A holistic approach: why RM professionals should spread their wings

Revenue management professionals are getting better and better at integrating their core discipline and distribution in order to be more responsive to evolving buying patterns of travellers.

The game is not only about ensuring that the product is available at the right price, but hotel companies also have to ensure that it is available in the right place and at the right time. This is imperative as travellers increasingly migrate to mobile.    

EyeforTravel’s Ritesh Gupta talks to Dev Koushik, director, revenue optimisation, InterContinental Hotels Group about the evolution of the RM discipline.

EFT: What would you term as your biggest opportunity for this year?

DK: The biggest opportunity this year and beyond is the continuous evolution of the RM discipline into other areas and other revenue streams. At its core, revenue management is about making trade-off decisions on which demand to accept and which demand to reject.

These decisions also need to be applied at a more macro-level - some examples include: 

1.  Buying keywords - which markets should I buy keywords in and which markets should I not?

2.  Allocating marketing dollars - which markets should I over-invest and which markets should I under-invest?

All these are key trade-off decisions where the talent and skill sets of a revenue manager along with the capabilities that he has developed, will come into play and it is up to the RM teams to advance their discipline in these areas as well.

EFT: How challenging is to implement and integrate all sales, marketing and revenue functions across the portfolio of hotel brands?

DK: The most challenging aspect, at least at the above property level, is the fact that some of the details that a RM team may be involved in - may not be understood by other business functions. This requires a little bit of education on the RM teams’ part on how we can extend our capabilities into other areas. Also, a RM professional should diligently try to understand at a more fundamental level what a marketing decision or sales decision will do and how this needs to be integrated within the RM professionals’ way of thinking. There are instances where a RM professional may say rates are too low for an account and try to reject the price for that account - but may not be able to understand the true revenue potential the account may have on non-peak days accounting for multiple night stays. This is where the RM capabilities that RM teams typically have need to cross the boundaries and extend into other areas and they should talk a more holistic language that is understood by the different business functions.

EFT: What difficulties do fragmented data and weak cross-functional alignment cause when it comes to being customer-centric?

DK: Especially at the above-property setting, given the way different business functions operate with different KPIs it is extremely difficult to have a common understanding of all the activities that drive revenue performance. This is another area where revenue management has a key role to play.

EFT: How do hotel companies link online guest satisfaction with financial performance of their properties today?

DK: Hotel companies have started to understand what kind of levers which include metrics like online guest satisfaction, online reviews, quality scores, guest satisfactions scores influence revenues and how to make the operators understand the value behind each of these metrics. As everyone should be aware - a hotels’ revenue performance is a combination of several different factors that include RM effectiveness, quality metrics, brand awareness, consistency, distribution management and sales effectiveness. It is extremely difficult to attribute only one or a subset of the levers to revenue performance especially if one were to do performance data analysis.

In a nutshell, yes the companies have started working on correlating the above metrics to revenue out-performance - but we need to understand that not one lever would be sufficient to affect revenue out-performance. It is a combination of several levers and that needs to be understood by the different business functions within the company especially when every function claims to increase revenues on an incremental basis.

EFT: Is there coordination between the RM team and the social media team to improve RM-related decisions?

DK: The coordination needs to be perfected – in the sense that the social media promos need to fit within the RM pricing structure and also fit within the need periods as defined by RM. Also it must fit within the demand calendar framework driven by RM.

EFT: How important is mobile and what should RM executives be aware of when it comes to mobile distribution?

Mobile as a distribution channel is here to stay. As with any distribution channel, the basic principles of revenue management apply here as well. There may be instances where the mobile team is focused only on increasing the ADR from that channel - but as an RM team, we need to look at the revenue decisions more holistically as pricing and product availability needs to be based on the demand factors that we have for the total hotel and not just for the mobile channel. It also refers to the trade-off decisions (talked about earlier). One more yielding decision, which we have not talked about, is more location based. Given the extremely short lead time for these consumers, it would be great to use location as a lever to make yielding decisions. Once again, this needs to be done systematically and not on a one-off basis.

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