Contributed by Sarah Jones, Director of Revenue Management & Special Projects, SHR
In the recent Skift article, Hotel Revenue Managers Say They Want a Revolution, author Sean O’Neill explores the question of why, if this is true, real changes have been slow in coming. He draws this conclusion by comparing Cornell University studies from 2010 and 2017, where nearly 400 revenue managers were polled for their predictions, the most far-reaching of these being that revenue management would be applied to all hotel revenue streams moving forward for “total RM.” Mr. O’Neill suggests that the overarching reason for the lag may be because “the industry is in desperate need of loud champions of new techniques and strategies.”Agreed. So, what can we do to help move the original forecast closer to reality? By looking more deeply into some of the most provocative points and comments in the article, we can perhaps get at the root of what might be holding the total RM movement back. And more importantly, find out what revenue managers can do about it now.
#1 Aim for Team Transparency
O’Neill points out that one reason for slow changes may be that the age-old internal management struggles are still happening, citing one survey participant as being overruled by GMs with the “Take last year’s numbers and add two percent” mentality, rather than deriving metrics from real data.
This has always been one of the biggest hurdles for revenue managers—to convince long-standing hotel team members of differing techniques and backgrounds to try something new. And to further complicate matters, revenue managers are often, after following this old-school method, still held accountable for decisions they were unable to influence. I believe that varying reporting structures are part of the problem as well. Ideally, RMs should report directly to the general manager or a regional VP of revenue (or some combination thereof) for full transparency on decisions and a greater perspective on the hotel's performance. Because if this is not addressed in a successful manner, further theories of “total hotel management” will never be raised, let alone realities of it achieved.
#2 Get Everyone on Board
Pamela Barnhill, chief executive of software provider IBC, and IHT President & COO is quoted as saying “Those who are dominating in this space, clearly understand connectivity, distribution and all the data that influences supply and demand.”
I agree that not only does the revenue manager need to fully comprehend the hotel's distribution options and how to manage each system best for their property, but I will add that the hotel's executive team must also have an appreciation of this. The revenue manager must clearly outline technology limitations versus a revenue decision—or a combination of both. This must also be clearly communicated and documented for all stakeholders across the board. Often, the lack of understanding of how all the systems interface results in the revenue training being seen as the need when it is a system limitation controlling the decision—or vice versa.
#3 Play Some Offense
Cindy Estis Green, co-founder of analytics software startup Kalibri Labs, is seen as hopeful by the author for saying that “Revenue managers seem to be evolving from the traditional role of being entirely reactive [to demand changes] to being somewhat proactive…. Some are taking on the responsibility of both stimulating and optimizing that demand.”
This is a very strong, true statement. I see revenue managers who align with the marketing efforts at the hotel creating a real and lasting win-win situation. For not only are marketing teams then given some direction rather than only soliciting ideas, revenue managers can influence the process and assess results knowing, and contributing to, the efforts put behind marketing initiatives.
#4 Know the Real Bottom Line
Mr. O’Neill asserts that though hotels of all sizes tend to blame entities like the OTAs for their shrinking profit margins, “…the most critical problem facing hotels is a stunning lack of knowledge about exactly how much falls to the true bottom line for any given reservation.”
In my view, hotels should estimate the cost of all booking channels. Remember, no channel is “free.” There is the cost of marketing to drive booking guests to a hotel's website, as well as the cost of staff to answer the telephone. In addition, hotels need to take into account the transaction cost and add that to commissions, plus other advertising costs per channel, to get a clearer picture of the ROI on commissions, advertising, and other costs. Everything counts.
The possible outcome? I believe that by gaining team transparency, getting a consensus for action, taking an offensive, proactive stance, and underlining all of these with a clear understanding of true revenues versus costs, all of us can start taking some long-awaited action. The next survey will reflect what we do now if we dare to start our own revolutions today.