The top issues facing select-service revenue management
The top issues facing select-service revenue management
01 JULY 2019 8:28 AM

As the revenue-management discipline evolves and grows in importance, select-service hotels have hurdles to maximizing success, including finding the time and people to do the job right, experts said.

MINNEAPOLIS—While revenue management at select-service properties might have historically been viewed as less complicated than handling revenue at larger full-service hotels, experts said that’s not necessarily the case.

Speaking during the “Revenue-management leadership in the focused-service hotel segment” panel at the 2019 HSMAI Revenue Optimization Conference, Monte Gardiner, senior director of revenue management at Best Western Hotels & Resorts, said the challenges of revenue-managing in the segment are often underrated.

He said one thing people often overlook is many select-service hotels simply don’t have the trained revenue staff of larger, more sophisticated properties, which can make what seems like simple tasks more difficult.

“I speak with hotels in this category on a daily basis, and (managers) say they’re wearing multiple hats,” he said. “They don’t have the time to do all the things required by our discipline for x, y or z (reason). So we need to be aware that time is the number one constraint in short supply in hotels.”

Hoteliers must be checking their systems
Partially due to the staff and time restraints described above, artificial intelligence and machine learning are increasingly important as the hotel industry moves toward more widespread use of automated revenue-management tools, said Tom Buoy, EVP of revenue for Extended Stay America. But he said it’s important to keep a close eye on those systems and how well they’re operating, otherwise revenue managers might be letting their automation undermine their efforts.

“If you don’t have an automated system and no employing professional revenue managers today, then you’re missing out on daily opportunities,” he said. “But one of the things you have to do on a regular basis is a commercial engine audit, which are designed to identify areas of leakage. You could be losing 5% of your revenue without even thinking about it.”

Expanding scope for revenue managers
Lara Stabell-Gibb, corporate director of revenue management for OTO Development, said the work of revenue managers is growing increasingly complex even at select-service properties. She noted that many companies like hers have revenue managers work with multiple properties instead of just one, but they have had to scale back the number of properties a single revenue manager can handle—from 15 to 20 to six to 10—based on the workload.

And a big part of the reason the work is becoming more complicated and more important is an increasing focus on profitability, whereas revenue management was traditionally “really based on the top line.”

“It’s evolved into a hybrid,” she said. “There are a lot of choices (for a revenue manager to make) and a lot of data points to drive those decisions at all times. If you had a larger amount of hotels (to manage, it can be overwhelming.”

She said today revenue managers are asked to be “a strategist, a consultant and a leader.”

“It’s not just about managing the inventory anymore,” she said.

New responsibilities, new challenges
Revenue managers are getting more and more responsibility in forecasting future performance, both in revenue and profit, Stabell-Gibb said.

As forecasting grows into a bigger part of the revenue manager’s role, so does reducing forecast error, Gardiner said.

“Forecast error is a real problem,” he said. “It’s not a unique problem for focus-service hotels, but it’s amplified by the sparsity of data.”

Both Stabell-Gibb and Gardiner said this requires revenue managers to understand the markets they work in at a deeper level and be quicker to react to new events and circumstances.

Gardiner said this is especially important in select-service hotels because they’re relatively small compared to full-service properties and fill up quickly, which “shortens the window where you can influence a hotel’s profitability.”

Best Western’s systems “just released something we call the ‘Garth Brooks alert’ because when a concert is announced, you have a short window to intervene (to capture higher rates before rooms book),” he said.

Gardiner said accuracy in forecasting can’t just be an on-property mission. He said the lack of manpower often leads to hoteliers finding automated systems or other third-party solutions, and those partners must do their part in making sure they get things right.

“We need to hold to account our partners who are not helping with this issue,” he said.

Developing trust in systems
While Gardiner noted revenue managers have to train themselves to be critical of automated systems to balance the benefits of both automation and human knowledge and experience, panelists also said the industry also has a long way to go in learning to trust the machines.

Stabell-Gibb said their systems have “pushed a few of our properties out of their comfort zone,” with their select-service Hyatt Hotels Corporation brands particularly.

“The Hyatt system was making recommendations that no one really understood or were afraid of, so trusting it took a big leap of faith,” she said. “It proved to be fruitful. Nobody expected to get $500 a night at a Hyatt Place, but it did happen.”

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