I am incredibly proud of the fact that I can count myself as one of the very early hotel Revenue Managers (probably dating back to a time before most readers of this article may have even been born!) Twenty seven years have passed incredibly quickly and although I would never class myself as a ‘revenue dinosaur’, as the script of Jurassic Park says; much like life… revenue does find a way…
NB: This is an article from Right Revenue, one of our Expert Partners
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My earliest memories of revenue was as a Sales Manager for Hilton, taking a contract for a large piece of negotiated business to this very interesting man called Wael who had the title ‘Revenue Manager’. I thought he was the most interesting man in the world because he had three screens, and I wanted three screens! What on earth did you have to do to get three screens? He told me to ‘walk’ this valuable piece of business (as I thought) as he neither wanted it or needed it. Whilst I was distraught at the thought of not winning this elusive contract, he very calmly explained the concept of displaced business… I was hooked!
From that point on, my career has never strayed too far from Revenue Management but if we rewind back to that time (when we all wanted coffee from Central Perk and Ant and Dec were still young), most hotels had never even heard of Revenue Management, or have the luxury (as Hilton did) of having a dedicated revenue professional.
Those early days saw Reservations or Front Office people, moved to a back office, given three screens and a mug of coffee and told not to come out until they had ‘yielded’. As an industry we bred a generation of statisticians who relied heavily on intuition and a mountain of excels spreadsheets.
No-one else in the hotel really understood what these Revenue Managers did but over time, they started to understand the results. This new role was critical to the success of the hotel. These Revenue Managers started to impact not only occupancy and rate growth but also, over time, clever owners and managers started to see that these incredible individuals could also reduce the cost of customer acquisition; impact marketing campaigns when the hotel actually needed the business; grow successful distribution strategies and impact the profitability of other departments with their clever forecasting and strategies.
These amazing individuals made us realise that optimising rates and profitability was not about moving rates once you reached a certain occupancy, but that with really useful data, they could forecast demand and set strong pricing strategies which impacted every single department…
Move into the early 2000’s Revenue Managers had a respected seat at the table. And whilst all of this was quite literally groundbreaking, pricing was limited firstly by the subjective nature of human judgement but also by the lack of relevant data; the time taken to pull this data together and then the very obvious issue that once all of this had been completed (which took hours), it was immediately out of date and decisions were often re-active rather than pro-active.
There is a very famous statistic, often quoted by Revenue Managers that if you had to make a decision on a rate for just 5 room types, over 5 market segments and on 5 distribution channels for just one year, that would equate to over 45,000 decisions to be made every single day! That is just not possible for a human being to make.
So now we enter the time (thankfully) when we see a shift to making data-driven decisions with technology to back up those decisions.
Advanced analytics and revenue management technology has revolutionised Revenue Management. Hotels now have access to vast amounts of data and powerful tools to analyse it, leading to more informed and effective decision-making processes.
Key Drivers of the Shift
- Big Data: The explosion of data from various sources — social media, competitor behaviour, web traffic, events, guest reviews, even the weather —all provide a rich dataset for analysis.
- Advanced Analytics: Techniques such as machine learning, predictive analytics, and real-time data processing enable deeper insights and more accurate forecasts.
- Automation: Modern revenue management systems can automate routine tasks, allowing managers to focus on strategic decision-making. In short, revenue management technology does the ‘smarts’, so that clever revenue people can do the ‘strategy’.
There are many benefits of Data-Driven Revenue Management
- Improved Accuracy: Data-driven approaches reduce the reliance on human intuition, minimising errors and biases.
- Real-Time Insights: Advanced analytics provide real-time insights, allowing for more agile and responsive decision-making.
- Comprehensive Analysis: The ability to analyse large datasets from multiple sources offers a more comprehensive understanding of market dynamics and customer behaviour.
My favourite revenue quote is ‘without data you are just another person with an opinion and without an opinion, you are just another person with data…’ Clever hoteliers leverage both, investing in technology whilst mentoring their valuable team members to allow them to grow and expand their revenue knowledge.
