The recent global pandemic, while devastating for the industry, has left us in a position to rethink and reset. When teams were reduced in size, leaders scrambled to reprioritize and redefine their activities. Now, leaders understand which activities are essential, and how job descriptions and organizational structures can be adapted to reflect changing priorities. Traditional, historical, data sources were no longer useful, so teams looked elsewhere for signals. Now, strategies can be informed by a richer portfolio of data and insights.
Unfortunately, revenue management is showing signs of being unable to shake the myopia of pre-pandemic days. Evolving travel patterns, shifting booking windows and changes in business mix require rethinking traditional pricing approaches, yet revenue managers persist in short-sighted pre-pandemic behavior like overpricing rooms, only to crash price at the 11th hour. Check out the chart below from March Madness 2022.
Some follow an equally troubling approach in this era of shortened booking windows: As the hotel suddenly approaches sellout, they reactively, dramatically, raise the price, too late to capture the full value of that demand.
Revenue managers cling to spreadsheets in lieu of embracing technology that could facilitate faster and more dynamic decision making. These static and complex views make it difficult to visualize patterns, and to share those opportunities with stakeholders. Creating these spreadsheets is also causing inefficiencies in how revenue managers spend their time. A ZS and HSMAI study found that revenue managers spend more than half of their time on manual, administrative, non-revenue generating tasks — like copy and pasting data or updating systems — leaving little time to actually generate revenue.
For revenue management to continue to build on the success of the last few decades, leaders need to push for fresh strategies and better justification for actions. They must make investments in automation, analytical pricing solutions and developing hard and soft skills. It’s time to end the myopic focus on “rates and dates” and become the strategic revenue generators that industry desperately needs.
Upskill Revenue Managers Revenue managers must learn strategic data analysis. Despite a reputation to the contrary, surprisingly few revenue managers are well versed at strategic data analysis. They stay in their comfort zone — pickup, pace and competitive pricing reports, leveraging rules of thumb (always price $49 above the comp set, kings are $20 more than doubles — rather than taking a hard look at a wide variety of data indicators. If you don’t believe us, just ask OTA Insight. Despite the high volume of market insight in that tool, its most viewed screen is the competitor pricing report.
With revenue management systems providing analytically derived pricing decisions, revenue managers must shift their mindset from managing price to managing demand. This requires a deeper understanding of market conditions and their impact. Revenue managers must evaluate recommendations in the context of what they know about their markets. This doesn’t mean override because the price doesn’t feel right. It means finding the data from both the system and the market to justify necessary adjustments. This is what converts revenue managers from pricers to strategists.
Revenue managers also need to deepen their knowledge of sales and operations. They have (rightfully) emphasized the importance of sales understanding revenue management to ensure optimal price and placement of groups. Without understanding the sales process, however, revenue management can easily box salespeople into a corner with overly restrictive guidelines.
To avoid this, they must walk a mile in sales’ shoes. Similarly, revenue managers should understand operations. What is the hotel’s cost structure of the hotel? What drives it? What are the operational implication of pricing strategies that increase volume or impact length of stay? If revenue managers can’t interpret the hotel’s profit and loss statement, how can they effectively contribute to profit optimization?
Finally, revenue managers should be retrained on every available tool, solution or data source available. Many organizations assume this is already happening. Trust us, it isn’t. Unfortunately, with attrition in roles and lack of reinforcement from leaders, revenue managers might not even be aware they have access to these tools, let alone how to use them. Take an inventory and put a plan in place for refresher courses (many of which your partners will likely provide for free), then put procedures in place to reinforce effective use over time.
We’ve underscored the notion that revenue managers need to develop their communication skills for years. Now is the time to do it. Communications training, including brushing up on PowerPoint or visualization tools to support data storytelling, will benefit revenue managers.
Finally, revenue managers need to pick up a book once in a while (and so do their leaders). The best defense against myopia is to broaden your perspective. Reading (or listening to) business perspectives outside of your day to day operations is a great way to facilitate this.
Prioritize Time for Revenue Generating Activities Revenue managers won’t be able to demonstrate their newfound skills if they’re buried in non-revenue generating tasks. The ZS/HSMAI study uncovered that a day in the life of a revenue manager involves 51% copying and pasting, clicking around in systems, building rate codes, answering emails and attending internal meetings. Many leaders were surprised at how much time was taken up this way. They need to fix it.
Leaders should delegate, automate, reduce or eliminate any activities keeping revenue managers from revenue generation. Even before this team took on additional tasks during the pandemic, there were many tasks that simply didn’t belong to them. Why is revenue management responsible for keeping PMS and CRS systems updated, and reconciling reservations? Delegate these tasks elsewhere. All that time spent moving data around to build reports — automate it. Why do we let stakeholders across the organization convince us to reformat core reports or drag us into performance management readouts they could see for themselves on reports? Eliminate these non-productive interactions.
Lead by Example A relentless pursuit of revenue generating time is just the start. Leaders need to set the tone. Myopia is driven from the top. If leadership doesn’t challenge teams to think differently, everyone will easily slide back to the status quo. Embrace the technology and up the analytical thinking game. Don’t accept “gut feelings.” Ask for evidence. Read, and share new ideas.
Finally, a critical part of leading by example is to advocate for revenue managers when they request investments or need help managing stakeholders.
There’s a real danger of revenue management slipping into a myopia pandemic of our own making. It’s time to take steps today to keep shortsightedness from limiting revenue management’s potential to drive value.
