Gain competitive advantage – build a revenue culture and align departmental goals

NB: This is an article by Pontus Berner, Co-Founder and Managing Partner at berner+becker revenue management.

At berner+becker we strongly believe that building up a revenue culture in a hotel is crucial to success, and education is central to creating that culture. We couldn’t agree more with Jack Welch, former CEO of General Electric who said “An organization’s ability to learn, and translate that learning into action rapidly is the ultimate competitive advantage”. In other words, by educating your employees in revenue management, your company can win tremendously!

Essence of Education

For long I have been given training in revenue management and every time it makes me so happy to see when people reach the point of understanding a problem and reaching their solution. To see them going through that “Aha” experience after just having realized for themselves that there is a totally new way of seeing and approaching something. I remember a colleague approaching me after a training who said that I finally made her understand what the 100 index stands for in terms of market share. She still hadn’t understood this after a year of revenue management course in her university. Such comments prolong life a bit.

When having built up a revenue management knowledge within the hotel and across all commercial departments, it makes life so much easier for everyone involved to understand and to strive for working towards the same goals. It limits misunderstanding and those sometimes difficult discussions between the revenue manager and sales. For example, about whether or not a wholesaler contract should be prolonged when considering the profit and RevPar of the hotel. If a sales manager truly understands a displacement calculation and what negative affects displaced room nights of a higher paying segment have on the RevPar, focus could be put elsewhere from the beginning. Instead, they could make sure to capture business that actually brings incremental revenue to the hotel.

This is also true for a group reservations manager who understands the correct pricing and displacements of group business. This can eliminate unnecessary communication with the revenue manager and in turn, enables much faster reaction times resulting in getting that offer out to the client before the competition does, ensuring you win the business! In essence, education will increase the knowledge of the team, enabling them to make the right decisions and foster a company culture focused on driving profitable revenues.

Aligning departmental goals

So many times I have seen targets of sales and reservations that are not aligned at all with the total strategy of the hotel, and in the end it really hurts the bottom line result. One of the most common issues often happens when a hotel’s overall strategy is to cut down on volume produced in a certain lower paying segment, like wholesaler or corporate business. However, the goals of the sales team still remain solely focused on bringing in volume. Inevitable, if the sales team bonus is based on volume only then that is what they will fight for. This creates a clear conflict of interests.

To tackle this problem, the education as described above is important, but can’t solve the problem alone. What is needed is that management takes a deep dive into the goals of the hotel and transmit them correctly into department goals. This is something that is shockingly neglected in both small and big hotel companies. Actually, I think I have never come across a hotel which in my meaning does this 100% successfully.

It doesn’t need to be that hard. Just having the mindset that this is important in itself and then carefully think it through will get you a long way. For example; a hotel wants to decrease its wholesaler business on weekdays and increase the ADR by 5eur in that segment year on year. Then simply put a target on volume reduction for weekdays and ADR increase for the leisure sales manager. Another example would be to put a target of shifting at least 5 corporate accounts from last room availability (LRA) to non-last room availability (NLRA) for a corporate sales manager who works in a hotel where less corporate business is needed.

So to conclude, keep your staff educated and up to date. Then, once a year during your budget and strategy process for next year, make sure to take some hours of your time and use those to establish goals of the hotel and think carefully of how to translate these into departmental goals, and base the bonus programs on them. I guarantee that work flow, communication, staff happiness, and your bottom line results will see a positive development!

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