The drop-off in demand caused by COVID-19 is testing the acumen of hotel revenue managers.
With shelter-in-place orders keeping travelers at home and hotels operating with very low occupancy, revenue strategies are being reevaluated. Some hotel owners and operators might even be wondering if their revenue-management team is essential during this pandemic or in the recession that’s likely to follow.
Dave Roberts, professor of Hospitality & Tourism Management at Virginia Tech University and a former SVP of revenue strategy and solutions at Marriott International, said he’s worked through several downturns and heard more than once “in a downturn, revenue management doesn’t matter.”
In fact, pricing mistakes are much more costly in a recession, which makes revenue strategy a priority, Roberts said.
“In a downturn, inventory management is about half as important as it normally is,” Roberts said. “On the other hand, pricing is, I believe, more important in a downturn than it is in a steady state of recovery, and the reason for that is that pricing mistakes are more expensive.
“If you have a high-demand environment, you can make a pricing mistake, and you can mostly offset that with some adjustments. … In a high-demand time if you underpriced—or overpriced—you can adjust that between that point-of-arrival date and you can actually recoup most of those losses—not all of them but most of them. You don’t have that opportunity in a downturn.”
Nicole Young, senior corporate director of global revenue management at Rosewood Hotel Group, said her company had suspended operations at its hotels in Europe and the Americas, including the Caribbean. Despite that, Young said she’s “never been busier in my career with a whole bunch of hotels that aren’t operating currently.”
“Everything that you’ve been conditioned to look to for benchmarking for success for wins, those elements really don’t apply right now,” Young said. “So what can we do within our organization to define what our wins are? Sometimes that’s what has happened today that will affect tomorrow, or the future, that we can kind of start to use to gather information for sound decision-making.”
Adjusting revenue strategies
Changing revenue strategies due to coronavirus means acknowledging the losses coming to your company’s portfolio or your individual property, Roberts said.
