RM hits the big stage but must work harder to secure the lead role

Revenue management today is beginning to deliver strategic benefits across the business. With a bigger and broader mandate, RM specialists have an important role to play in communicating with other departments to make the most of emerging opportunities. EyeforTravel’s Ritesh Gupta finds out more

Revenue management as a discipline in the hospitality industry is expanding its mandate by capitalising on emerging trends in several ways. This is happening both at the property and corporate level. Revenue managers are working with their counterparts in operations  to identify opportunities. They are doing this by focusing on food and beverage, function space and spa projects - to apply revenue management techniques to other revenue generating outlets across the enterprise. 

Success of projects like this gain visibility for the discipline, and move the organisation towards the goal of total revenue management.

Making a tangible contribution

Here we explore a couple of examples to assess how RM is gradually assuming a bigger role: 

·          Business Strategy: RM is just beginning to contribute to overall business strategy, says Kelly McGuire, executive director, Hospitality and Travel Global Practice at SAS Institute.  To date RM has been focused on short-term revenue maximisation – it  is not that this isn’t important but price is an important strategic lever that can help organisations achieve longer term business strategy goals like growth plans or market share. 

“RM not only brings the important strategic lever of price to the table, but also the data and analytics to support the kinds of analyses that are required to understand the profitability impacts of strategic decisions,” says McGuire who believes that as time passes we’ll see revenue management taking on an increasing role in the development and execution of business strategy.

·          Marketing: This is another area where revenue management is taking on a larger role. RM and marketing have always been two sides of the same coin – one responsible for demand control and one responsible for demand generation. 

“When these two departments work more closely together, decisions can be synchronised. Marketing no longer sends out promotions that dilute revenue during peak periods and RM no longer sets rates so high that business from loyal customers suffers. Marketing helps RM take a longer term view of the business by understanding the impact of a guest’s lifetime value, and RM helps marketing increase the overall profitability of campaigns by timing them during slow periods and targeting them at the right segments,” says McGuire.

Communicating essentials

One hurdle, at least at the above property level, relates to RM teams’ responsibility and involvement in operations that may not be clear to other business functions.

Conveying the art of RM so that everyone understands what we do is very important, says Liz Uber, vice president of revenue management, Pillar Hotels & Resorts.

Her team is involved in the following ways:  

·          Setting restrictions and rates, but also providing assistance in investigating what is going on in the competitive set, identifying sales strategies, and helping with e-commerce action plans. 

·          Working very closely with their hotels and above-property counterparts to ensure that everyone is on the same page and things are not missed. “We strive to constantly educate the team on why we recommend certain restrictions, rates, or patterns. This is true not only for transient business, but group business as well. Partnering with the sales and catering teams to discuss what the right business for the hotel, both on the rooms and food and beverage side of things, is important. This ensures that we are taking a look at all of the revenue potential for a particular guest or group, and making the most profitable decisions,” says Uber.

What about gaining support?

RM is such an analytically driven discipline that it is still frequently not well understood by other departments across the hotel, and this is a constant challenge for revenue management, as they attempt to work with other departments across the organisation, says McGuire. 

McGuire always advises revenue managers to remember that any new RM project is a journey. She says one should:

·          Never assume that people really understand what revenue management is. 

·          Start by educating your peers. It is crucial that these sessions are delivered in approachable business language – not ‘technical speak’ or through math problems. “You want to include your audience, not alienate them, and you will look plenty smart being able to explain a complex concept in a simple language. Visualisations help – as well as story-telling and practical examples from your experience,” says McGuire.

·          Be sure to involve other departments in decision making, and solicit input from them as to the challenges they are facing. Participation fosters buy-in. If people feel like they are being listened to, they are more likely to want to help. “This is mostly common sense, but it is easy to get so wrapped up in your own day-to-day challenges and business processes that you forget others are not as intimately familiar,” says McGuire.

So even as RM teams are gradually working their way into new spheres within an entity, they still need to ensure that coordination and communication is being done appropriately to ensure everyone benefits in the long-run. 

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