Top 10 revenue management opportunities for 2010

January 20, 2010 |

Mail article Print article Facebook Twitter

Revenue management professionals have an opportunity to shine in 2010, adding value to their organizations and the economy as the industry recovers its lost momentum. The following strategies and tactics should help position your revenue management efforts for success in 2010.

1. Communicate RM Strategies to Key Stakeholders: With high levels of uncertainty inside and outside of our hotels and companies, revenue management professionals have an opportunity and obligation to shift the culture from reactive to proactive and to harness the energy of the organization toward growing revenue. Key stakeholders range from owners and asset managers to executives and line-level employees. Each of these stakeholder groups has its own perspective of the current economic situation, but the successful revenue management professional can clearly articulate a vision for returning the hotel to financial success in a way that everyone can understand and embrace. At a time when hotel foreclosures and financing challenges are rampant, there is an opportunity for revenue management to be transparent with strategies that have been implemented to drive incremental revenue. Perhaps even more important, it is critical that we invite all parties to be a part of the collaboration focused on generating additional revenue. Through social interaction or inclusion in weekly meetings, probe deeply to understand line-level employees' hurdles to closing more business, driving more up-sells, minimizing cancellations, etc. Highlight their important role in keeping our current guests happy, especially in the age of social media. With the line-level associates having a keen understanding of what we are doing to right the ship and being asked for their input, their confidence will increase, and as a result, guest satisfaction should also rise.

Transparency with owners, asset managers and executives is also critical, as we want to highlight what we are doing differently to generate a different result. Value-added analysis, deeper competitive set knowledge, and outside-of-the-box thinking will be cornerstones to building trust with these stakeholders. Again, encourage input from this group as they have experiences and ideas that we can incorporate into the strategies. For those on the cutting edge, engaging customers in this dialogue can also expose you to a new perspective and help them see our business from a different perspective.

2. Run as Fast Uphill as You Did Downhill - Rate Recovery: After the last recession, it took several years for RevPAR to reach pre 9-11 levels. Now, the forecasters are suggesting it will be 2013 or 2014 before rates recover. Certainly, there are many reasons for this pessimism, including the fact that we are all still in the recession mentality. But we need to ask ourselves one basic question: If we had a race to the bottom, why can't we have a race back to the top?

The obvious reason is that the market, in general, is still somewhat soft; but how price elastic are all of our market segments? We know that many of our 2009 customers would have paid higher prices because they have done so for years, but we did not do a good job of fencing our discount rates. As we fought to protect share, we matched some desperate rates and probably all diluted our revenues. We did not generate 50% market growth with 50% discounts. But every time opportunity strikes in 2010 (and our competitors fill), we should move to 2007 rate levels and test the waters. It just may be time for a race to the top.

3. Take Another Look at Segmentation: Segmentation is one of the key elements of revenue management, but what does segmentation really mean? Segmentation can be looked at a number of different ways: by booking channel, customer type, rate type, etc. The importance of segmentation from a revenue management perspective is in gaining an understanding of your business and being able to set forward-looking strategies.

Developing an effective revenue strategy includes understanding which segments have demand, which segments you want, which segments are realistic to capture, and knowing where and how each segment books.

It is also important to be tracking and looking at the right segments. The segments used for reporting and forecasting dictated by ownership, management company, and/or brand may not be the most appropriate in understanding where your business comes from. While continuing to meet the requirements of the aforementioned stakeholders, take another look at how you segment and if it makes sense for your hotel, in your market. Track segmentation in a way that helps you make decisions as to what business levels you can expect to achieve, on what segments you should be focusing, which segments you should de-emphasize, as well as where and to whom you should be marketing.

Get the full story at HSMAI