Revenue Managers these days have a tough job.
NB: This is an article from TCRM
Often not fully understood by their colleagues and provided with limited resources, these individuals are expected to have answers for financial top-line performance, dictate or influence guest policies, be a super user for most of the hotel’s technology, communicate with everyone from front desk agents to ownership executives, and predict consumer behavior in a rapidly-changing environment.
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In the interim, however, many companies have kept salary ranges stagnant despite these new, higher expectations. Recent job postings offer between $50-$75K while other executives are making at least 25% more. This is enough to dishearten any great Director of Revenue Management.
When the COVID-19 pandemic struck, there was more pressure to create cashflow and many revenue teams were furloughed. But in a way, the slate has been wiped clean. Companies have a golden opportunity to consider what kind of Revenue Manager will move them forward, and how to adequately compensate a talented Revenue Manager.
What’s in a name?
The hospitality industry has spent a lot of time trying to rename the Revenue Management discipline. Profit Optimization? Revenue Maximization? Commercial Strategy? This discussion needs to include more than a new title. The discipline needs to make important changes to create a different path.
- Strategy meetings often become stale, repetitive discussions without much actual strategy involved.
- Owners’ meetings become politicized showcases in which the positive is highlighted and as many negative things as possible are swept under the rug.
- An inordinate amount of time is spent hashing and rehashing whether Best Available Rate should be at $239 or $219 on a specific date.
- Optimal mix and flow-through discussions are rare.
The sudden economic downturn from the COVID-19 crisis temporarily or permanently closed many hotels and put a significant financial strain on ownership resources. Focus that was slowly turning towards profitability versus just top-line revenue is making a much faster swing. As the saying goes, cash is king, and many companies had inadequate resources to weather such a drastic event. While no one could have foreseen or prepared for something like this, a profitability focus when things were good for the industry could have prevented some of the economic carnage that followed in the path of the virus. Despite the importance of profitability, top-line revenue was still considered the primary metric.
Without carefully focusing on cashflow and profitability, however, there’s a danger that companies could “revenue themselves out of business”. Watching occupancy numbers can be addictive, that addiction growing stronger as the numbers increase.
Savvy business teams should take a step back and ask, “At what cost is this occupancy coming to us?” This is where the revenue manager of the future comes in – part accountant, part marketer, part guardian. This revenue manager is the gatekeeper of revenue, making sure that there is a strategic plan to convert those dollars to profit.
Five strong foundations for the revenue manager of the future
1. Keen understanding of consumer psychology
Revenue Management definitely utilizes the practice of psychology, but it is not really seen as such. Perhaps this is because we, too, are subject to the rules of consumer psychology, so it seems natural to us after experiencing it from the standpoint of the consumer; it’s just what people do.
- prices which end in a 9
- slash-through pricing to promote value for a deal
- products positioned in a certain order or placement on the page
All harken back to basic rules of consumer psychology.
Without understanding that psychology should be at the center of revenue strategy, a revenue manager can be prone to the “spaghetti method” – throw everything at the wall and see what sticks. This inconsistent approach and lack of positioning can damage the customer’s perception of the hotel and generate a decline in overall revenue over time.
A revenue manager who knows how to apply consumer psychology knows that the first question to ask is, “Who is our target audience?” Too many hotel executive teams struggle to appeal to every type of business, which results in diluted messaging and strategy. While a hotel may indeed have more than one target, it is not reasonable to expect a hotel to appeal to couples looking for romance, families with small children, party crowds, corporate, business travelers and Comicon groups all at once.
This is where integration between revenue, marketing and sales is imperative. All three teams need to agree on the target market of the hotel. Only from there can psychology, creative marketing, and solution-based selling be effective in addressing each team’s needs and desires. Which leads us to our next foundation…
