What do revenue managers do?

Today’s market moves dynamically. Market dynamics means the factors that affect a market. For hotels, it goes beyond price, demand and supply and the Hotels most likely to succeed are those that learn to adapt to the new market dynamics. In order to be successful, increased data collection and more advanced analytics will have to be paired with robust marketing techniques.

This is where the role of the Revenue Manager kicks in. An effective revenue manager must constantly strategise by re-evaluating the variables in order to be ahead, if not at the very least, stay abreast with an ever changing market. As the market unfolds, the strategies and tactics of revenue management must be adjusted accordingly…day by day, minute by minute.

Some hoteliers view a revenue manager as one, who practices ‘a dark science…combining technology and the black arts’. Others have come to realise the potential benefits that a truly competent revenue manager can bring to the table.

A Revenue Manager has to focus on multiple tasks during his or her daily work extended to the weekly tasks. More importantly, some of these activities have to be done every day. The results of taking / not taking these actions can have very far reaching consequences on revenue generation and maximizing hotel revenue.

Revenue management represents the ‘know how’ that supports hoteliers achieve the highest profits by correctly identifying the market segments that the hotel has to serve, allocating the right products and services as well as setting up the optimal rates to be offered to these customers. Essentially, it should optimise profit and increase the hotel’s average daily rate (ADR).

Up until a few years ago, the job of a revenue manager consisted of gathering and compiling data, which is then analysed to identify trends and making decisions about applicable hotel rates. With changing times and fast paced technological advances, it’s now an incredibly complex process, involving online travel agencies, mobile marketing, customers who are ‘real time’ active and competing hotels that consistently lower/increase their room rates.

The tasks list for a revenue manager can be an exhaustive one, one that includes hundreds that extend daily, weekly, fortnightly, monthly, etc, and, is not just confined to room revenue issues but to the hotel’s total revenue.

Let’s look at a few of the key daily ‘to do’ activities of a revenue manager:

1. How did we do last night? Compare actual revenue with the budgeted figures and calculate the variance (+/-) to which revenue centres are doing well /not doing well. Are bookings picking up? Which market segment generated the most bookings (corporate, leisure, etc)? At what rates did these reservations come at? Is there a period where bookings ‘spike’ to indicate a trend? Is it necessary to introduce a minimum stay policy and increase the base rate? Review what packages are on offer – should you discontinue any during any particular period. For example, if there is a large conference in town, you might be able to ask for full prepayment during the event dates.
2. Room availability. How does last night’s room nights and revenue compare with your pick up and business on the chart? Is the ‘pace’ in-line with the month’s forecast and budget? If not decide on the next step – such as, do you need to review your rates to pick up the rooms required? Are you receiving too many last minute cancellations? If so, tighten your cancellation policy. On the other hand, if the booking patterns indicate a strong month can you secure incremental revenue based on the pace?
3. Look ahead: Check for advance days, weeks and even months. Have unexpected external influences changed from when you prepared your initial forecast – making it under or over -estimated. Are there days where an inventory imbalance is creating room availability issues? This could be due to groups holding large stock of rooms but have yet to confirm. Have you covered the risk of these groups cancelling or reducing room take-up? Check for sold-out dates. Resolve oversell issues. Plan now to cover all future eventualities. Communicate with and keep both the Front Office and Sales departments involved in what you plan to do – especially in an overbooked scenario.
4. Pricing right: Two common pricing strategies adapted regularly are profit and revenue maximisation.The former approach involves high prices to increase short term profits sacrificing long-term volume. The latter approach involves setting prices as low as possible to achieve high sales volume at the expense of short term profits. It is not uncommon for hotels to do weekly pricing adjustments. Some hotels do it daily…sometimes as much as 3 – 4 times in a day, depending on pickup and demand trends. A right pricing strategy that yields results is crucial to any hotel’s success.
5. Check the competition: Be alert to comp set pricing strategies that may impact on your fair market share. How many times are your competitors changing rates or do they adjust at all? Has anyone launched a special offer? All of this and more can provide you clues to your own booking trends. Hence proper knowledge of competitor pricing is indispensable whilst enabling you to continually achieve a positive market penetration index.

Ilzaf Keefahs  – writes on hospitality related matters that he is passionate about, and likes to share his views with hoteliers and customers alike.

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