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.

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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