Three critical steps to future-proofing revenue management teams
Revenue management is a rapidly evolving discipline and preparing teams to have a view right across the business is essential today. To tackle this challenge, companies need to consider their recruitment processes and they need to nurture the right talent, while at the same time developing new and relevant systems. EyeforTravel’s Ritesh Gupta takes a look at what hotel firms are up against.
What makes a competent revenue manager, is a question that all hotels today must ask. It has become clear that promoting a director of rooms or reservations manager to revenue manager isn’t necessarily an appropriate skills match. Revenue managers need to be analytically minded, with a background in business strategy, analytics and communication. Hotel organisations also need to ensure that RM teams can contribute to enterprise-wide decision making, as well as making use of appropriate RM systems.
Let’s now explore the three key things that can play a role in improving the performance of revenue management.
1. Recruitment – yes you need the right people
The problem has always been recruiting the right talent and providing the right environment for them to grow and develop, says Kelly McGuire, executive director, Hospitality and Travel Global Practice at SAS Institute.
Generally candidates are chosen in a couple of ways:
· Some hotel companies look outside the industry for candidates with the right analytical and business background, but that might not have a background in the hotel industry.
· Others look to innovative ways of delivering training (online, conferences, certifications) for continuous learning. This is particularly important because in many cases there is only one revenue manager at the property – they don’t have a peer group to learn from and develop with.
“Creating RM communities where best practices can be shared and growth opportunities identified helps revenue managers stay connected and allows them to continue to develop new skills,” says McGuire. She believes it is be better to facilitate RM training in other departments across the hotel – like operations and marketing. “If these folks are exposed to RM concepts, it will make working together much easier. They could also return the favour, giving revenue management a more holistic perspective.”
2. Ensure decision making is enterprise-wide
There is a lot of pressure on RM departments today to determine how to incorporate new data sources and new processes into pricing decisions. Whether it’s benchmarking data, forward-looking demand data or user-generated content, revenue managers struggle to get their arms around what’s available and how it could improve their pricing decisions.
So how is RM is getting ready for a holistic and strategic view of pricing and demand management? According to McGuire, they are gearing up by taking a more macro look at available data, market trends and competitive movements.
Indeed, as RM teams gets their head around emerging technologies and available data, they are better prepared to understand how these will fit within a more holistic strategy.
According to McGuire, RM is also reaching out to other departments across the organisation to better understand the goals, and how RM can contribute to improving enterprise-wide decision-making. While much of this activity is manual at this point, it is paving the way for building a strategic analytic culture with hospitality organisations.
3. Systems need to catch up
One thing to note is that the systems which support RM decisions, have not evolved as quickly as the role.
Liz Uber, vice president of revenue management, Pillar Hotels & Resorts says that although systems are very useful in making RM decisions, there is still not one system that takes into account all the information and variables available.
As an example, large special events can certainly be noted in many RM systems. However, some of the smaller events, explains Uber, such as local festivals, are not always identified by additional demand until it is too late. In addition, things like weather, airport delays, road closures, and last-minute market condition changes need to be consistently monitored and regular adjustments must be made to the system to reflect such changes, says Uber.
Finally, the current systems often allow you ‘weigh’ how impactful area competitive hotels are on your market share. “Of course, there are times when those hotels might adjust rates because they booked a large group or lost a large piece of business. “Our hotel would not necessarily adjust our strategy in those specific instances,” explains Uber, adding that the combination of information and the revenue manager’s knowledge continues to be key in making profitable decisions.
McGuire says there are three main areas where RM systems have not kept pace with the evolution of the role:
· Analytics: The market has completely changed since RM systems were first developed. RM systems were not originally designed to operate in the environment of price transparency created by the advent of the Internet and OTAs (and now value transparency with user-generated content). Vendors have either had to retro-fit systems to account for different analytic techniques (like price optimisation), which means that the impacts are not fully integrated, or they’ve completely ignored the problem – forcing revenue managers to do manual work outside of RM systems.
· Technology: Technology has evolved since RM systems were first introduced. Originally, complex forecasting and optimisation algorithms took too long to process, meaning pricing decisions could not be delivered in time. Compromises were made in the analytics to balance accuracy of results with timeliness of delivery. Processing power has improved, so we no longer need to make compromises like heuristic optimisation, single forecasting methods or summarised data. Introducing multiple forecasting methods increases forecast accuracy, and ultimately improves pricing. More complex optimisation algorithms can properly balance all operating constraints with revenue opportunities, arriving at the most profitable price and availability decisions, and more detailed data provides better visibility into the nuances of the operation – improving both forecasting and optimisation.
· User experience: As the RM role expands across the organisation and deeper into the analytics, users are finding the need to operate outside of the RM system more and more. Systems need to evolve to become less restrictive in the data streams that can be accommodated, the reporting formats that are available, and the workflow and decision support that is provided so that they can evolve with the revenue managers’ role.