The pandemic has brought the need to create stronger results with far fewer resources for revenue management leaders. Much of the talent has left the industry, leaving hotels without the resources and experience needed. As companies rebuild, many are finding what is being called the “great reset” for revenue management. BCG recently referred to this new way of business as Bionic Revenue Management. To win in this new world, companies will now not only need to strike the right balance between the art and science of revenue management, but also the human and machine interaction. Below are a few tips to consider on how best to transition into this new age of revenue management.
Improving the Science of Revenue Management
Although it is common knowledge that machines improve processing power, there are a few common areas where machines are not being used to their fullest capability in revenue management.
- Find ways to automate redundant tasks on your own or outsource these tasks to save on overhead expenses. Before the pandemic, many companies had analysts running recurrent and manual tasks such as reporting, thus inflating their payroll expenses. Many of these roles disappeared during the pandemic and these responsibilities either moved to more senior talent or have completely fallen by the wayside – leaving hotels with a very inefficient payroll or without information needed to drive better performance. Before committing to add back any overhead expense for roles with recurring tasks, look for more cost-effective alternatives through automation or using other companies that already have these processes built out for far less than the cost of adding headcount.
- Ensure your pricing optimization engine is calibrated to the dynamics of your market and hotel. Forecasting and pricing optimization are now automated for many hotels, but often still lack the additional calibration steps needed to help your system perform and price appropriately to the nuances of your hotel. If your team is constantly overriding or fighting the system, this is a clear sign that you need to take more steps to the calibration or set up of your pricing engine. Ignoring this will result in lost revenues and many hours every week spent by your revenue manager endlessly fighting the system.
- Have a third party run an audit on your hotel. Just as you would have someone else proofread an important document for you, it is highly recommended that you have a reliable outsider review the system settings for your business. MOST hotels we’ve seen over the years have rate plans and channels inadvertently closed, which makes their hotel unbookable for certain customers. Most major hotel brands will offer some type of automated audit, or for more hands-on or intensive reviews, you can find outsourced RM firms that will likely find errors,more than making up the cost of the audit itself.
Improving the Art of Revenue Management
Of course, every seasoned revenue manager will encourage their hotel to look at data regularly. To prevent falling into a rut of reviewing the same stack of reports every week without a clear goal, it is critical hotels know what questions they are trying to ask and what problems they are trying to solve. In a world immersed in data, the hotel asking the best questions wins. Below are a few elements that are often difficult for a machine to pick up on:
- Understand booking patterns and influencers. Each hotel has a unique booking window and strategies should be applied very differently depending on whether the hotel is inside or outside of that primary booking window. Think of it as managing two separate hotels —use the non-primary booking time as the place to test and learn what influences impact booking behavior to build higher rated base business.
- Focus on value proposition. Hotels need to understand their true value proposition to avoid a pricing race to the bottom with competitors. To find their unique value, they have to understand what types of guests prefer their hotel over others and what specifically about their property appeals to these guests.
Striking the Balance
The impact of the pandemic has forever changed the discipline of revenue management. With a depleted workforce within the industry, it can prove difficult to find, attract, and retain a revenue management leader that knows how to drive performance with less resources. This transition will be the difference for many successful companies as the impact to both, the top and bottom-line, will be significant. So before committing to any new overhead expenses, do the math.
If you don’t feel your team has the capability to build out the machine processes, there are still cost-effective options out there. Hotels can avoid dealing with the constant churn that comes with securing this highly sought-after resource through outsourcing. The pandemic aftermath has broadened outsourcing options with a wide range of experience and expense, so hotels should do their research and take advantage.
If there are any takeaways from this pandemic, it is the fact that we are in a new age for revenue management and many companies have already transitioned to more effective solutions. Are you ready?