How revenue managers look at cycle dynamics
 
How revenue managers look at cycle dynamics
14 JULY 2017 9:04 AM

With many anxious about approaching the end of a prolonged cycle for the hotel industry, revenue-management experts said that shouldn’t change the way they do their jobs.

TORONTO—Cycle dynamics shouldn’t change how a revenue manager approaches operations at a hotel.

That was the message from a panel of revenue-management executives who sat down with Hotel News Now during HSMAI’s recent Revenue Optimization Conference.

Sources said the discipline didn’t exactly follow that advice in 2009.

“We failed miserably in the last cycle,” said Dev Koushik, VP of global revenue optimization for InterContinental Hotels Group. “Hopefully, when the next one comes, we can show (our expertise). … The science we’re applying should be able to survive any cycle, but only the next time will tell.”

Koushik defined “failure” as significant drops in rates and the lack of any semblance of rate integrity.

But Chris Cheney, VP of revenue management for Stonebridge Companies, said maintaining that integrity can be easier said than done in bad times.

“Market forces are powerful things,” he said. “If there’s not demand, people go searching for it, and if they can’t find it, they try to buy it.”

Cheney said the way to counteract that impulse will be to focus on “maintaining the value proposition of the hotel” and remembering its “amenities and services mean something.”

“We have to make sure we’re selling a service and not just quoting a price,” he said.

Cycle expectations
Jamie Pena, VP of revenue strategy and global distribution for Omni Hotels & Resorts, said she doesn’t see the hotel industry going over a cliff any time soon.

“I don’t see a decline, but the trick is to hold rate,” she said.

She noted one of the biggest threats at the moment is the industry talking itself into a recession.

“We self-fulfill that story,” Pena said. “For us, it’s about keeping the positive chatter going with revenue teams. Group pace looks good, and the industry looks good.”

Some have been surprised by the ongoing strength of hotel demand in the U.S., but Cheney said that shouldn’t be surprising if looked at from a market perspective.

“Generally, at the market level there are specific reasons (for demand growth). Travel is more accessible to more people than ever in human history,” he said. “There are emerging classes in other parts of the world … and there are certain markets that impact more directly than others.”

Geoffrey Field, VP of revenue management for Shaner Hotels, noted there can be supply issues even in high-demand markets.

“That’s what determines the cycle, in my opinion,” he said. “You get more investment in those markets, then 90% occupancy is down to 80%, and some are struggling to keep that 90%.”

Challenges for 2018
The experts at the roundtable shared some of their expected headwinds for revenue managers in 2018.

Koushik projected “anemic rate growth,” and Sloan Dean, SVP of revenue optimization and underwriting for Ashford Inc., said he expects worse than that in some markets.

“There could be negative (revenue per available room) in several markets,” he said. “There is going to be several key markets that are problematic in 2018.”

Lori Kiel, chief revenue and marketing officer for the Kessler Collection, and Cheney both pointed to issues around keeping the human element in revenue management.

“For me, it’s about data and analytics,” Kiel said. “If you don’t have a process behind it, it’s going to suck the life out of revenue management, and you’ll end up with analysis paralysis.”

Cheney said the issue will be not overemphasizing automated revenue-management systems.

“We’re trying to control robots rather than them controlling us. … We need revenue managers to maintain the artistry and help systems understand new things and not just go off history,” he said.

Field said the key will be leveraging automation to improve the work of human revenue managers.

“We need to get revenue managers to be more analytical and look further out,” he said. “That will be critical in achieving (average daily rate).”

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