Many hotels are reorganizing commercial work to stay ahead of the competition and take the first important step toward total revenue management.
NB: This is an article from Demand Calendar
The main reason for rethinking commercial work in the hotel is that the hotel cannot afford to add staffing to each silo to handle an additional workload. Another reason is to free up the general manager’s time for more focus on supporting operations to increase guest satisfaction.
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The way towards total revenue management is by implementing more efficient processes, tools, and systems to free up time for total revenue management. Essential reasons for forming a commercial team are to broaden knowledge, increase collaboration, and share the workload while improving work-life balance for all leading roles in a hotel.
Two approaches to total revenue management
There are two distinct approaches to total revenue management in the hotel industry. The first approach, which focuses on each revenue source separately, is sometimes called “siloed revenue management.” This approach involves independently managing each revenue stream, such as room revenue, F&B revenue, and event revenue. The second approach, which focuses on maximizing average revenue per guest, is called “holistic revenue management.” This approach involves looking at the overall revenue potential of a guest and finding ways to increase it by cross-selling and upselling different products and services.
Both siloed and holistic revenue management approaches have their advantages and can successfully generate profit. However, the holistic approach can be more effective in maximizing profit in the long run.
Siloed revenue management
The siloed approach allows for more specific and targeted management of each revenue stream, which can be beneficial for certain situations, such as when a hotel has a strong demand for a particular revenue stream (e.g., room revenue or food & beverage revenue) and wants to optimize the pricing and inventory accordingly. However, it may miss out on potential cross-selling and upselling opportunities.
- Allows for more specific and targeted management of each revenue stream
- Helps to optimize pricing and inventory for specific revenue streams that have high demand
- It can be easier to implement and manage than a holistic approach
- May miss out on potential cross-selling and upselling opportunities
- May not be able to fully capitalize on the guest’s overall revenue potential
- This can lead to pricing inconsistencies and confusion among guests
Holistic revenue management
On the other hand, the holistic approach considers the guest’s overall revenue potential and aims to maximize it by cross-selling and upselling different products and services. This approach aims to increase the overall revenue per guest, which can lead to a higher profit margin. Additionally, it enables hotels to identify and target guests who are more likely to spend more on other products and services.
- Considers the guest’s overall revenue potential and aims to maximize it
- Enables hotels to cross-sell and upsell different products and services
- This can lead to a higher profit margin
- Allows hotels to identify and target guests who are more likely to spend more on other products and services
- It can be more complex and difficult to implement and manage than a siloed approach
- It may require additional resources and technology to implement
- It can be challenging to coordinate and align different departments and revenue streams
It’s worth noting that there is no one-size-fits-all solution. Instead, the most successful approach would depend on various factors, such as the hotel’s concept, facilities, target market, competition, knowledge of the commercial team, and technology.
The total revenue management plan
It is unlikely that anyone working in marketing, sales, revenue management, and general management will sit idle, waiting for someone to bring them more work. It is more likely that all team members are overwhelmed by work and cannot fit in anything else during their workday. It will even be hard to free up time to create the plan to implement total revenue management. The main reason for the work overload is that most commercial roles still work manually, extracting, transferring, and compiling data from one system to another. Working manually wastes time and blocks marketing, sales, and revenue management from focusing on more critical tasks.
Free up time
The first step is, therefore, to free up time for everyone on the team. A move from working in silos to working as a commercial team will ease collaboration and coordination and minimize conflicts. Implementing one system that automatically collects data from systems used in the hotel will give all roles in the commercial team easy access to the same data. This will increase productivity, so there will be time to start working with total revenue management.
Analyze the business
The next step is to analyze the business and decide on the approach. For hotels where room revenue is the dominating source of revenue, siloed revenue management would be a good choice. The hotel already has knowledge and skills in revenue management, so it could easily manage a few less dominating revenue sources in the same way room revenue is managed. If the hotel has freed-up time, the revenue manager can handle the additional revenue sources.
The holistic approach is better for hotels with several primary revenue sources. These hotels have many facilities and sell their guests the whole package of products and services. The guest is center stage, and the goal is to maximize the average revenue per guest. Analyze which guests are the most profitable and focus on acquiring more of the same.
Onboard the team
Communicate the need to start working with total revenue management and the plan to transition from too much manual work to automation to make room for working with total revenue management. There is always resistance to change, so do not forget to communicate all the benefits for the individual to change the way of working, such as less stress and a better work-life balance.
Provide training and support to help employees to adapt to the new way of working. You will probably need to implement a system with functions supporting total revenue management, so ask the vendor to help with training and facilitating change.
Preparation and communication with the team members will take 4-8 weeks. Once everyone is onboard, implementation of new processes, tools, and systems can start, which will take 2-3 months. In addition, the team needs another 2-3 months to adjust to the new way of working and see the first results.
It takes time for people to change and get used to new processes, tools, and systems, so do not expect immediate financial results. However, if the hotel implements a commercial system, all roles in the team will quickly experience ease in their workload. A commercial system will collect data automatically and save huge chunks of time. The system will have reports that automatically consolidate information. Instead of spending hours (or days) preparing reports, a system will provide the same reports within minutes. A system can also pre-analyze and show information in real-time dashboards. Manual work magically disappears. The freed-up time can be used for deeper analysis, planning, and creating and executing strategies. Working on highly qualified tasks will grow revenue and profits faster.