Gearing up for maximising profitability across segments and revenue streams

Revenue Management Special: Preferred Hotel Group’s Brij Bhushan Chachra believes the critical issues for RM at this juncture are: human resources, the understanding of new distribution platforms and social media

Published: 22 Jul 2011

Revenue Management Special: Preferred Hotel Group’s Brij Bhushan Chachra believes the critical issues for RM at this juncture are: human resources, the understanding of new distribution platforms and social media

By Ritesh Gupta

Revenue management in the hotel industry is constantly evaluating several issues at this juncture - dynamically measuring the responsiveness of guests to price changes, RM tools and ancillary revenue streams, and automated systems.

Considering the progress made over the years, it is widely believed that revenue management is an accepted science behind pricing and maximising revenues.

The focus of the function will continue to grow, across industries, says Brij Bhushan Chachra, Director, Revenue Account Management – India, Middle East & Africa, Preferred Hotel Group.

“The role of revenue management will further be enhanced from yield management, to channel management and now to marketing management also. I see RM becoming an integral part of our industry and across departments to influence Total Revenues including Restaurants, Functions Space and Spa’s. Lastly, in my view the future of revenue management will also assess and maximise profitability across segments and revenue streams,” said Chachra, who is scheduled to speak at the forthcoming EyeforTravel’s Travel Distribution Summit India 2011, to be held in Mumbai (12-13 October) this year.

Chachra spoke to EyeforTravel’s Ritesh Gupta about the future of RM . Excerpts:

Can you elaborate on some of the critical issues which RM has had to face in the recent past and how do you think the industry needs to gear up for the same?

Brij Bhushan Chachra:

The critical issues I see for RM are: human resources, the understanding of new distribution platforms and social media. Today we find a shortage of resources who understand the complete spectrum of the job on hand. A need for including this as an integral part of our training programmes across departments is something which the hotels should look at. Even in our hotel education schools this can be looked in as a discipline to address. This, coupled with the use and availability of right distribution capabilities especially for the independent hotels. At Preferred Hotel Group this is our endeavour to provide hoteliers with the best human resources and systems to maximise their revenues.

It is being highlighted that the big innovation that is on the horizon is the capability to quantify price elasticity and use that output to generate optimal prices directly. Bringing publicly available competitor pricing data into the heart of the RM system and forecasting how customers will respond to changes in price—it’s a totally different approach. The most advanced hotels are moving in this direction and airlines are likely to follow suit. What’s your take on the same?

Brij Bhushan Chachra:

This is surely a good approach. In fact today also RMS systems are using competitive information to recommend prices and I do see the trend for using such predictive approach. However, the use will also depend on the market and the segment of hotel.

The modern RM is no longer the record keeper of the past and instead is far more reactive to market conditions, in tune with sales plans and the RM professionals are being described as decisive forward thinkers who are innovative and creative. How do you think this all is reflecting the approach of RM professionals today as far as forecasting is concerned?

Brij Bhushan Chachra:

The RM role has graduated from a yield manager to a channel expert and now to an e-marketing guru. Today revenue managers are equipped with much data across channel and segments which assist them to forecast and measure results.

Whilst RM systems go a long way in identifying opportunities and maximising revenues they are not capable of business forecasting and this still remains an area where Revenue Mangers have to improve. What’s your viewpoint regarding the same?

Brij Bhushan Chachra:

Absolutely, a system is as good as its user. In a dynamic economic world as in today, Revenue Manager inputs are a must even for the best of systems to perform. Having said that, it is my belief that a good revenue manager is one, who can beat the forecast by implementing proactive and innovative strategies. I guess that this is what revenue managers are meant to do!

Can you provide an insight into initiatives being taken by the industry to maximise profits by accurately forecasting demand by segment, and setting price and availability restrictions to ensure access for the most valuable customers?

Brij Bhushan Chachra:

To start with today the hoteliers are now looking at the total spend by segments much more closely followed by measures like GOPAR. Also the lifetime value of the consumer has gained ground and hoteliers are taking measures to quantify and evaluate. Therefore using the above parameters the hoteliers are targeting the most profitable segments. In fact today we are seeing the shift form macro segments to micro segments.

Earlier, a senior Carlson executive told me: One as-yet untapped areas is to introduce a notion of value for the underlying hotel product. Rate optimisation, as good as it is, still depends on the formed opinion of consumers (expressed through his/her price elasticity) to maximise revenue. There is an opportunity to influence that formed opinion by balancing price with product variables in the optimisation algorithms. What’s your opinion about the same?

Brij Bhushan Chachra:

While I do agree there is an opportunity to balance the price and product variable and influence the so called “opinion” however the opinion will still be governed with the consumers his/her price elasticity. Therefore we need to have these in the optimisation algorithms to maximise the notion of value for the hotel product however the result and actual influence of the revenues will need to be evaluated.

Travel Distribution Summit India 2011

Brij Bhushan Chachra, Director, Revenue AccountManagement – India, Middle East & Africa, Preferred Hotel Group isscheduled to speak at the forthcoming EyeforTravel’s Travel Distribution Summit India 2011, to be held in Mumbai (12-13 October) this year.

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Tim Gunstone

Managing Director

EyeforTravel

+44 (0)2073757557

tim@eyefortravel.com

 

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