In part one of this article, we explored what is considered best practice for an on-property revenue manager today, how hotel groups can establish and cover the costs of a cluster revenue management department and what is involved with outsourced revenue management.
However, for many hospitality companies, the focus is less on understanding the basics behind the common approaches to revenue management today, but more on the advantages and challenges with each approach.
To help identify which approach to revenue management is best suited to your hotel (or hotel group’s) situation, this article highlights a number of issues that should be considered.
What styles of hotels typically align with the different revenue management approaches?
There are no existing industry standards mandating which revenue management approach different types of hotels should adopt, but certain styles of hotels do naturally lend themselves to specific approaches.
For instance, boutique hotels, limited-service hotels, or serviced apartments are generally more suitable for cluster revenue management, as they have leaner sales and marketing teams (in many cases, the sales and marketing team could be centralised, too) and a high percentage of the revenue is driven by rooms.
On the other hand, full-service, upscale and luxury hotels usually have on-property revenue managers as they may communicate to a much larger hotel team and look after various and more complex revenue streams (rooms, food & beverage, meetings & events, spa, etc.) which are harder to optimise remotely.
Franchised hotels or budget hotels may be more likely to consider outsourced revenue management services, given their revenue management tasks are simpler and can be standardised without needing as much hands-on management.
What are the advantages and limitations with each approach?
Depending on the style of hotel you operate, there are distinct advantages and disadvantages with each approach to revenue management.
On-Property Revenue Management provides the widest range of commercial support to an individual hotel, compared with other approaches. A property revenue manager can offer detailed support for commercial planning activities, owners’ review meetings and in-property training. However, experienced revenue management professionals are scarce resources in the market. Even if you have one, you may not keep them forever as they outgrow working for one property alone.
Cluster Revenue Management offers hoteliers the ability to access qualified revenue management talent within a reasonable budget. In addition, cluster revenue management professionals provide best practices that can be shared amongst a hotel portfolio and have direct corporate team support, such as access to regional marketing and loyalty departments. The challenge with cluster revenue managers is that they are shared between properties and have real limitations on the time and tasks allocations they can provide to any single property. You may not be able to directly engage a cluster revenue manager at any given time, even if it is critical to your hotel.
Outsourced Revenue Management Services are the most cost-effective solution among the three approaches, but also come with the most risk and limited scope of support. The outsourced revenue management provider should leverage advanced RMS technology to optimise performance, and the hotel itself must have a solid foundation of IT infrastructure—i.e., integrated distribution landscape—to support the remote professional services.
There is no right or wrong answer when it comes to which approach to revenue management should be adopted by what style of hotel today.
Each approach to revenue management must be deliberately evaluated by each hotel based on their needs. For some hotels this may be to bring on an in-house specialist to work closely with all commercial departments, while for others a better option may be to hand over pricing decisions to outside experts.
Whatever approach a hotel takes, it is important that once the initial model is chosen, a change management practice is enacted to align all stakeholders and establish processes to achieve the best revenue outcomes for the hotel.