Why revenue strategy must matter to the c-suite

By now, the importance of revenue management is clear to most hoteliers around the world.

NB This is a guest article by Michael McCartan, managing director of EMEA for Duetto.

With new intermediaries emerging and customer acquisition costs rising on a seemingly daily basis, effectively managing how and where your rooms are sold is critical to the success of your business.

Selling the right room to the right guest at the right price and on the right channel can mean the difference between a mediocre and a highly profitable operation.

The new normal

But that’s easier said than done. Booking.com and Expedia are growing even larger, TripAdvisor and Google are becoming online travel agencies and new challengers such as Airbnb are growing at staggering rates.

Throw in the dissolution of rate parity agreements in Europe, and it’s clear the distribution landscape isn’t getting any easier to navigate. In fact, the pace of change is accelerating.

Until recently, revenue management has been driven primarily by operators, but that’s beginning to change. The importance of understanding revenue management—and ultimately moving toward a holistic revenue strategy—has to go beyond the property level and include the most advanced technology.

Revenue managers can’t make a hotel’s most important decisions alone and by hand with ad hoc spreadsheets.

 All together now

To optimize profits effectively, revenue strategy must be embraced by the numerous departments throughout a hotel and all the way up the corporate ladder. It must integrate revenue management with sales, marketing and technology.

Revenue managers and their systems have been responsible for forecasting demand and pricing rooms to maximize revenue, but that can no longer be done in a vacuum, separate from the marketers creating much of that demand and the sales team trying to convert it.

These once siloed departments must come together to focus not just on revenue, but net revenue.

Revenue strategy isn’t a fancy new name for revenue management, but rather a new way of thinking.

A view from the top

To understand the scope of importance, look at what AccorHotels recently did.

Under CEO Sébastien Bazin, the company announced late last year that it will invest €225 million by 2018 toward a “Leading Digital Hospitality” plan in response to the accelerated pace of technological change.

In the release announcing it, Bazin said, “Accor is transforming on a strategic, digital and managerial level.”

A philosophical change like this with such a financial investment has to start at the top. There must be a clear leader who can ensure all the spokes in the wheel are turning together with the same goal. When the directive comes from the CEO, it empowers the rest of the team to move quickly and embrace change.

Revenue strategy decisions like this must be based on ROI, not price. Revenue managers are busy people and without the support of chief executives, it can be very difficult for them to find the time to evaluate new innovations.

And it is even harder for them to justify the disruption of changing strategies and switching out systems. Having a mandate from above gives them green lights to proceed quickly and effectively.

The price of not changing can be far more costly. A revenue team without the proper structure and oversight leads to broken chains of information and a lack of communication. A revenue team without the right tools will allow intermediaries to continue disrupting how consumers book rooms and acquisition costs will continue to rise.

I recently spoke with another hotel company in Europe that has taken a slightly different approach, but one founded in the same thinking.

Its property-level revenue managers are being referred to as “the new CEOs” because the company’s executive leadership realizes how important revenue strategy has become to driving overall success.

Title contenders

The director of revenue management—or director of revenue strategy as some companies are beginning to call the position—is the person best equipped to lead the overall vision at the property level.

It’s imperative an integrated revenue strategy begins at the board level of hotel ownership groups, management, asset management and brand companies and that the revenue managers have the systems and support they need.

Future success lies in the convergence of marketing and technology, in a more integrated revenue strategy that focuses on optimizing demand and measuring overall profitability. For this to happen, there must be collaboration and a common goal throughout the hotel, but the mission has to start at the top of the company.

Savvy leaders realize this and are making changes today to be ready for tomorrow.

duetto 400w

NB1 This is a guest article by Michael McCartan, managing director of EMEA for Duetto. It appears here as part of Tnooz’s sponsored content initiative.

NB2 Image by Shutterstock

 

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Viewpoints

About the Writer :: Viewpoints

A founding principle of tnooz was a diversity of viewpoints from across the spectrum. Viewpoints are articles by guest contributors from around the travel and hospitality industries. The views expressed are the views and opinions of the author and do not reflect or represent the views of his employer, tnooz, its writers, or partners.

 

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