RM in 2014: a higher profile and hard work ahead
In 2014 expect revenue managers to have a bigger mandate, but that doesn't mean they should rest on their laurels.
A hotel firm’s revenue performance is a blend of a diverse set of factors. From revenue management efficacy, brand awareness, online reputation to distribution management and sales effectiveness among others. Today revenue managers are pursuing ways to extend their capabilities into various areas of the business and are coordinating with other business functions as they gear up to take on a bigger role. As just one example, understanding the impact that a TripAdvisor ranking has on a brand - and how to consider this in the overall RM pricing structure - is an important consideration.
Clearly, the discipline of RM continues to evolve and those revenue managers who embrace the change, and ever increasing responsibility, will naturally take a bigger role in the hotel company.
RM is no longer successful in isolation and should take in wider commercial aspects like sales and marketing, distribution, advertisements and social media into consideration before recommending a strategic direction, says Stefan Wolf, Senior Vice-President, Revenue & Distribution Strategy, Onyx Hospitality Group. He argues that the emphasis for developing successful revenue managers is shifting from analytical skills to more people skills like communication. “Without a developed capability of emotional intelligence, perceived and actual barriers between revenue management and other departments or disciplines are harder to overcome, which would prevent a successful launch of total revenue management,” he adds.
Here EyeforTravel’s Ritesh Gupta talks to Wolf about what to expect from RM as a discipline going forward.
EFT: In your view what would you term as the biggest challenge facing RM departments today and how are you preparing for such challenges?
SW: There is certainly no lack of challenges for the RM departments. Apart from ever increasing competition, shorter lead–times and more channel choices for the consumer, revenue managers need to focus on prioritising the analysis of abundant data and converting information into action.The ability to identify strategic opportunities quickly in either low or high demand situations will lead to an improved RGI (revenue generation index).Training and corporate support will enable the revenue management departments to overcome these challenges.
EFT: How is RM gearing up to take a holistic and strategic view of pricing and demand management?
SW: With so many channels and channel preferences available in addition to different value perceptions of the same product by different market segments it becomes a near impossible task to implement a holistic pricing and demand strategy without the help of technology. Automated revenue management systems help to identify business mix optimisation opportunities in a dynamically evolving market place.
EFT: Talking of new avenues for revenue generation - like mobile distribution or relying on big data/analytics for up-selling - how are these developments impacting RM as a discipline?
SW: Applying RM tactics to SoLoMo distribution is another example of the developing discipline of revenue management, offering a special discount to the `Mayor of Foursquare’, for example. And so is the strategic analysis of up-selling, while not so long ago up-selling only meant training front desk staff to sell higher room categories, now revenue management should get involved to analyse the probability of success for up-selling based on past buying behaviour by segment and determining a dynamic up-selling price incorporating demand factors like seasonality and geographic guest mix.
EFT: Can you share any insights into how RM professionals are trying to integrate multiple data streams into a single integrated framework?
SW: Business Intelligence solutions allow the correlation of multiple data sources to achieve a holistic view of demand and a granular approach to pricing. In order to monetise the power of BI analytics it is critically important for revenue management to ask the right questions or the abundance of information can result in suboptimal strategies or no direction at all.
EFT: There is on-going talk into how RM teams are coordinating with social media teams. How is that panning out?
SW: Dedicated social media teams are still not the norm in the industry, so social media responsibility is given to various positions sometimes including revenue management. Even if dedicated resources for social media have been identified, more improvement on coordination with revenue management is required and that is true for marketing. In my opinion, revenue management is still seen in many companies as an isolated discipline with the objective to drive yield in high demand periods as opposed to an integrated discipline using data analytics to recommend a holistic revenue and profit optimisation strategy.Those companies recognising the required re-definition of the revenue management discipline early and attempting this integrated approach will achieve an advantage over the competition.
EFT: How is the industry gearing up to maximise ancillary selling/non-room related revenue?
SW: With the ability to correlate multi data sources including POS and Spa systems revenue managers have begun to integrate ancillary revenue streams into an overall optimisation strategy, for example by identifying higher total spend segments versus higher ADR segments. But that is in a lot of cases still limited to in-house guest while an overall approach to Spa or F&B revenue management is not widely applied. With more technology available and the evolving nature of the discipline this will change, so the total revenue of the hotel can be optimised.
EFT: How do you think RM executives need to evolve to make use of social analytics?
SW: Several studies have identified the correlation between ranking on review sites and price optimisation opportunities, so if your ranking is high you can monetise that fact by increasing your price while occupancy cannot be stimulated in the same way if your ranking is low. Understanding this logic and applying it in a strategic manner are still different things today, but technology is been developed to apply this logic and come up with price recommendation influenced by social analytics.