Evolutionary Moment

A new Era in Revenue Management?

There are times in our business lives when a game-changing moment arises that affords us the opportunity to hit the reset button. How many times, as busy hoteliers, have we thought, we would love to change the way we do this or that, but we are too busy and there are too many interconnected processes to consider.

When such moments in time arise those that are a glass-half-full kind of person will see the opportunity to take the evolutionary leap, reinvent and accelerate their business. When that is done it is fitter, faster, more capable than ever and ready for the next generation of challenges.

The recent pandemic has effectively torn up the rule book when it comes to hotel management in general and revenue management in particular. Yes, the guest still wants the exceptional experience of hospitality and care, in fact even more so now, however, how it is accessed, presented, sold and delivered has all changed. The restrictions on our lives have accelerated the adoption of digital technologies in a way that would have taken years to achieve otherwise.

Grandparents are zooming and shopping for groceries online. Comparison sites are mobile so bookers can move faster, CRM is yesterday, CX is today, and social media platforms are standard communication methods. BOTs and AI are normal parts of our lives, and we expect to see them as part of the service delivery.

In the world of Revenue Management, this is the evolutionary moment of the decade, a time for transformational change in the way we operate. This is the time for hoteliers to examine their processes, technology and in-house resources and design a new picture of success with a faster & more efficient method of achieving it.

So just what are we supposed to be examining?

Revenue Management, A Team Sport

It is a curious paradox that for an industry that is so, “of the moment”, trend-driven and so closely attuned to the public’s needs, hotels tend to be very slow to change processes. This can have a very limiting influence on the commercial success of a property. Through no great fault of their own, hotel’s management teams have tended to develop in specialisations and, as a result, can operate in silos. Financial Controllers adhere to the standard set of accounts and ask that all data will fit into their P&L and balance sheets, Sales and Marketing tend to look at volume generated by initiatives they undertake and manage with their software and the Revenue Manager has their own processes and applications they run.

Now as we enter the budgeting process for 2022 is the time to break down any silos that may have developed over the years. The landscape has changed so completely that we no longer need to remain married to the old conventions. There is now an opportunity to ask those questions and consider the actions that may previously have seemed radical. It is unfortunate that in many hotels a lot of really experienced staff have been excluded from contributing to the commercial planning processes. Many felt that their sole purpose was to make the guest happy. Being commercially aware in no way diminishes the service our guests receive, in fact, it can, in many cases, improve the guest experience.

Segmentation

Like most businesses or projects, it is always best to start at the beginning and for independent hoteliers, everything begins and ends, with the guest. The question we must ask now though is, who are our guests? This may seem a bit odd as we have been looking after our guests for years and we know who they are. But do we now understand our business mix? Market segmentation is the single most critical data set for the effective application of sound revenue strategies, and it has shifted enormously.

GDS business has practically disappeared for some hoteliers while others, who relied heavily on FIT (Tour Operator) traffic, have not seen guests from this segment for nearly two years. Wedding business is replaced by family reunions, the over 50’s are more mobile than the 30 somethings and the OTA’s are trying every trick in the book to move your guests off your site. Holiday destination leisure hotels have seen their business mix shift to almost 100% domestic leisure while city centre hotels are still trading at between 20% and 50% occupancy as the MICE and corporate segments have dried up, at least for now.

This means all hotels have to revisit their segmentation, the leisure hotels need to create new segments to tackle the different demographics within the domestic leisure market while city properties need to pay closer attention to segments that would previously not register as being important. In undertaking this exercise our guest-facing colleagues will have invaluable insights and contributions to make.

Tech Stack

I have written previously about the importance of your PMS, it should be the home of the one truth about your business, the source of all reliable data. If ever you were considering a change of PMS now is the time to start. However, you may decide that your PMS is fine but that the set-up is not fit for purpose. Very often the argument for not changing a system set up and coding is that the historical data will not match with any new format. Really? So what? 2019 was great, we have the data, let’s export it as something we can look at nostalgically and get on with managing the business of the future.

Involve your team, the end-users. Reception, Reservations, Sales and Marketing, Housekeeping, Financial Controller, F&B. They all interact, and this project presents a great opportunity to break down any silos that may have developed. Now is the chance to ensure that everybody is on the same page when it comes to Revenue Management.

If changing your PMS, approach it on the basis of what you want, not what the salesperson tells you it can do. Very often PMS providers will drown buyers with features, many of which are innovative and nice but many of which may be superfluous to your needs. There are many options available, so be demanding, take advantage of the choices to select the softwares that combine to meet your needs. Prepare a spreadsheet and compare providers as much as possible on a like-for-like basis and finally, if the provider says, “sure we can do that, no problem”, ask them to demonstrate it before committing.

This is not, of course, something to be taken lightly, it is a major project that should not need to be revisited for at least 5 years. The good news is that technology has developed so much over recent years that transferring from one PMS to another is no longer the nightmare it used to be. Nonetheless, you should consider it strategically and consider what your technology plans are for the future. What are the plans for the hotel? Will you be adding more keys? New services? Sales and Marketing modules, CRM & CX software? Remote working, frictionless check-in and check-out.

Most importantly your PMS needs to be capable of integrating with the remainder of your tech stack and provide you with fast reliable and easily interpreted data allowing you to make fast and well-informed decisions on pricing and distribution.

Once your data sets are correctly established you are ready to dynamically and proactively manage your pricing and distribution. By revisiting your business mix, assessing the total revenue value and cost of each segment, creating a clear picture of success for 2022, and aligning your sales and marketing, finance and revenue management teams, you will be driving your business rather than allowing it to drive you.

Now is the time to reimagine, reinvent and innovate. This is the transformative evolutionary moment; this is the time of bridging to the next generation where only the fittest will survive.

When considering the other two critical elements of your tech, your website and booking engine, see my earlier pieces on https://www.revenueplus.ie/news for further advice or to discuss your particular circumstances contact Patrick at patrick@revenueplus.ie

Patrick O’Flaherty is a Hotel and Revenue Manager with 30 years experience. His career spans the UK, Middle East, Russia, and Ireland, opening, operating, and managing hotels of different sizes and profiles.

With experience of opening and operating large 5-star city centre business hotels and beach resorts, successfully running traditional Inns and Country Estates, Patrick possesses an intimate knowledge of the challenges facing hoteliers today. Strong financial planning and management skills combined with a deep understanding of the complexities of distribution provide for a focused and empathetic assessment of your business’s needs and the necessary strategies for growth.