Revenue Management Must Focus on Profit, Not Everything
Hoteliers are asking their revenue managers to use their magic to harness every feasible revenue stream.
But while revenue management has evolved and diversified, the discipline shouldn’t stray too far from the basics.
“The discipline is a hybrid,” said Vickie Callahan, VP of revenue management at Atrium Hospitality. “Revenue optimization is profit optimization, and you have to have both. We are focusing our team to be more focused on profit.”
Callahan added she has seen a lot of concern as to where the science of revenue management is going.
Panelists said in hotels, rooms revenue is still revenue management’s biggest obsession. Perhaps food-and-beverage revenue gets a slice of attention, but the airline industry remains so much better at concentrating on fee revenue.
For example, Crenshaw said, in 2018 the airline industry made $92.9 billion in ancillary fees and $64.8 billion in baggage fees.
Jack Easdale, SVP of revenue management and enterprise analytics at Venetian|Palazzo|Sands Expo, said revenue managers also need to remember what is important to those outside the business.
“Shareholders would still say profit is the most important metric, whereas Wall Street would say you are judged on (revenue per available room), so it is a balancing act,” Easdale said.
Nicole Young, senior corporate director of global revenue management at Rosewood Hotel Group, said most revenue managers have been in situations where obtaining the most revenue is not the healthiest situation for the business.
Callahan said education is needed for those coming into the discipline.
“There are different skill sets that are needed,” she said. “I learned the ropes, but I am not sure the current batch of revenue managers have the time now.”
Gino Engels, co-founder and chief commercial officer of OTA Insight, said the industry needs more benchmarking data on profitability, rather than the traditional RevPAR metric.
“Profit margin is not something you can take to the bank,” Engels said.
Eyes on the price
As hotel products continue to evolve, revenue management is required to function in different ways, but most on the panel agreed revenue managers must have a seat at the top table.
Easdale said his team concentrates on capturing value, not just value creation.