Our resilient industry saw and continues to see many encouraging signs of revenue and profitability recovery in 2021, especially destination leisure markets.
NB: This is an article from Strategic Solution Partners
Smith Travel Research’s most recent US forecast has 2021 RevPAR up 47.3% over 2020 and 2022 is projected to increase another 19.7% over 2021. In comparison to the excellent year of 2019, 2022 RevPAR is projected to be at 87% of 2019 levels and 2021 at 73%. With recovering revenues and profitability comes the rebuilding of teams since most of the industry was forced to execute massive layoffs and furloughs throughout 2020.
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Will the hotel and resort industry be able to find enough progressive revenue strategy leaders in the coming months to rebuild ideal teams that can succeed in the new industry landscape?
How Has the Landscape Changed?
One of the attractions to work in our industry is that it has always been a reliable place for constant change and new challenges to overcome, especially within revenue and overall commercial strategy. Although one could argue that the past eighteen months brought an overwhelming number of challenges and too much change within a short period of time, a few of the key changes and challenges adjusting the landscape for revenue and commercial strategy teams are as follows:
- Doing more with less approach – increased responsibilities and expectations from owners and management companies to break-even or achieve some level of profitability with less top line revenues.
- Alternative accommodations are no longer just an ankle biter, they have become a force to reckon with for several markets as share shift from hotels continues.
- Many long-term hospitality professionals left the industry — both voluntarily and involuntarily.
- There is less “above property” subject matter expert support for many teams.
- Increased competition from new hotel and resort supply continues in many markets, including tertiary. Are there any US markets left that aren’t saturated or soon to be saturated with new supply?
- Rapid technology growth and adoption.
- Millennial travelers surpass Baby Boomers for the first time in 2021.
What is a Progressive Revenue Strategy Leader?
Long gone are the days of traditional revenue leaders that just primarily focus on managing inventory, yielding incoming demand, producing forecasts and budgets, and handling ownership relations. This is especially true for independent hotels and resorts where extra hats need to be worn, an entrepreneurial and creative mind is essential, and playbooks need to be written instead of waiting to be handed one as can commonly be found within the big brands.
The revenue strategy leadership role has been one of the fastest evolving roles within the industry for many years and it’s not slowing down anytime soon. Some of the key criteria for today’s leader is a tech savvy individual with a relentless desire to win, can think holistically across the asset while understanding ownership goals, embodies strong business acumen, understands the entire commercial division and not just their direct revenue and distribution responsibilities, knows how to generate demand and not just yield it, and is a great storyteller for differing audiences.
Additionally, it is important that the revenue strategy leader understands that RevPAR isn’t the golden metric, instead, truly focuses on Net RevPAR in day-to-day strategic decisions. Properties with various revenue centers, typically upscale and luxury assets, need to have their revenue strategy leader and the entire commercial team focusing heavily on TrevPAR and Net TrevPAR.
Why Finding Enough Progressive Revenue Strategy Leaders May Become a Major Challenge?
It is very important to remember that even prior to COVID there was a shortage of progressive revenue strategy leaders. The common candidate experience requirements of certain hotel classes or markets, select systems, and simply having multiple years of successful revenue leadership experience were fading, and due to the imbalance of supply and demand, we witnessed many properties throughout the country settle and take risks on candidates that would have never been previously considered. Key contributors that will likely drive another significant shortage in the coming months and possibly long term as teams are rebuilt include:
- Leveling Up – some traditional revenue leaders chose not to “level up” to become more dynamic, therefore are going to be left behind.
- Leaving for Other Industries – several leaders transitioned to other industries during COVID and may not be willing to return for various reasons — one major reason being the lack of work-life balance. The work-life imbalance stands out more than ever because during COVID many were truly able to disconnect from the everyday race that they had only ever known and, for the first time, were able to re-evaluate their priorities.
- Alternative Accommodations – this space has been working hard behind the scenes to become more sophisticated and mirror hotels within distribution, marketing, operations, and technology strategy. Part of this evolution is being driven by former hotel leaders that transitioned into this space and they will likely further accelerate this unique platform, which includes recruiting more hotel professionals.
- Increased Responsibilities and Questionable Compensation – revenue strategy leadership is arguably one of the most specialized and high-pressure positions at a property, especially at upper upscale and luxury assets where there are multiple key revenue streams, increased competition, and highly involved owners. The expectations continue to grow while compensation and positioning within the organization may not always commensurate.
- Talent Pipeline – the talent pipeline from university hospitality programs has steadily been declining over the past few years. Additionally, analyst positions were some of the first to be eliminated when COVID hit, therefore creating a gap or longer wait period for internal bench strength.
- Supply – continued new hotel and resort supply growth equates to an increased need of talent.
- Commodity Selling Increases – record big brand growth, oversupply in many markets, and fewer authentic independent properties is pushing the industry further into selling a commodity, which is not appealing for some.
- Job Security – unfortunately, the lodging cycle trends continue to show a downturn about every 8-10 years. This gives the revenue strategy leadership role an unstable long term outlook regarding employment stability because many of these roles are among the first to be eliminated, furloughed, or restructured during downturns.
Recommended Solutions Should You Find Yourself Without a Progressive Revenue Strategy Leader
The first recommendation is to evaluate how you take care of your team — is it truly appealing and competitive for today’s environment? This may sound basic, but it continues to surface as a significant opportunity in our industry, especially since the pandemic began. Companies that chose to overwork their teams at reduced pay for an extended period may have benefited in the short term, but it’s likely to haunt them in the long term as team members become burnt out and find other companies or industries that show greater respect for their value and overall well-being.
The hotel industry has been long known for high turnover when compared to other industries, including leadership positions, and it will be very hard to succeed in the new landscape without improving this, especially for key positions such as a revenue strategy leader.
Next, as the industry further becomes an investment vehicle with high ROI expectations and ownership groups increase their deployment of asset managers and their own revenue strategy experts into the field, always ensure your revenue strategy leader has the proper support from general managers and corporate offices. It’s impossible for an asset to always win in market penetration and achieve ownership revenue goals, and when these times do occur, the revenue strategy leader is typically in the hot seat, rightfully so.
However, a lack of or inconsistent support and alignment from a general manager and/or corporate office on how to improve upon an opportunity can cause a lot of unnecessary drama and additional work for the revenue leader. There have been too many good revenue strategy leaders change companies, roles, or leave the industry due to this situation and the mindset of “we will just find someone else” needs to be further reconsidered. While many historically successful revenue strategy leaders are rising to the occasion and “leveling up”, some may need more support or time to make this big step.
Developing junior managers, analysts, or helping proven directors evolve further can be a lot of work. Much of this development has been done by above property resources through the years, but COVID has eliminated or streamlined many of these resources over the past eighteen months. A flexible partnership with a proven outside resource can be a great way to ensure that internal development and succession planning stays intact.
Last, the most progressive companies have moved towards Commercial Strategy leadership roles at the corporate office level, and this is expected to gain momentum across the property level moving forward. This key role, which acts as the right arm to a general manager, creates cost savings, total asset revenue and profit improvement driven by aligned and holistic strategies, and an expanded career path that will increase the candidate pool and improve tenure. The Commercial Strategy Director ideally would be someone from revenue, marketing, or sales.
For those concerned that this is too much for one person to handle or there aren’t enough dynamic candidates out there to take on this type of role, experimentation is encouraged versus continuing to run in a hamster wheel that is headed for a cliff. General Managers have been wearing multiple leadership hats for years despite many only having one area of expertise, therefore a dedicated property level commercial strategy director overseeing the three pillars of commercial is quite logical from this perspective as well.
The industry has undoubtedly become more complex and challenging than ever before, especially with the long term and substantial disruption caused by COVID, therefore a recalibrated property level organizational chart is long overdue, especially in more complex assets with various revenue centers.