The Changing Role and Future of Revenue Management

Siv Forlie, SVP, Revenue Optimization & Customer Strategy, Genting Cruise Lines

Siv Forlie, SVP, Revenue Optimization & Customer Strategy, Genting Cruise Lines

I remember early in my career, while presenting the forecast in a weekly revenue management meeting, a general manager asked me why we were selling such strange rates. He was referring to the daily RevPAR… We have come a long way since then. Hospitality based revenue management has evolved significantly to handle the rapid growth of the internet and third party booking sites. Once just a small subset of hotel sales and marketing departments, revenue managers have now risen to play a major role in the operation of a successful hotel or resort.Understanding the ability of revenue management to constantly evolve to meet the changing nature of the hospitality industry provides an insight into the many benefits that the discipline provides to a hotel or resort.On the surface, experts say the best revenue managers today have strong analytical skills and thorough knowledge of the brands and markets they’ll be working in, as well as the computer systems they’ll be using, but there’s also more to it than that. The role is becoming increasingly collaborative as its prominence grows, so inter-departmental communication is also essential, as is the ability to take educated, calculated risks in the hunt for greater financial rewards.

The best revenue managers are calculated risk-takers. They understand the upside and downside of risk, and they’re willing to try new things and innovative approaches to pricing, packaging or how top accounts and segments are managed. They’re able to teach those complex ideas to the sales team, GMs and asset managers with a very constructive, interpersonal approach. The most skilled revenue managers are also great teachers.

Change is the only constant.

As revenue management is evolving, the focus is shifting and revenue management is moving beyond the traditional topics of forecasting, tweaking rates, rate parity and business mix.

The force of evolution is driving the field of revenue into new directions. Revenue managers are getting bolstered to do way more than before by purpose-built software that has the capacity to learn. More and more of the tactical-level decision making is getting successfully automated leaving more time and resources dedicated to higher-level thinking like strategy formulation.

Understanding costs, economies of scale and improve knowledge on the type of customer each channel can and does attract are high on the agenda. We are challenging revenue managers to tighten up high yield spill, low yield spill, dilution and inventory spoilage, all of which cost many businesses millions of dollars in lost revenue each year.

There is room for the discipline to grow and expand its focus while working to improve profitability for hotels. Legacy structures, legacy mind-sets and legacy software solutions must go! Revenue management is a great discipline to review operational efficiencies and communication, ensuring every revenue generating asset in the property and the staff that manage these have a revenue management mind-set and work together.

Growing focus on the customer journey is changing the revenue manager’s responsibility. As modern revenue management is heavily impacted by technology and systems in organisations which have invested in efficiencies, to analyse the customer journey at all touch points is an important task. Good revenue managers spend a sizable amount of time mapping out customer journeys and make sure every property has offerings to entice them to book. They look at properties through fresh eyes, identify under-utilised assets and create a market that drives profit from them - including testing and implementing revenue management principles on food and beverage outlets and conferencing spaces.

With many hospitality organisations moving from analysing data on small scale, we now see organisations that take data seriously moving in the direction of setting up centralized data science teams that allow the staging of data; enabling data analytics on a different level. Big data is not the goal. The goal is better data and better decisions. More data is better only when revenue management analytics improve price-demand estimates, provide controls for your particular business mix and pricing strategy, and enhance the optimization process.

The future

It’s important to remember revenue management’s mission from its humble start in the 90’s: to answer business critical questions like what to sell, when to sell, whom to sell, at what price to sell. This is done with data-driven tactics, strategies, and predicaments of customer’s behaviour at the micro-market level. Revenue management leverages mission-critical, real-time insights generated by business intelligence that collects data, interprets it and presents findings on key performance indicators as identified by business stakeholders. This will always be the mission of revenue management, however as tools and skills evolve, more attention is given to how and how well it is done.

The future of revenue management is likely to be more than total revenue management, faster market report generation and individualised room rate adjustment on the fly. A fine balance between revenue management strategy formulation, decision making and the application of artificial intelligence must be found, and good things are likely to happen.

My advice to all organisations with a revenue management discipline? Invest in your people and this will lead to improved profits. The business discipline of revenue management demands highly skilled business analysts with exceptional skills in revenue management and distribution knowledge but they should also be experienced in data analysis, digital marketing, consumer psychology, critical thinking and innovation. Today’s revenue managers must possess exceptional communication skills to influence decisions by educating key stakeholders on their concepts and ideas. Appropriate education is key to develop and hone these skills as well as improving enablement and engagement.

A truly effective revenue management strategy requires time and skills, and this has always been a huge challenge for many organisations. Revenue management is not a set-and-forget process – it is a constant work in progress. While technology has made the revenue management process more guided, there are still large sources of untapped revenue for most operators. The key to revenue management success in 2020 – and beyond – is to embrace the challenge, invest in talent, and give it the time and attention it deserves and requires.

Check out: Top Revenue Cycle Management Technology Companies