kimes article about Total Revenue she refers to a study which she conducted in 2010 regarding the future of Revenue Management. She asked the respondents about what they thought what Revenue Management would look like in the future and in which other parts of the hotel they thought Revenue Management would be applied. “Respondents felt that in the future, Hotel Revenue Management would be more strategic in nature, would be more technology-enabled and that it would encompass all parts of the hotel. The respondents identified function space and restaurants as the most likely candidates for future applications of Revenue Management”. I believe this to be very true. Total Revenue Management can and should be part of the strategies of any property in order to ensure that increased result is being made. In future articles, I will write more about the subject of Total Revenue Management. In this article, I will limit myself to the implications for the organization and for the Revenue Manager.

During the Revenue Forum in November 2013, Idan Velleman from PowerYourRoom pointed out that Revenue Managers will become Demand- and Profit Managers and will move away from a Room Only Revenue Management effort. On the same Revenue Forum, Kim van den Wijngaard from Olery pointed out that Social Media already has a large impact on our Revenue Management strategies. There are studies done about the impact of Social Media on our result and on the possibility to attract more reservations coming in to our own website.

Cornell University published in November 2012 the outcome of their research: The Impact of Social Media on Lodging Performance, where they stated that “data from Travelocity illustrate that if a hotel increases its review scores by 1 point on a 5-point scale the hotel can increase its price by 11.2 % and still maintain the same occupancy or market share.” In the same report it is concluded that “a 1-percent reputation improvement leads up to a 1.42-percent increase in revenue per available room (RevPAR).” In other words; focus on Reputation Management together with the ability to give high quality service, generates reservations and revenue!

Jennifer Davies from Expedia says that “On Expedia.com, good reviews of 4.0 or 5.0 generate more than double the conversion of a review of 1.0 – 2.9,” Research that Micros published in April 2013 on How a Higher TripAdvisor Ranking Can Help Hotels Book More Room Nights has the following findings:
Properties ranked 20 see 10% more directly booked room nights p/month vs those ranked 40
Properties ranked 10 see 10% more directly booked room nights p/month vs those ranked 20
Properties ranked 5 see 9% more directly booked room nights p/month vs those ranked 10
Properties ranked 2 see 7% more directly booked room nights p/month vs those ranked 5
Properties ranked 1 see 11% more directly booked room nights p/month vs those ranked 2


The graph illustrates the importance of being on top. So; a great number of good reviews do not only generate Revenue, they generate Reservations. Do well and you will be able to attract more reservations coming through your own website; in most cases the cheapest channel you will be able to find!


The future is here!
I agree with the statement that the future of Revenue Management will be more focused on strategy, technology and applying Revenue Management on other departments. There already is a shift from hotels and hotel chains that is starting to extend the responsibility of the Revenue Management to the Function Spaces, however; I do not see properties to be massively moving to apply Revenue Management in their restaurants, which I consider to be a shame. I believe this is mostly because Restaurants are considered to be a service and not as the money making department it can be. There is no reason why the F&B Department should not contribute to the properties income more.

When it comes to technology, the shift is all about moving from Property Based systems to Cloud Based. On the Revenue Forum in Amsterdam, Thomas Broos from Van Hessen talked about the implications of this shift. He pointed out that today’s youngest generation will not know what a laptop looks like once they grow up. Developments in hotel systems are all done in the Cloud. Although we still are still not able to compile all our internal and external systems in one big database, the move towards The Cloud does mean that we are heading in the right direction. Imagine updating your PMS, OTA’s, Yield System and forecast from your Mobile Device. It will come! It does mean that we all should take this into account when purchasing any new technology. Think Cloud and skip Property Based! We have the knowledge, technology is moving in the right direction; why wait?


Challenges and Opportunities
The implication of the shift towards Total Revenue Management and Profit Management involves increased knowledge on the application of Revenue Management on departments other than Room. But not only training is of an essence. To an even greater extend staff members of all departments will have to be aware of the implications on their daily tasks. In many cases, a Revenue Management project on a property starts with making sure that all heads of department are aware of the changes the implementation of Revenue Management on their department. This can either be the fear of not being able to handle an increase in responsibilities on an already overloaded schedule, or the fear to delegate a certain responsibility to somebody else. The trick is to address these fears and make sure that the project involves increased knowledge and challenges to everybody.

I would advise you to take good care of the job description for your current or future Revenue Manager and keep in mind that, as I wrote in the first article “The Current Role of a Revenue Manager” in this series; there is a difference between a Revenue Manager and a Channel Manager.


Read the previous articles “The current role of a Revenue Manager” and “Forming a Revenue Management focused organization”


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Forming a Revenue Management focused organization

OrganizationPosted by Annemarie Gubanski Nov 18, 2013 14:45:42

Forming a Revenue Management focused organization

After the first article in this series, we continue with an analysis on how to create a Revenue Management focused property. This is part two of a series of three articles, in which we will try to find an answer to the following questions:

- The current role of a Revenue Manager. In this article we defined that the purpose of a Revenue Manager is to use analytics in order to create the winning strategy.

- Forming a Revenue Management focused organization. Now we defined the role and skills of a Revenue Manager, we will see if we can use these findings to form the optimal Revenue Management oriented organizational schedule

- The future role of a Revenue Manager. In an ever changing world, even the role of a Revenue Manager will change. In this article, we will find the answer to the future role of a Revenue Manager and what implications this might have.

Revenue Management within the organization

Revenue Management is not a one-person job, reserved only for the Revenue Manager. Revenue Management involves forming the best strategy by analyzing result. For a strategy to have its effect, every department within the property should not only know about it, they should also apply the same strategy.

At the same time, forming a strategy is not only a job for the Revenue Manager. All relevant departments are involved in the decision making. The difference is that a Revenue Manager bases the strategy mostly on analyzing the result. To demonstrate what I mean I usually draw the following picture on a whiteboard. This is a picture of the whole organisation.


The hands and feet stand for the Operational departments. They are increasingly important as most of the comments made on Social Media are about Operations. The heart stands for all decisions we make based on feelings. For instance, it can feel right for the Group Sales Department to contract a large group and give a discount in order to assure the business. The head symbolizes the brain, or the analytical part of the organization. For instance; analysis that shows that a particular group should not be contracted against a rebate, as we expect to be able to book an equal amount of individual guests against full price.

We humans base most of our decisions on feelings. The analyzing part usually comes later. For instance, when we are hungry and see a snackbar close by, we could go in there and order ourselves a huge plate of French Fries. The notice that a salad would have been the healthy and less fattening option usually comes afterwards. As Revenue Management stands for the analytical part of decision making, it is good to take time to listen to analytics before making the decision.

The role of the General Manager

The General Manager is essential in order to guarantee success. I usually describe a Revenue Manager to be this negative and nagging person. With this I do not mean that we are negative, rather that we always calculate the loss of a certain piece of business. As we work with a fixed capacity, this becomes increasingly important during days and periods with high demand. We just do not like to see a space occupied by a guest paying 20% less than the rate we could have sold this space for. We focus on the 20% loss (displacement) instead of the 80% income. This means that you can expect us to be skeptical against any high producing contract, when we see that a great deal of this production lies in weekdays or periods in which we expect high demand. This goes right against the rules of negotiation; increase your volume and we increase your discount.

At the time the contract is being signed, the property has not yet experienced the demand the Revenue Manager is expecting for this certain period. Practically, you see unused space when the Revenue Manager already states that this space is going to be filled somewhere in the future. At that time, it is good to remember that a Revenue Managers role is to know about Lead Times and Expected Demand.

As Revenue Management comes with the need for a certain mandate to be able to direct the properties strategies, a Revenue Manager should be placed in the Management Team. This means that a Revenue Manager is reporting directly to the General Manager. This, in its turn, means that a General Manager should understand the principals of Revenue Management, in order to support the Revenue Manager sufficiently.

The organizational schedule

In order to assure there is a dynamic discussion regarding Occupancy versus Rate and Long Term versus Short Term, it is strongly discouraged to put a Revenue Manager under a Sales Manager or under an individual that does not have a profound knowledge of Revenue Management. As said; as a Revenue Manager has an active part in deciding on the strategies of the property, he/she is preferably part of the Management Team. For several reasons, a General Manager might like to keep their Management Team slimmed and chooses to have one representative for the Commercial Team. In this case, the Commercial Manager, being the head of all commercial departments, should have a profound knowledge of all different fields of work including Revenue Management!

Read the previous article “The current role of a Revenue Manager” and the next article in this series; “The Future role of a Revenue Manager”

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What is the current role of a Revenue Manager?

OrganizationPosted by Annemarie Gubanski Nov 13, 2013 15:41:20

What is the current role of a Revenue Manager?
As the job description of a Revenue Manager can differ depending on where you work, it is not easy to define the current role of a Revenue Manager. It is important, as it not only has an implication on our image of a Revenue Manager, but also on training needs, recruitment, the organizational schedule and even development within Revenue Management. In three subsequent articles we will try to find an answer to the following questions:

- What is the current role of a Revenue Manager? In this article we will define the purpose of a Revenue Manager and match this to the day to day routines of this role.

- Forming a Revenue Management focused organization. When we define the role of a Revenue Manager, we will use these findings to find the correct place within the organization

- What is the future role of a Revenue Manager? In an ever changing world, also the role of a Revenue Manager will change. In this article, we will define what implications these changes have on the role of a Revenue Manager.

The purpose of Revenue Management
Let us start with the definitions of Revenue Management. The classic definition of Revenue Management comes from Robert Cross, the author of the bestselling book “Revenue Management, Hard-Core Tactics for market Domination”: “Sell the right space at the right price at the right time to the right customer”. Later on, the evolution of distribution channels prompted us to add “at The Right Channel”. This is the most known definition of Revenue Management. Although this definition is easy to remember, it does not cover a good job description of a Revenue Manager. A more accurate definition can be found on Wikipedia: “Revenue Management is the application of disciplined analytics that predict consumer behavior at the micro-market level and optimize product availability and price to maximize revenue growth.” Though much harder to remember, this highlights words like Analytics, Predict Consumer Behavior and Optimize Product Availability. It therewith comes closer to what a Revenue Manager actually is supposed to do.

When we describe the definition found on Wikipedia to be more actual, you can describe a Revenue Manager as a person combining a commercial talent with a love for numbers. We must have a brain for mathematics, as making calculations is part of our day to day routine. The thing that makes a good Revenue Manager is the ability to apply a calculation and an analysis in a commercial matter. This does not sound like too much of a revelation, but all too often analysis ends with a conclusion only. Making a commercial analysis means that you take it a step further and apply the conclusion in such a matter that it results into increased profitability.

Our main purpose is to determine the strategies that will increase revenue. We do this by analyzing our result and apply this to the commercial functions of the property. A Revenue Manager is responsible for the total revenue of his or her department. So, a Revenue Managers responsible for Rooms Division should have control over all reservations that involve rooms. This includes contracts and group business. A Revenue Manager that is not able to control anything other than the public rates is called a Channel Manager. These are two different capacities.

The four competences of a Revenue Manager
A Revenue Manager needs to have great Analytic, Commercial, Technical and Communication Skills.

Analytical skill:
As analysis is the core of our work, analytical skills are a must. As we also concluded earlier, we will need to apply this analysis in a commercial way. This means that we will need to have the ability to use our analysis in such a way that it increases profitability.

Commercial skill:
As we are responsible for the total revenue of our department, we are very tightly bound to all commercial departments, such as Sales and Marketing. This means that we need to have good understanding of what these departments need and how they work.

Technical skill:
As we are depending on various different systems and even see us forced to produce a great number of analyzing tools ourselves, a technical ability is vital to become a good Revenue Manager.

Communicative skill:
One perception of a Revenue Manager is this person that sits in the office and produces Excel sheets. We need to be able to communicate the best strategy in order to make sure that the strategy is executed. As we stand at the basis of strategic decisions, it is vital that all departments within the property are properly informed in order for strategies to get their full impact.

A Revenue Manager that has strong analytic, commercial and technical abilities is a good Revenue Manager. The difference between a good Revenue Manager and a great Revenue Manager is the ability to communicate.


A day in the life of a Revenue Manager
This is not easy to describe, as the day to day routine of a Revenue Manager not only depends on the current workload, but also differs from property to property. Above any property specific tasks, a regular routine of a Revenue Manager usually include:

- Analysis of Benchmarking reports.

- Updating Forecast and forecast Total Demand

- Analyze success and need of Marketing campaigns

- Analyze Wash Factors and Overbooking levels

- Keeping track of competitors strategies

- Make sure rate strategies are communicated both internally as on the various channels

- Analyze Denials and other lost business

As you can see, Revenue Managers focus on quite a number of details. As we previously concluded; a great Revenue Manager distinguishes him/herself from a good Revenue Manager by being able to communicate clearly. From these numbers of details, we should be form a strategy that is easy to understand and easy to communicate.


General misconceptions about Revenue Management
These are four, what I consider to be, misconceptions I regularly come across when I visit the properties that acquire my help to form a Revenue Management focused organization.

Misconception 1: Revenue Managers only take care of the Booking Channels
Updating and optimizing the various Distribution Channels is a different function, generally referred to as Distribution Management. Distribution Management and Revenue Management are two different capacities, though the one cannot function well without the other. The function of Revenue Management is to form strategies that increase revenue income by analyzing our result. Channel Management is our way to communicate our rate strategies to the applicable markets. This can be done by a Revenue Manager or by a function that works closely with the Revenue Manager, for example a Channel Manager.

Misconception 2: Revenue Managers are only responsible for the public rates
This usually is a direct result from misconception no 1. The most optimal use of a Revenue Manager is to make him/her responsible for the total Revenue income of the department he/she is responsible for (for instance Rooms Division, Restaurant, Meeting Facilities, etc.). As all contracted rates and group rates also have an impact on the result of these individual departments, Revenue Management should be involved in the volume, specifics and rate of these departments. The level of involvement and cooperation between the different departments can differ from property to property.

Misconception 3: Revenue Management should be above Sales
This comes from the knowledge that Revenue Management never should be placed under Sales or Marketing. In the second article in this series about the forming of a Revenue Management focused organization, we will discuss this point into further detail. In my experience, the optimal way is to place commercial departments such as Marketing, Sales and Revenue Management on the same level. You should take care that all individuals are equally strong and can come to terms with each other. When a General Manager wants to slim down the Management Team and applies one person who is responsible for the commercial decisions, it is vital that this person has a profound knowledge about Revenue Management and understands the analytics behind a Revenue Managers reasoning.

Misconception 4: Revenue Managers only care about short term result
Short term result is great. Long term result is always best and should be the focus of any member of the commercial team. As it is the focus of a Revenue Manager to increase revenue on all market segments for which we try to find the optimal rate and production, all rates and conditions are questioned. My experience is that the communication level usually is the core of the issue. Questioning decisions usually gives the best result and these discussions are best done by individuals that are equally strong. More about this in my next article!

Read the next articles in this series: “Forming a Revenue Management oriented organization” and “The Future role of a Revenue Manager”

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