The industry has realised that revenue management involves far more than understanding graphs and spreadsheets. The industry has realised that revenue management involves far more than understanding graphs and spreadsheets.

Correctly positioning and integrating revenue management into the organisational structure is the key to success. Revenue management is the glue that binds departments together and success is predicated on sales, reservations and marketing all appreciating its value.

“If a hotel company is starting on the revenue management journey, they should be aware that it is not a quick fix to make extra revenues during high demand times,” explains Jumeirah’s group director for revenue management, Stefan Wolf.
“Rather it’s a transformation of a company to improve its long-term profitability. If revenue management is already part of the organisation, its function needs to be truly understood and supported to be able to have a meaningful impact.”

In short, for a strategy to work, the entire organisation must be behind it. Whilst this may be easily achievable in individual properties, pan-regional organisations have a mammoth task ahead of them.

The implementation of a new culture is by far the greatest challenge for operators who are looking to introduce robust revenue management procedures.

“A great revenue management strategy needs to be built on a firm foundation,” explains IDeaS senior account manager, Guy Barnes. “A strong culture must be in place that secures buy-in from all of the departments across the organisation — and do so vertically from the CEO down to the housekeeper.”

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New Technology

By combining historical data like reservations, booking patterns and rate structures with future predictions of economy, seasonal data and demand, revenue management systems offer an opportunity to take a fresh look a hotel’s productivity.
In the past, a hotel’s performance and trend data has been viewed un-dynamically, making it hard to fully interrogate the relationship between different data sets. In effect, managers were forced to build a picture of an organisation’s performance from data produced departmentally and identify key correlations by hand.

Technology systems like Opera Revenue Management System (ORMS) by Micros-Fidelio have transformed hotel data analysis and forecasting. Within a year, ORMS can increase room revenue by 4-7% by instantly identifying inefficiencies and providing remedies – with some surprising results.

“We recently had a customer who started analysing their rate structures and realised that they were never actually selling their deluxe rooms at the indicated price!” says Micros-Fidelio’s Oliver Menzel. “Their deluxe rooms were mainly occupied by guests paying for a standard room, who had been upgraded free of charge. Such a discovery is vital, as it will allow the management to review both their selling strategy and pricing on deluxe rooms.”

Essentially, a successful revenue management strategy is characterised by how dynamically an organisation can interact and interpret market data from four sources: market segmentation, forecasting, pricing and inventory allocation.

“What makes a successful strategy is how artistically one interplays with these four components to optimise the potential revenue,” explains Ròya International’s hospitality consultant, Turab Saleem.

“For example, every month of the year has its own dynamics and each day of the month also needs to be looked at separately. You then have to apply your in-depth market understanding. If you can efficiently trace economic metrics, airline performance, currency fluctuation, performance of competitive destinations and understanding of competition, then you can effectively plan your revenue management policies to maximise the potential revenue.”

Of course, automated systems cannot replace real-life business instinct, but they can identify potential opportunities and ensure that the relevant data is submitted to the right person at the right time.

This is the philosophy behind IDeaS own revenue management solution, which delivers pricing, forecasting and optimisation services via software as a service (SaaS).

“Accurate demand forecasting should provide sales and marketing with a specific understanding of when and where there is business need,” says Barnes. “IDeaS v5i solution can suggest when to advertise promotional rates or even alert you to any significant changes taking place as they happen.”