Slowing performance to lead to revenue-management challenges

Hoteliers need to embrace and anticipate change in their crucial systems and processes for successful revenue management in 2020. Photo credit: IDeaS

With STR projecting U.S. hotel revenue per available room to be flat in 2020, revenue managers most likely will face a variety of challenges, driving them to adopt a broad set of strategies to drive growth. Inventory continues to rise in key markets, with a slight increase in average daily rate and a slightly declining occupancy, according to Mike Chuma, VP of global marketing for enablement and engagement for IDeaS. “We also expect to see a continued downward pressure on group business,” he said. “What all of this means is that many revenue managers are going to be entering headwinds in rooms revenue for the first time in their career.”

Chuma suggests that hoteliers should be focused on building a strategy to expand revenue management to maximize/optimize channels and ancillary revenues across the entire property, and to monetize the entirety of the guest experience. “But, more importantly, hoteliers need to embrace and anticipate change in their crucial systems and processes,” he said. “The level of change from new competition is only going to speed up. Hotels should continue to hone their processes, systems and organizational structures to maintain their current success, but they need to break out a portion of their time and focus [on testing] and learn iteration.”

Better collaboration between the revenue-generating teams will help hoteliers maintain that success, according to Dominic Donatoni, enterprise sales consultant for Navis. “We consistently hear about how data is siloed across the revenue-generating teams (marketing, revenue management, reservation sales),” he said. “Making sure everyone is on the same page and making team-focused decisions will be a great solution for preparation when the downturn occurs.”

Revenue managers must embrace the nontraditional parts of revenue management, such as function space and restaurant revenue, said Infor Hospitality GM Jason Floyd. Incentive plans for the various commercial and operational teams should be aligned with the same goals and objectives. “Why would a revenue manager focus on function space if the incentive scheme does not include that?” Floyd asked. 

Focusing on the overall total revenue-management strategy, rather than the nitty-gritty, will benefit hoteliers greatly. “Yes, it’s nice to sell the last three rooms at $1,000 but that’s not going to move the market penetration needle,” Floyd continued. 

As part of a bigger-picture strategy, hoteliers should take advantage of the revenue-management technology available to them. “Hoteliers need to understand how technology can work for them in the best possible way,” said Kevin Duncan, senior director of corporate initiatives at Cendyn. “Revenue strategists need to use technology to use the data in the most profitable way. When revenue management first started, it was all about yielding but now it’s the Pandora's box of data about guests and environments and the challenge is to what to do with all of this information.” 

Education of property-level staff in order to control costs and drive rates is also essential, said Paul Bennie, director of business development at ProfitSword. In an economy where everything is increasing in cost, maintaining RevPAR growth can be difficult, he continued. But by promoting a customer-centric culture, guest-facing employees such as housekeeping or operations teams can better understand their impact on helping a hotel be successful and ultimately can do a lot to help keep costs down while enhancing revenues. 

“For example, hoteliers teaching front-desk teams to maximize rates when they can, will ultimately help drive the rates up,” Bennie said. “Educating property-level teams to know how everyone can make a difference is often an overlooked ability, yet is one of the easiest and more effective ways of driving up revenue each day.”

Finally, coordinating the guest engagement across the touchpoints in a property is key to avoid the revenue and experiential leak, said Nor1 CEO Jason Bryant. “By coordinating all of the guest offers across all the touchpoints, hoteliers will see greater guest loyalty.” 

The Must-Have Tools When Automating Revenue Management

There are many tools that are must-haves for driving world-class revenue science. While these systems aren't new, flexible integration, data quality and orchestration are paramount. Hoteliers need critical systems such as a central-reservation and property-management systems, but to provide the most robust data to drive world-class automated revenue science, they need to include strong rate shopping and digital marketing analytics to get a full demand picture, Chuma said. 

“But to move yourself to a higher order of strategy, you'll want to layer in other tools and data from your marketing systems, as well as data from other revenue streams across the hotel,” he said. 

One way to improve revenue management is to automate the unconstraint demand forecast moving forward. Photo credit: Cendyn

Chuma suggests starting with integrations to customer relationship management, web, search traffic and channel cost analytics to drive the marketing and promotional rate effectiveness. Then hoteliers should begin to leverage integrations from sales and catering systems to see the full picture of group and meetings and events impact. Then look to your other systems, such as food and beverage, ancillary revenue, servicing costs, other fees and amendments. “By taking in all of these factors, you will create a very robust story around moving from just automated revenue management to powering a robust commercial success strategy for your hotel with revenue science,” he continued. 

Hoteliers need to manage have a tool to manage the data they are collecting, Duncan said. “There are so many [business-intelligence] tools out there but hoteliers need a solution to help manage the data they are receiving through scheduled reports and alerts,” he said. “They need something with machine learning to drive better revenue decisions.”

Having a system to capture all direct guest demand under one platform will create efficiencies and provide confidence in making the right decisions with all the right data to ultimately drive your revenue strategies, Donatoni said.

Other tools needed to automate revenue management include an auto-forecasting tool. “Forecasting should be done in increments of two weeks, monthly and 90 days,” Bennie said. “Beyond 90 is what you want to aspire to, but use the tool to guide you along the way. After you do the forecast on a micro and macro level, go back and see your results.”

Bennie also suggests doing tactical reporting—not only from a PMS but other reporting systems, as well. “This will help you ensure the most effective strategic planning from all levels of revenue production,” he said. “It can also provide one-stop reporting with pickup analysis, pricing, availability, etc.”

Tips to Improve the Revenue Management Process

As old as revenue management is as a discipline, the principles remain relatively the same. But technology needs to be readily available for the revenue manager in order to adequately address today’s market needs and expectations. Many guests will not book if your website is not mobile phone optimized and will move on if your booking engine isn’t user-friendly and accessible, Bennie said. Revenue managers also need more tools to run effectively, but they should further ensure that the tools are actually being used. “Surprisingly, revenue managers often have tools available or are paying for them but simply neglect to use them, a scenario that not only leads to unproductive expenses, but that also results in a loss of potential revenue,” he said. 

Hotels must make sure that the required technology is in place to perform revenue-management tasks effectively. Photo credit: ProfitSword

Data and data quality between systems is king these days, Chuma said. Take time to establish, create and align data standards for system interoperability. “If your systems don't talk, get them connected and focus on bringing in and understanding your data across all revenue streams,” he said. “Align on your system of record and just get started so you can gain confidence.”

Chuma also suggests hoteliers integrate revenue-management disciplines in all areas of the business. “Take this opportunity to create new incentive plans that promote collaboration across departments, build new metrics to track key impacts to total revenue and profit performance, such as channel acquisition costs,” he continued. 

Don’t focus on pricing strategies based on your competition, but rather maximize the opportunities with your best customers, Donatoni suggests. “We hear all too often, adjust rates based on what the competition is doing, [but] you should be making decisions based on what your top customers are looking for,” he said. 

Hoteliers need to break down the data and information silos to be successful with revenue management. “Get everyone on the same page around the same data,” Donatoni said. 

Collaboration also is crucial. “There needs to be solid collaboration between all the parties—collaboration between sales, marketing, revenue managers, and operators,” Duncan said. “ Hoteliers need to set the expectations of all those parties and they all must agree to them to get the best results. The end result of all the efforts needs to be driving profit. Hoteliers need to manage the minutia but prioritize the profit.”