Why RM is the new profit management

EyeforTravel’s latest report delves into the changing discipline of revenue management and why it is becoming so relevant to a hotel’s bottom line

Revenue management is becoming a more all-encompassing discipline, according to EyeforTravel’s new Aggregating Data Streams for More Effective Revenue Management report. In fact, 71% of revenue managers believe that the discipline should be recognised as ‘profit management’.

As Johnathan Liu, Vice President Pricing & Revenue Management – UK & Ireland, AccorHotels, put it: “So, it [the discipline] is moving from a systems-led, transactional space to more of a revenue culture across the whole business.”

The report, which is free to download, notes that a successful future will depend on a focus on profit, with the industry shifting emphasis from the traditional measures of success like Revenue Per Available Room (RevPAR) and Total Revenue Per Available Room (TRevPAR). Instead, the industry will look at guests more holistically and consider the total profitability of each, and aim to maximise this.

Backed up by research from Cornell University, a key finding is that, going forward, Gross Operating Profit Per Available Room (GOPPAR) will become the most important industry benchmark.

2 Top tips

1.  Consider all revenue streams and count the costs

Against this backdrop, revenue managers will need to consider all revenue streams and also have a better understanding of their costs. Alongside traditional operating costs of the hotel, revenue managers will need to calculate and include their distribution costs. The report highlighted this as an area of concern for revenue managers.

2.  Build skills, invest in tech

It will also be necessary for revenue managers to increase their skillsets and invest better technology, says the report. Interestingly, one of the findings was that 71% of revenue managers felt that they didn’t yet have the tools to do their jobs effectively, making technology investment a priority for the next five years.

Many of those featured in the report, which include brands like AccorHotels, NH Hotel Group and IHG, noted that technology and automation is needed so that they could free up time to be spent on more important tasks, moving away from data collection and setting restrictions to working on overall strategy, coordination with other departments and guest experiences. This latter element is noted as being key in the report, particularly as guest reviews can have a direct effect on the property’s profitability.

Elsewhere in the report we consider:

  • The effect of competitors on pricing, how to account for them and what strategies to take to get a competitive edge.

  • Understanding and constructing predictive analytics.

  • Understanding the costs of a business’s channel mix and how to win direct bookings.

  • The state of the industry’s approach to ancillary revenues.

  • The key metrics every revenue manager should be working toward.

  • The future of a revenue manager’s role and the skills they will require.

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