The coronavirus pandemic, which continues to impact our lives, society, and economy in less than predictable waves, does influence hotel asset classes and geographic markets in different ways. For example, for many operators, select service and extended stay properties, especially those within vacation worthy drive-to markets, have proven remarkably resilient.
On the other hand, major market downtowns, especially cities like New York, Chicago or San Francisco, and other properties dependent on group and business travel, have been markedly challenged. What comes next? No one knows for sure.
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As we experienced the pandemic, our first actions were clearly directed at cost savings in operations and asset management. In many cases, this meant steep, regrettable reductions in staffing, giving cross-training a new meaning in our hospitality lexicon, and being extremely conservative in our use of CapEx and FF&E reserves. Property stabilization and debt services were the orders of the day.
For many operators, it will take some time to replenish those reserves. However, in having to quickly and dramatically curtail expenses, many operators have gained insights that will likely help us run more efficient operations in the future, no matter the phase of a hospitality cycle or overall economic conditions.
Regardless, it quickly becomes apparent that we cannot save our way out of difficult times. Restoring profitability to our balance sheets means finding ways to increase sales, no matter how formidable the circumstances. This takes an overriding Sales Culture that involves the whole team – sales, marketing, social media, reservations and revenue management – every department. In the process, working together as we think on our feet, we can find ourselves re-discovering “old-fashioned” revenue management skills: knowing our local areas well; understanding our core customers; cementing alliances with local business groups, including chambers of commerce and convention bureaus; and encouraging and empowering our local sales teams to pursue creative revenue generating strategies.
This article will discuss some fundamental principles of revenue management that stood us well during the earliest days of the pandemic and continuing; and how we can continue to build strong revenue teams and a sales culture focused on taking care of our guests in order to further drive revenues and profitability.
The Evolution of Revenue Management as a Hospitality Discipline
Over the last decade and more, the art of revenue management has been wedded to increasing science in the form of an extensive data-driven approach relying on both retrospective and, increasingly, predictive analyses. Revenue managers will study historical data, competitive set information and a host of marketplace factors. Event registrations, airline bookings, company relocations, the prospective product pipelines, major brand strategies, weather patterns, etc., all come into play.
In the past, Revenue Management was concerned primarily with setting rates, as complex as that task alone can be. Today, we pursue a much more sophisticated approach where the Revenue Management Team is looking at many avenues to improving revenue. As we know, the advent of AI and complex statistical analysis has been instrumental in the evolution of Revenue Management-from those simple, daily pricing determinations to complex revenue recommendations.
Systems today can calculate more information and make recommendations based on that data input in the blink of an eye, faster than we can even name the possible choices. Think of a simple Google search for “artificial intelligence” that generates about 953,000,000 results in 0.60 seconds!
As technology has advanced significantly, so has our organizational approach. The Revenue Manager or Director of Revenue position has been elevated to the executive committee level. This individual is an integral member of the team that sets an organization’s or property’s overall revenue management strategies, including those revenue centers that contribute to total room spend and gross operating profit per available room.