A third generation of revenue managers will focus more on optimizing the revenue from a single guest rather than the traditional rooms-revenue model, according to panelists during the HSMAI Revenue Optimization Conference.
BALTIMORE—A third generation of revenue managers will focus more on optimizing the revenue from a single guest rather that the traditional rooms revenue model—an emerging practice called total revenue management—according to a panel of revenue management experts Monday during the HSMAI Revenue Optimization Conference.
For too long revenue managers have focused on optimizing rooms revenue instead of total guest spend, which might include golf, spa or food and beverage, said Bonnie Buckhiester, president of Buckhiester Management.
“We’re very rooms-centric. We don’t spend enough time optimizing (food-and-beverage), retail or golf,” she said.
Buckhiester sees revenue managers in three generations. The first revenue managers weren’t given that title but were mostly GMs and directors of sales who were practicing pricing strategies. The second generation—which is most of the revenue managers with tenure today—are very analytical and do a lot of number crunching. Some are not as good at the strategic planning, Buckhiester said.
A third generation, those early in their career or entering the industry today, need to be very much interested in the whole asset, she said.
“With the second generation revenue manager, it’s a loss of opportunity,” added Melissa Edwards-Clayton, regional director of Internet marketing for Fairmont Hotels & Resorts in Canada. “If all of us are working in silos, we don’t have the insights and analytics to make the right decisions.”
Edwards-Clayton said Internet marketers and revenue managers should work side-by-side and share intelligence on which groups and which channels should be opened.
“The third-generation revenue managers reach out to me regularly, and I reach out to them in all day-to-day activities to leverage opportunities,” she said. “Without working out that way we’re leaving something on the table.”
Impact of technology
Another barrier to practicing total revenue management is technology as many revenue managers report integration issues and functionality limitations.
When hotel teams are collaborating, they’re typically operating on multiple software applications.
“The biggest challenge for us is making sure all the data gets translated into technology to make the decision easier,” said Jon Ozark, VP of revenue management and gaming analysis at Caesars Entertainment.
“Our biggest obstacle in technology is not having it,” said Alex Gregory, director of sales and marketing at Sea Island, a luxury resort in Georgia.
Technology helps third-generation revenue managers determine new metrics to measure total revenue management, the panelists said. If you’re “sub-optimizing” the hotel—giving away rooms to high-spending gambling guests, for example—accounting systems can help track that.
“You can look and say, ‘Did we make good decisions or not?’” Ozark said. “Then you can give credit for the decisions that are made that might not be optimal for the hotel but are optimal for the entire operation.”
The Sea Island team is doing well understanding the revenue that’s coming in for guests, particularly segmenting it down to group versus transient, Gregory said. But understanding what channels are driving what profit for them is difficult. To help, he said the resort requires guests to use their room card to make purchases throughout the resort. Doing so allows his team to better see and analyze a great deal of data all in one place.
“That really helps to understand which channels are profitable,” he said.
Are revenue teams changing?
The panelists agreed the number of diversified team members who join the weekly revenue meetings is growing and that different departments can contribute to those meetings.
At Fairmont, all the key stakeholders are involved in those meetings. That way, management gets “a better sense of when we’re seeing compression,” Edwards-Clayton said.
“Maybe we’re seeing compression in golf so we’ll pull out of those channels and shift inventory to our spa offering,” she said. “We’ve got a much more holistic approach now.”
“If you’re not part of a team, you’re at a severe disadvantage,” Edwards-Clayton said. “The stakeholders need to be in the room.”
Internet marketers in particular need to be in those meetings because they need to be educated on the pricing strategies to effectively optimize revenue.
Ozark encouraged all team members from the different disciplines to prepare in advance for those meetings and come with solutions to problems.
“Don’t be a weather forecaster and say what the weather is going to be. Don’t wait until the weekly meeting (to determine a solution),” he said. “Instead you can say to the GM, ‘Here’s what’s bad and here’s what we’re going to do about it.’
“Come to the table with a game plan and do it in collaborative way.”
Gregory said most revenue managers today understand the group versus transient model because that is the most basic model. Studying displacement by channel should be next, he said. However, there might be a learning gap, so Gregory suggested investing in technology to help understand those channels better.
“Have any of us tried to place a value on a 4 p.m. checkout that might be mandated by a channel?” he said. “Things like that you might not be thinking you need to place a value on.”
“We need to track upgrades religiously to see how much exactly we’re giving away,” Buckhiester added.
In the long run, Buckhiester said revenue managers should tackle these barriers one by one and ultimately determine what a hotel’s most profitable market segment is.
“Total revenue management is the future, and we should be doing it now, but we’re just not there yet,” she said.