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 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”

Download this article in Pdf

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