Executives on the changing revenue-management landscape
Executives on the changing revenue-management landscape
29 JUNE 2017 8:42 AM

Panelists at the HSMAI Revenue Optimization Conference in Toronto share their opinions on how the revenue-management discipline is growing and changing.

TORONTO—Experts in the field of revenue management seem to think the “management” part of that has grown anachronistic for the work done by revenue managers.

Speaking at the HSMAI Revenue Optimization Conference’s “Up side down” panel Wednesday, hotel executives who specialize in revenue said the discipline has grown to focus more on long-term strategy, as automated systems take over the mundane day-to-day activities once handled by revenue managers.

“As we get more automation and data science, more of that tactical decision-making is done with automation,” said Dave Roberts, SVP of consumer insight and revenue strategy for Marriott International. “So the role of a revenue manager has broadened into revenue strategy for hotels and much broader performance management.”

Panelists noted that change in duties has gone hand in hand with a push up the hierarchy both on property and in the corporate structure.

“We’re working on elevating the status and stature of the revenue manager at the property level,” said Monica Xuereb, Loews Hotels & Resorts’ chief revenue officer. “That’s something we’ve done over the last two years. We’ve elevated them to the executive committee, reporting directly to the general manager, equal to directors of sales and marketing, so they’re no longer being overridden by sales. That has improved key decision-making at the hotel level since there is someone highly analytical and strategic sitting at the table.”

Mark Woodworth, head of hotels research in the Americas for CBRE, noted the work of revenue managers will grow ever more important over the next year as the hotel industry continues to try to realize more significant rate increases.

“One thing we’ve seen the last two or three years with our forecasts, and forecasts are rarely 100% accurate, but where we’ve been consistently off is (average daily rate growth),” he said.

What’s next for revenue management
Panelists agreed that one of the top changes in the revenue-management space is an increased awareness and interest in profitability.

“Net (revenue per available room) is now part of the daily conversation,” Xuereb said. “Even for sales, it’s a big change. We’re doing a lot of education on how contracts or the agreements we sign on a broader level have an impact on the profitability of our business.”

Lennert De Jong, chief commercial officer for CitizenM, said revenue managers must dig deeper into the numbers to understand more about their businesses’ profitability.

“You need to dive into the P&L and take out distribution costs,” he said.

De Jong also argued that hotel businesses might benefit from taking revenue-management functions off property and keeping those operations at corporate offices.

“We’ve always centralized these things,” he said. “I don’t understand why you’d occupy valuable real estate with administrative offices (for revenue managers) who are reporting to a generalist. I don’t see how that’s getting the best out of your organization, but that’s just an opinion.”

Moving beyond rooms revenue
Panelists noted that while many want to get revenue managers involved in various aspects of their hotels to maximize revenues other than rooms, sometimes that can be easier said than done.

Roberts said his company and others have made significant progress in managing meetings and events, but it has been more difficult with other aspects of hotels like food and beverage and spas. He said food-and-beverage revenue management is particularly tricky because not everyone is in agreement about the purpose of those operations.

“It sounds elementary, but we need to define what it is we’re trying to do,” he said. “It’s not necessarily about profit maximization. Some believe (F&B) may be part of the guest experience and think of it as a loss leader. … So are you trying to maximize profit or is it about driving guest loyalty and better brand perception? Until you answer that, you can’t do a revenue-management piece.”

De Jong said the focus on short-term rooms revenue can leave some guests feeling burned. He noted last-minute price cuts to drive occupancy can degrade guests’ view of a brand if they booked recently at a higher rate, so revenue managers need to think more comprehensively about the impact rate cuts have.

He cited as an example a hotel charging $300 a night until two weeks out and then cutting that rate to $250 a night. Consider, he said, how that might be perceived by an otherwise loyal customer who booked at the higher rate then saw the lower one appear at the last minute.

“One thing you have to do for yourself is stick to (thinking about) the longer term,” he said. “Or customers will lose faith in your proposition.”

He said executives are “doing a good job” if they “beat up revenue managers for decreasing price as it gets close to the arrival date.”

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