What Skills and Knowledge do Revenue Managers Need to be Effective in Their Jobs?

Hospitality firms generally operate in an environment of high fixed costs and dynamic sales where demand for goods and services can vary by time of day, day of the week, month of the year etc. This fact can cause firms to dilute revenue in high demand times by making wrong pricing decisions and erode profits in low demand times because of inertia or an inability to stimulate demand appropriately. Recent developments in technology has meant that hotel pricing is transparently displayed on various internet websites, unbiased online customer reviews disclose the realities surrounding their hotel stays and competitors can shop each other on an hourly basis raising the need for a competitive approach to pricing and selling hotel products.

This adds a new level of rapidly evolving complexity to hotel management therefore new tools and skills are required to operate effectively. To this end revenue optimization has become a top priority for hotel executives though a full understanding of the concept.

As revenue management is a fairly new to the arena of hotel management there is a shortage of suitable top up courses available to hotel managers therefore a new revenue management certification programme is proposed to build links between academia and industry and assure the industry of a larger pool of revenue management talent.

The development of an integrated programme that can be utilised to develop key transferable skills in undergraduates as well as provide new skills to existing hotel managers is proposed. Innovative delivery methods will be explored and tested to meet both industry and hospitality management education needs.

What is your view of the specific revenue management skills and knowledge that need to be developed to produce talented revenue managers that operate effectively on a local, regional and global level?

How Does Electronic Commerce Add Value to the Bottom-Line?

Studies have found that heterogeneity in customer purchasing characteristics leads to important profit implications therefore estimating profitability at the transaction level is important.

Although there is useful research that focuses on customer profitability analysis (CPA) it can be argued that behaviour and subsequent profitability may be influenced directly by the transaction. The estimation of customer lifetime value (LTV) is fuzzy and seems to be based on a deterministic view of customer transactional history excluding values relating to ecommerce opportunities or social networking.

An offer on the internet or via email may influence the customers intention to purchase and transaction profitability (TP). The sale of one travel product may influence a chain of others which in turn may influence customer propensity to purchase incremental products. For example conference delegates whose room and board is being paid for by the company will spend more on extras that others. Alternatively when they book to stay with their family on a leisure trip, the ratio between spend and cost may be different. A customer taking advantage of an exceptional low cost airline offer may spend more on accommodation and thus generate more profit at the hotel level.

A return to travel providers controlling the prices of their products has meant that intermediaries are only viable where they add value to the transaction but the impact of this business on TP is unclear. Price is the product attribute which influences consumers to include a product in their evoked set. This is the first part of the selection process where thousands of travel products are quickly evaluated for further research. The evoked set represents a small number of deals which consumers consider worth further investigating before deciding what and where to purchase. Thus being part of the evoked set increases the sales opportunity significantly.

As rate parity (where price is the same on all channels) has been seen to increase consumer trust, previous studies highlighted the cost advantage of direct online sales and encouraged hotels to bypass intermediaries (disintermediation). However, although the Internet has enabled e-commerce and provided small and medium sized (SME) businesses with the potential to sell their products on a level playing field with multi-national companies, SME do not have the resources to purchase the tools required to develop highly effective, direct, online selling strategies neither do they have opportunities to generate a return of investment due to the more limited range of sales possible.

Social networking has allowed the consumer voice to be more widely heard and positive online comments have become a significant lever to move a product from evoked set to being purchased. This type of customer online activity does not generate cost and can place an SME in a more advantageous position without using additional (limited) resources.

A new approach to evaluating transaction profitability is required in order to recognise the true contribution of information and communication technology to the bottomline. I will be researching this area in the next few months. If you would like to be involved in this study, do drop me an email soon.

Functions, Roles and Reporting Lines and Customer Centric Revenue Management

Revenue management is often viewed as the role of a revenue manager who is seen as a geeky numbers person whose office is at the end of the hall. Other managers often do not see the need to interact with the revenue manager and do not always appreciate the link between their role and revenue management effectiveness.

In reality the whole management team (as well as supervisors and line level employees) can have an impact on the benefits achieved from revenue management in the short medium and long term. This is because successful customer centric revenue management depends on a collection of activities where the knowledge, participation and contribution of different stakeholders will have an impact.

For example what is the role of the General Manager, Director of Sales, Marketing, Operations etc.?

Please post your view on this topic in order to contribute to research in progress. Results will be available for you to few in a few weeks.

Increase revenue by reserving space for valuable guests

Effective Revenue Management means measuring the value of a guest not just in terms of room rate or REVPAR but also in terms of potential for other profit centers such as F&B, the spa, other attractions within the hotel or facility.
Hoteliers who simply accept reservations at the rate they ask will never know how much better revenue might have been had they saved rooms for guests that provide higher value. Hotels should start measuring and tracking a guests profitability as a 2% increase in customer retention is equivalent to a 10% reduction in costs. (Chatterjee A., Hospitality Upgrade 2006).
Hotels are often unaware of:- How much money they are leaving on the table- How many of their customers will never return- How many of guests are not the segment that will generate revenue in the future?- How much it costs when high value customers are turned away to accept the one night stay at a higher rate- The cost of constantly marketing towards customers that probably will not returnAs email addresses offer a fast, cheap and easy way to cement guest relationships hotels should capture these by asking at check in or check out or on a permission box on the hotel web site. As reason for guests to provide these email address could be so that the hotel could send the guest a copy of their bill together with a request for a guest feedback on their recent stay at the property. Studies indicate that guests are more likely to respond to email surveys than to a survey mailed to them. The survey also contains a section where permission is given to receive occasional promotions from the guest.Information can be use to target certain guest demographics at times of the year when they are most likely to be making reservations. It can be used for all market segments and the promotions can be used for email postcards and flyers or mailings in the absence of email addresses. Capturing the information now will enable the hotel to use it later - this is especially critical for independent hotels.The CRM process is not difficult but needs to be thought out and become a part of the overall marketing and revenue management strategy. The cost of CRM is far lower than the cost associated with most of the other reservation channels.
Source: http://www.carolverret.com/

Telltale Signs of Poor Revenue Management

It is easy to spot hotels which are not using revenue management (effectively), Hotels which start-off with strong rates and begin dropping rates when they realize that reservations are not what they expected. Hotels with coaches parked outside during high season. This is the same hotel which will not vary the rates when reservations appear stronger than anticipated. This rate, “set it and forget it”, situation is more common among smaller independent hotels and can be avoided if someone is assigned to revenue management. The hotel industry tends to magnify the complexity of various tasks but revenue management need not be a complicated process in order to be effective. There is a need for those responsible for applying revenue management tactics to have gone through a learning process in order to be most effective. This text has been modified from the article by Neil Salermo that can be found at http://www.hospitalitynet.org

Revenue management is a combination of art and science

It doesn’t happen by accident or simply good fortune. It takes work and dedication. This involves the adjusting of rates and hotel inventory based upon room demand, if possible before any rooms have been sold. These adjustments are usually dependent upon current reservations, historical data and the forecast. This text has been modified from the article by Neil Salermo that can be found at http://www.hospitalitynet.org

Traditional Revenue Management

Here the hotel closes discounted rates are occupancy increases – often only when the hotel has already sold 80% of its rooms causing the hotel to lose a great deal of revenue opportunity. Many hotels build a demand base with discounted group business; dedicating a portion of their rooms to groups –this can enable the hotel to end up with stronger average rates overall as the value of the remaining rooms is higher. This would be a very simple process except that revenue management should be applied to group bookings as well. One of the factors affecting good revenue management is the fact that many hotels accept too many group rooms at deeply discounted rates. This text has been modified from the article by Neil Salermo that can be found at http://www.hospitalitynet.org

Yield or Revenue Management?

There are many ways to implement revenue management. Whether it is referred to as yield management or revenue management, it means different things to different people, but no matter what definition or tasks are applied to revenue management; it can work magic if applied correctly and consistently. The process of managing the flow of business revenues should be tailored to the individual hotel operation. The primary goal should be to maximize hotel revenue by taking advantage of available demand for rooms at the property. Large successful hotels take revenue management very seriously and have people dedicated to the process; while in small and medium sized properties the responsibility is left to the general manager and front office/reservations. The sad part is that many of the people involved in the process of revenue management have not had access to the new knowledge that is required to succeed in optimising revenue. No matter who is responsible for this important responsibility, revenue management can make a serious impact on the hotels bottom-line. There are several important elements of revenue management, but none less important than controlling costs which is what managers of hotels seem to spend so much of their time doing. The key to increased profit is to find ways to increase Revpar in order to generate additional funds from every room sold that drop directly to the bottom line. This text has been modified from the article by Neil Salermo that can be found at http://www.hospitalitynet.org

How major travel firms improve their e-mail marketing performance and maximize sales

Email marketing is becoming an important marketing tool for many businesses as sending emails is very inexpensive and has a good conversion rate, if executed correctly.The only cost is represented by the research of qualified email addresses. Emailing is a big opportunity for marketers because it provides the chance to personalize marketing messages for each individual customer, tailoring the message to meet customer needs.The difficult part of emailing is managing to reach the customer without the email being classified as spam. A mistake marketers often make is to “over blast” customers with emails. This might mean that future emails will not even be opened, or even worse, deleted as junk.An effective technique is to segment the address database during each process, to send messages to those customers that have been identified as having an interest in the content instead of just blasting all customers, even those would not be interested in the offer.Both HTML and simple text messages result in the same number of clicks. The deciding factor is therefore mainly what is offer within the mail.The content of messages has to be simple and clear as well as eye catching. All of the aspects of the offer have to be mentioned, to attract even the most cautious customers.To build a larger email database, hotels should make clear how the received addresses will be utilised and how this might add value to customer transactions as well as offer an incentive or reward.By the end of 2006, 95% of marketers will have an e-mail program. So beat competitors’ emailing campaigns by know how to execute email marketing messages in effective way, with personality and style. So access the full podcast by contacting kate@betterrevenue.com and learn all you need to know.To get the full text and audio podcast

Loyalty programs are the entry point or the base from which to begin building a relationship with customers. In order to create loyalty an organization must develop and maintain consumer trust which is based on factors such as price competitiveness, the brand image, the service guarantee, the relevance of the offer, virtual care and CRM.In the current environment it is important to be able to continuously update CRM systems and processes because each new step towards customers adds a layer of complexity and sophistication in terms of being able to target the right customers with messages and obtain information that will allow hotels to market smarter.The actual trend is personalizing services for each segment of customers and trying to maximize the positive impact of these services on customers at all touch points using the last interaction management techniques.The objective of segmentation is find the right trade-off between quality and quantity data, to target the right segments and manage communications spend based on customer value potential.A challenge for CRM in the future is keeping pace with technology and the changing attitudes and motivations of customers.Organizations such as Hilton Hotels, Cendant and Delta airlines are investing a lot to develop CRM using new, high tech techniques to increase the customer retention rate.Hilton hotels discovered that by sending three personalized emails to a customer you could double the folio total.Cendant successfully introduced a system to reward costumers for multi-brand use under the same umbrella company, and two years after launch, members stay more often, pay more for rooms and stay longer.Delta airlines recently executed a re-positioning of their brand image and now uses mind set based segmentation of customers.The systematic success of investments in CRM underlines the fact that this kind of activity is still underestimated and has to be discovered and explored. It represents one of the main opportunities for the future in the hotel market to re-invent the business, and obtain a higher retention rate and new customers.To get the full text and audio podcast contact kate@betterrevenue.com