Here we are again with our yearly opinion article about how to get revenue management right for 2021. The last few months with the COVID-19 crisis made a clean sweep of the past decades of hotel revenue strategies. As of today, almost all of the experience acquired during these years has become nothing more than castles in the air. While it can be frustrating to dismiss such hard-earned and valuable insights, it can also be invigorating to start anew. By elaborating the right strategy, you can reopen your hotel on the rock-solid ground and differentiate yourself from the competition. While doing so, it is paramount to stay in the right mindset.
Covid-19 has exposed weaknesses both in hotels managing Revenue Management internally as well as the traditional outsourcing model and Revenue Management software providers.
Revenue management is an art, and like all art, it’s a constantly evolving process that can never be mastered. In this area of ever-changing elements, such as customer behavior trends and the continual march of technological advances, even the most experienced revenue manager must keep learning.
Hotel revenue management is a process of using analytics, performance data, and other information to anticipate customer demand, so that pricing, distribution, and availability can all be optimized. In the process, those within the hotel industry can maximize the amount of revenue they generate, improving their overall financial results.
Nowadays, hotels need to be more resilient and agile than ever before. Being prepared for anything, whereby reducing risk is a top priority. Hoteliers need to rethink their businesses entirely, and outsourcing is the perfect facilitator in this process.
If your hotel is fortunate enough to be open for business at the moment, every department is likely consumed with ensuring safety and quality for guests and protecting cash flow at all costs—but what does this look like for revenue management specifically?
There’s been some hearsay going around lately. Utterances like “historical data are now useless” or “forecasts are inaccurate” are not uncommon. Some may even say “revenue isn’t coming in, so you don’t need revenue management right now” or “there’s no demand to manage”.
With the pandemic, the (re)positioning of revenue management as an integral part of the commercial area is again under examination. There are many questions about what the future holds, and no one knows for certain.
Hotels are closed but the future awaits, let’s make the best of this suspended time, and let’s plan. We need to keep ourselves focused and our Hotels on track, we need to dust off our drawers those activities that we left on hold because other priorities were taking over.
Here are below my suggestions on how to rearrange your hotel revenue management strategy and make good use of all your home-time during the COVID19 lockdown:
Don’t let your revenue manager go
The position of a revenue manager is one of the hardest hit by Covid19 in the hospitality industry like many others starting from the GM to the doorman. This means it’s likely to go through significant changes soon.
The revenue management concept was devised thirty years ago and is effectively employed today by most hotels and airlines. However, even though hotel managers often talk about revenue management, the definition of the concept differs depending on the individual… One thing is for certain – revenue managers are faced with the most important challenge in running a hotel, namely selling the right rooms to the right customers at the right time and rate through the right sales channel.
There is still a lot of reluctance when it comes to the profile of revenue manager function, and many still believe a hotel can be operated successfully without or with a limited revenue manager.
While many academics and thought leaders had been advocating it for years, it has taken the COVID-19 crisis for the revenue practice to start evolving from the traditional rooms-revenue model towards a total revenue management approach, hence more hotels are starting to track TRevPAR (total revenue per available room) as well as RevPAR (revenue per available room). This shows that revenue managers are looking more closely at revenue generated in departments other than rooms.
This change could lead to revenue managers moving away from the common role of managing systems and data to taking a more important position in commercial decision making across departments.
Looking back, 2020 was the year when revenue management was reduced to revenue survival. As demand collapsed from the spring onwards, many hotels were forced to close and thousands of revenue optimization professionals were furloughed or made redundant. In many cases, revenue management became a centralized function, or whereas in the past each property in a chain would have a dedicated revenue manager, now hotels were grouped into clusters with one revenue manager responsible for multiple properties or even a whole region but at the end of the day, we still need a revenue manager in place to manage our hotel.
As a result, revenue, sales, and marketing teams will have to work together more closely and focus on the following four aspects:
– Identifying and converting new demand
– Driving profit rather than revenue to increase profitability
– Creating more profitable revenue streams for the hotel
Going forward, as hotels and chains are having to operate with leaner teams, we expect the best revenue managers to utilize even more of these intelligent solutions to build commercial strategies that align their plans and KPIs with those of the distribution, sales, and marketing teams, hence generating demand and maximizing revenue opportunities during the market recovery
A stronger concentration on a strategy that includes all three departments and offers increased flexibility in unexpected circumstances will lead to a more holistic approach and better results during the crisis, the recovery period, and even afterward.
There are few questions hoteliers need to ask themselves before they decide to keep or not to keep the hotel revenue manager pre and post Covid-19 and the most important during the pandemic as below:
1. Why revenue managers were struggling in securing a leading spot in the profit area before COVID-19?
- Is the pandemic will offer a unique opportunity to the revenue managers so they can offer more than what they offer now?
Revenue managers need to reframe their techniques and procedures to make the most of the available data and achieve the highest profits possible. The importance of having adaptable systems that provide a live overview of market changes and make accurate forecasting easier has skyrocketed.
Optimize the revenue management technology
The hotel revenue management technology sector is an area where the biggest impact of the pandemic can be seen in a very clear way. Traditional RM technology most often based primarily on historical demand patterns as a basis for determining the best possible room rate, at any given time. Of course, because of the pandemic, revenue management systems (RMS) reliant on historical data have now become obsolete, as hotels worldwide are experiencing unprecedented market conditions, which can’t be ignored or treated as a temporary blip.
Revenue your hotel estimate that only 5-6% of the 700,000 hotels worldwide use any formal revenue management solution. The remaining hotels rely on either pen-and-paper or spreadsheets to track prices and determine optimal rates – or have no formal revenue management strategy in place at all. But the aim for every hotelier wants to improve their revenue management capabilities. What not every hotelier may realize, however, is that doing so means more than just implementing the right technology solution and using the right data sources — ones that have been shown to improve forecast accuracy and pricing decisions.
We understand that not all revenue management systems are created equal. So how can you ensure you’re making decisions that maximize revenue in an uncertain world?
Work towards a better tomorrow with intelligent automation you can count on.
• Forecast accurately
• Price competitively
• Analyze with confidence
• Make decisions, not recommendations
Make sure you select the partner who understands your business, has the proven track record, and the financial stability to see you through every step of the way
It also means putting the right organizational resources in place and creating a revenue-maximizing culture.
The hotel industry is going through a transformation especially nowadays with Covid 19 and the way hotels do revenue management is changing. Even so, only 1 in 10 hotels deploys some level of revenue management software, due largely to the complexity of practicing proper revenue management. With the first stages of the pandemic addressing the needs for sanitization and viral safety with technologies like self-check-in, mobile room keys, touchless payment platforms, guest messaging apps, and housekeeping upgrades, the next phase will require a wholly new mindset about how to make all these disparate pieces talk to one another in order to optimize total revenue per guest (TRevPAR).
A comprehensive approach to revenue management generally includes a solution from each of the following categories: CRS, RMS, rate shopper, and business intelligence. Whether you choose to stick with one multi-purpose solution or craft a bespoke tech stack, be sure to prioritize agility, flexibility, and extensibility. Some solutions offer more of a one-stop-shop, while others overlap, Therefore the benefits of Revenue Management Software in today’s dynamic and unpredicted markets are increasing in importance and becomes every Revenue Managers best friend, where revenue manager can gain more time to focus on revenue management strategy rather than tactics.
The focus of today’s revenue manager is not only to set prices and increase RevPAR. Above all it’s to also optimize the company’s long-term strategy and financial results across channels, driving total revenue (TRevPAR) and profitability. Subsequently, Revenue management is taking on greater significance in the hotel industry.
Using the right revenue management tactics and avoiding the above mistakes, will make your hotel revenue management strategy more successful
Regardless of whether RevPAR and bottom-line profits are trending upwards or downwards in your hotel’s market, there’s no better time than the precious present to make profit optimization everyone’s job. Unfortunately, too many hotels still think of profit optimization as being primarily the job function of a revenue manager, versus a process that virtually every associate can embrace every day. Yet there seems to be plenty of other hotels and resorts that have seen profit optimization evolve from a person into a process and eventually into an underlying operating philosophy for all hotel marketing and operations.