#RoomRM

Ever since I joined the revenue management community in 2001 I remember hearing that we should focus on ”Total Revenue Mangement”. However, as the recent study on ”The Future of Hotel Revenue Management” by Sheryl E. Kimes Ph.D. from Cornell University, Total Revenue Mangement continues to be ”the new kid on the block” kind of idea. Something everyone thinks and wants to do, yet few have implemented so far.

Two things interested me in ”The Future of Hotel Revenue Management” survey. The first one was how the industry globally continues to be challenged by the same issues as already 10 years ago and secondly that only a few have been able to take the leap from Room Revenue Mangement to Total Revenue Management. Especially, as the RM professionals forecasted back in 2010 that the Revenue Management will ”likely be applied to function space, and may also include such revenue streams as spas, restaurants, and golf courses”.

Since realising this was not just a Finnish or Nordic phenomena I started to think why hoteliers have not taken as serious step with Total Revenue Management as they once did with Rooms Revenue Management.

I believe there are several reasons for this, yet the top three in my view are the following: The first one is, what I call, ”You get what you measure”. This certainly is true for some of the larger organisations where annual goals for RMs usually include RGI. The second important reason I believe is the lack of technology in this area. This is hindering the development of Revenue Managers in the direction of Total Revenue Management as with current technology I hear ”it’s too much work” and ”we don’t have time for it” as the most general answers. Thirdly, while we have a growing community of skillfull room revenue managers there is lack of skilled revenue managers to lead the orgamisational change required to run Total Revenue management for hotels.

”You get what you measure”

Nearly each hotel in larger market uses marketshare reports to follow how their sales and revenue startegies have succeeded. The KPIs on the other hand are measuring success in room KPIs; RevPAR, Average Rate and Occupancy. This does not encourage to spend precious time and recources to develop the Total Revenue Management strategies.  

What if hotels were measuring their success on Total Revenues? What shape would the decisions take if their perfomance was measured against Total Revenue per Available Room (TRevPAR) or Total Revenue per square meter (RevPAS)? Since there are a growing number of hotels signing up for the Benchmarking Alliance Hotel Trends+ measuring Total Revenue KPIs, I wonder what will happen to those hotels that continue to measure the room KPIs only? Will there be times where the hotels focused on Total Revenues will make decisions where they may take a ”hit” on room revenues? Will this then give a ”false” RGI increase for those hotels that continue to focus on RevPAR? Or will the focus on Total Revenues actually offer so much more value for the customers that they will bring big wins for RevPAR too – which would obviously be one of the goals too.

The leadership to Total Revenue Management goes directly to the top management, where the focus for the organisation goals must shift from Room Revenue KPIs to Total Revenue KPIs. If your goals are set for success in rooms’ KPIs and your organisation does not support the Total RM approach then we cannot expect the Total RM become anything but a talking point in meetings.

Part 2 on the TRM technology and RM talent coming up

Earlier this year I wrote on how #yougetwhatyoumeasure as perhaps the number one defining factor on why Total Revenue Management has not been much more than a talking point with little to no action. I have noticed that Total Revenue Management, TRevPAR and GOPPAR are getting more attention in the social media, yet few companies are working on solutions for managing them efficiently. NRevPAR (Net of distribution cost RevPAR) solutions are also being developed and I am looking forward to hearing about the results.

However, as a second hindering the inclusion of all revenue streams using revenue management techniques I come to realise is exactly that - the lack of intelligent IT solutions. This coupled with the varied operational practices among the companies is not making it any easier to build solutions that match these varied operational needs.

One year ago, Cornell University study on “The Future of Hotel Revenue Management” by Sheryl E. Kimes was published. One thing that was striking was that the Total Revenues continued to be year after year the next area to apply Revenue Management tactics and strategies to. First, I thought it was just me paying attention to many Total RM posts and blogs from last summer. Then I remembered that even google didn’t find any recent hits on the topic a year ago. A quick search (from my location) just this week confirmed this. Articles on first pages were either from 2012 or Fall 2017.

This is just great! The more there is material available, the more we can expect this area of Revenue Management to grow both in people skills and technology. Yet, we are still at the stage where there are not that many revenue managers who have been given the authority and empowerment nor the resources to develop this area in their organisations.

In my study “The Role and Future of Hotel Revenue Management” in 2005, I found that technology has an essential role in developing the skillset of Revenue Managers. For the industry to be able to take the next step, we need better digital services to lead the development.

However, technology alone is not enough. The Total Revenue Management for a full-service hotel can no longer be on one person’s shoulders. While it should have already been in place, now is the moment to ensure the whole team and organisation is educated in the basic RM knowledge and the core team to an advanced level of Revenue Management.

Currently, there are organisations, where the power of Revenue Management has been realised and they are able to move forward into developing data and tools towards building a revenue and profit generating organisation including all departments - and as we are in the hospitality industry this naturally will consider the customer’s perspective. As you know, a happy customer brings back more happy customers and repeated business.

On the other hand, there are other type of organisations where the move towards total revenue and profit concept is somewhat hindered either by the top management’s the lack of understanding the essential role Revenue Management has in the organisation or the vision and drive by the revenue management leadership. Or perhaps purely the attitude, why should I take on more than is required of me.

Looking back how the technology development on the rooms side has had an impact in increased profits (when managed correctly), it should be a no-brainer to understand that similar ROI is possible in other departments. Starting from Step 1 it is and will be hard work, but so it was when the first steps were taken when building better processes and technologies to manage room revenues. When the F&B, events, activities and Spa businesses have more mature and wide spread solutions available, they will eventually bring the laggards onboard too - unless it is too late!

A million euro hint for owners and directors! The revenue management is the area to focus development on as once it becomes part of the organisation’s culture there is no limit to what the teams can achieve working towards a common goal and always ready to take a pro-active action based on data, customer feedback, and the market conditions. Get the best revenue skills onboard today!  

Steps to get onboard on the Total Revenue Management ladder

• Have the right team members onboard - ready to learn every day and develop their know-how and market
• Coach and educate the revenue manager and each department in revenue management concept and practicalities
• See the teams work together coming up with ideas to serve the guest better, increase revenues, reduce cost for improved profits.
• Find the right software to make the daily data grinding smooth and enabling time to focus on analysing and proactively approach the future as well as ensuring more time for customer service.

Revenue Management IS the best job in the world!

I’d love to hear your thoughts!

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Hanna is one of the leading revenue professionals with nearly 20 years of experience in both global and Nordic markets. She collaborates with industry professionals and service providers to develop solutions enabling companies better serve their customers and increase revenue and profits. After the years abroad, Hanna is enthusiastically involved in developing the travel and event industry in Finland.

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