Revenue management strategies today are built largely on the relevant, impactful and extraordinarily detailed data provided by the increasingly sophisticated software and reporting that is now available.
NB: This is an article from Doll Rice, VP Revenue Optimization for Prism Hotels & Resorts
But this is only half of the picture. The successful execution of these tech-driven strategies relies on the human element to fully harness, utilize and implement the insights provided by big data and predictive analytics.
Without a talented revenue optimizer translating and applying the strategies from the data and predictive analytics, the hotel will not be as profitable. Ironically, at a time when technology and new software and systems have made-and continue to make-tremendous leaps forward, it’s the human element that remains essential. Even in an age of bits, bytes and bandwidth, algorithms might do much of the heavy lifting, but it’s ultimately people power that is the “secret sauce” to maximizing profits.
Technology and Traction
Yes, all of us in the revenue management space-and the hotel owners and operators who work with and count on us-want, need, and thrive on numbers, statistics, percentages, year-over-year performance trends, and accurate forecasting. Everything that revenue management software can and does provide takes some of the busy work out of human hands, saving revenue managers what once required hours of work every week crunching the numbers on equations and spreadsheets.
To be perfectly clear, this is a very good thing. General managers do not want their revenue managers spending time on busy work, and revenue management professionals are thrilled to have some of the grinding, obligatory and time-consuming background work taken off their plate. That additional time and flexibility isn’t just a convenience. Because, in spite of the rapid advance of technology (and, in part, because of that growing tech horsepower) revenue managers are becoming more and more critical to the overall success and profitability of the hotel business.
Today, revenue managers can spend more time and energy doing what they were hired to do: execute profitable strategies. They are able to let the software and third-party companies provide the data and reports for themselves and their teams to utilize. In other words, virtually all of them have access to better tools that allow them to analyze, aggregate and activate: to do their jobs.
Data and Details
Today, we have tools and technology telling us who our customers are, when they book, how they book, who they are booking for, what price point they book, and where they book from. Technology is dramatically enhancing the management of the 24-hour cycle of supply and demand that is at the beating heart of our business. Automated systems dump data nightly to be made available for immediate forecast updates. Technology allows revenue managers to see immediate year-over-year variances in real time-from any angle and through any lens. We even have technology that provides us with a window into the future, supplying pace and booking activity to assist in predicting which pieces of business are optimal and essential to driving a more robust the bottom line.
We utilize these powerful new technologies to gather all of this increasingly granular data. But, of course, it’s not enough to simply have the data, we have to make sense of it all-we have to use it. The good news is that a not insignificant percentage of that analytical function can be performed by automated systems. But a critical question remains: with all this intelligence, data, and information that technology and automation provides, how does the revenue manager actually know the precise guest, price and time to optimize profits?
This us where the human element comes into play, and it’s a true difference maker that simply cannot be replicated by a machine-no matter how powerful. It is the human ability to take all of this intelligence, data and information generated by technology and automation and interpret it and implement it to improve the bottom line.
To put it bluntly: even the most powerful tech tools are nothing without a good revenue manager.
Recipe for Success
The formula for success is deceptively simple: Predictive Analysis + Rockstar Revenue Manager = Profit. But what are the operational mechanics behind that formula? What do you see when you actually pop the hood on the revenue management engine, and what are the specific ways in which human insight and intuition is needed to truly leverage the flow of data and analytics?
- Shifting Schedules
Today’s revenue managers manage multiple properties, and they are responsible for knowing what’s happening in their market with a degree of specificity and transparency that can provide invaluable insights and perspectives about how best to proceed. While revenue management tools are becoming more sophisticated and better at accounting for and predicting demand flow within a given market, they are still a far cry from the nuanced understanding and up-to-the-minute knowledge that a talented revenue manager can bring to the table. Technology is pretty good at accounting for repetitive events, but not nearly as good with changing schedules. The social/entertainment schedule for a market might look very different this year than last, after all. And what about the impact of bad weather or a fast-changing weather forecast? What about the difference in popularity and attendance for an annual music festival if last year’s headliner was Katy Perry, but this year it’s Lady Gaga? How can you prepare for sports and cultural events that may get announced years in advance without people who can recognize, anticipate and account for the impact of those events?
- Group Dynamics and Relationships
While there are a lot of different revenue management tools out there, very few brands have a dynamic group pricing tool. Some have tools where you can set the rates for group, but it usually doesn’t account for food and beverage spend or space utilization. That’s where revenue manager insight and expertise comes in. Revenue managers can also make informed decisions about how to make tough calls when dealing with groups looking for event space versus other groups who want rooms-only, but perhaps at a higher rate.
As powerful as computers are, they cannot account for the relationships and interpersonal dynamics that remain a critical component of the hotel business. Every piece of group business needs to be considered based on a number of qualifying questions. Is this repeat business? Will a relationship with this group give us an opportunity to bid on multiple programs? Will they bring us transient business? What will the long-term impact be of going the extra mile to make this group happy, and does it make sense to sacrifice a few dollars today with an eye to maximizing the return from an enduring and mutually beneficial relationship going forward?
- Filtering the Firehose
The human element is also important as a filter, and to make sure your operation doesn’t get bogged down in the data. One challenge today’s hotel professionals face is that there is perhaps too much data coming across their desks. This can feel overwhelming, and can lead to “analysis paralysis.” The ability of experienced revenue managers to sift the wheat from the chaff and understand what is relevant and applicable to their property is critically important.
Essential Ingredients
If the human element is the secret sauce, what are the ingredients for that secret sauce?
First and foremost, of course, you have to hire right. Talent is key. Hire a revenue optimizer that can manage and own the data-not have the data own them! The best revenue optimizers today display outstanding communication skills, are detail oriented, and are consistently able to make smart and fast decisions and respond quickly to changing circumstances. Talented revenue optimizers are calculated risk takers, but they also understand diplomacy and have strong interpersonal skills. Above all, they have the demonstrated ability to think like an owner.
Additional best practices for getting the most out of your revenue management talent include:
1. Make sure that technology and automated systems fit the needs of the revenue optimizer. Purchase technology specifically to assist them with automation and compilation, freeing their time to analyze, communicate the findings, and collaborate with the hotel team.
2. Get revenue optimizers involved in the research and purchasing of these systems. Take their feedback seriously and ensure their buy-in from the beginning.
3. Ensure that your revenue optimizers understand the importance of collaborating with all other departments in the building. They are the ones who get, own and analyze the data, but they then need to use it in discussions with other departments to make the most profitable decisions as a team. Revenue optimizers cannot work in a silo.
4. Communication is key. Have processes in place to take the analysis that automation and technology provides and share it with the rest of the hotel. Other departments can use this analysis to make better decisions for their departments (e.g. scheduling to the current, updated forecast).
Owners and operators today are well aware of the value of sophisticated revenue management. Almost all have been in the painful position when that seat in their hotel is empty, and they have seen the missed opportunities and lost profits firsthand. Yes, task force services are available, the GM can make a few reactive tweaks here and there, and sales can continue to book business-but all those solutions don’t hold a candle to having that position filled with the right person.
The Future is Now
For years now, revenue managers have relied on historical data to assist in predicting the future. With predictive analytics now being added to the picture, revenue managers are increasingly looking forward, forecasting, making recommendations, being proactive, and basing strategies on customers’ needs, wants and experiences. However, as intuitive as this software is, it cannot replace conversations with the sales team surrounding market events, what is going on the competitive set, and developments within group contracts. It cannot replace the conversations the revenue managers have with counterparts in the field, their marketing managers, convention visitors’ bureaus, their regional team-the list goes on. The revenue manager must facilitate these conversations and couple this knowledge with the software to execute the most profitable strategies for the hotel.
We’ve come a long way in the sophistication of revenue management and the software we use, adding historical data and predictive analysis into the mix. Strategies are built largely on the data provided by all the software and reporting that is available today. But, again, this is only half of the picture: without someone putting together and analyzing and utilizing all that data, it’s functionally worthless. Successful hotel GMs and Owners recognize and value the importance of an experienced and talented revenue optimizer who can do just that. In this world of automated big data and predictive analytics, talented revenue management professionals are like great chefs: adding the flavors and unique accents that take a bland, mass-produced sauce into an award-winning artisan creation.
Without the rock star revenue optimizer implementing strategies from the data and predictive analytics, a hotel will never be as profitable as it could be. Technology is incredibly important, but ultimately, it’s just a general guide-not a rote instruction manual or a paint-by-numbers exercise. It’s up to talented professionals-people-to you to use their individual expert brushstrokes to create a true revenue management masterpiece.
Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com.
