What does the future hold for revenue management?
Ari Andricopoulos, CEO and co-founder of RoomPriceGenie, explains how the role of the revenue manager is shifting in response to industry dynamics.
As a discipline, revenue management is often regarded as one of the newer kids on the hotel management block. That said, it has ascended the ranks in terms of importance and influence at a rapid rate, largely due to the increasingly critical part revenue strategy has to play in terms of bookings and ultimately profits.
The role of revenue manager demands the ability to navigate and analyse data and then utilise that analysis to build a strategy that delivers a profit. To quote Liam Neeson: “What I do have are a very particular set of skills. Skills I have acquired over a very long career.” Not quite the same as a special forces operative but it can often feel pressured and unrelenting given the volume of data to analyse. Market conditions can change at any time and responses to these changes in terms of pricing and revenue need to be swift and, above all, effective.
In line with its ascendance up the ranks in terms of stature and influence has been the marked advance of technology across the hospitality sector. Human versus machine is a long-standing debate for many industries, but perhaps never more so than right now for hospitality as we work to recoup the losses of the pandemic.
Coupled with the after-effects of Brexit, the industry is also facing the challenge of falling staffing levels. There is a very real and present need to not only recruit new team members, but in many cases (including that of the revenue manager), redefine and diversify roles in line with the advancing capabilities of technology and changing guest expectations.
So what does this brave new world mean for the revenue manager? And how might their role change as automation looks set to have more of a role and influence on day to day operations and the guest journey?
Given the level of insight that a revenue manager has in terms of market data and analysis, many now are adding marketing to their remit. This can include managing the website, digital guest communication, and managing a hotel’s reputation online. However, as we all know, the addition of new roles and responsibilities does not equate to more hours in the day and it is here that technology has been pivotal in facilitating this shift. But it is important to understand that one should not be at the total expense of the other. In fact, the best results are achieved when revenue managers work together with automated revenue tools.
In order to achieve this harmonious outcome, it is important to know where the strengths are and how and when they can be combined.
Taking the strengths of the human brain first. Comprising 100 billion neurons and 100 trillion connections running between them, it is very well equipped to compare what is happening currently with pre-existing knowledge of other scenarios. Recognising patterns in a way that the most powerful computers cannot come close to.
However, a computer can be programmed to run millions of calculations at lightning speed in a way that you would need thousands of humans to replicate. So, each has an important role to play in the development and execution of revenue management strategy and tactics.
Revenue management strategy requires evaluating a hotel’s market position and taking decisions to set pricing in line with that position — all of which can be informed by factors including what type of rates to offer, time of year, local market and competitor activity. Broadly, the strategy would be in the realm of the experienced revenue manager.
Tactics on the other hand focus on the daily and very necessary work of crunching the numbers and calculating to confirm what the wider market is doing, so you can see what your market position is and in turn build a qualified strategy in response. Yes, a human being can also regularly review competitor prices, inventory and other metrics in the revenue management mix, but to do this consistently at a level that is both wholly accurate and insightful enough to have a positive and meaningful impact is arguably an unrealistic aim now.
This is especially so when set against all the other operational tasks required to manage a hotel. A more automated approach plays to the strengths of computers, saving many hours of inefficient calculations that would otherwise need to be done by the revenue manager, or be missed out completely. It also gives revenue managers more scope to analyse the data that has been harvested for them and make the necessary strategic changes.
Revenue management systems are built to deliver a consistent and live view of market data and demand. Revenue managers can then decide whether or not to adjust prices and by how much against the current inventory without the need to take hours out of their day to research the data needed in the first place to make such decisions. Arguably then, the role of the revenue manager looks set to become even more diverse and meaningful. Access to greater volumes of data can then lead to a more qualified view and more influence as automated tools support strategic decisions to be made much faster and more easily.
It is important to bear in mind that effective revenue management needs to utilise the expertise of both human and machine, rather than one at the expense of the other. Technology continues to shift and evolve hospitality and very few would have predicted the changes we have witnessed in the last two years. Much of this change has been guided by guest demand for facilities like contactless check-in, for example.
Technology has paved the way for a diversification of roles and revenue management is no exception. It is the knowledge of the revenue manager that we expect will permeate and have the strongest influence on marketing and wider operations. Time will tell how far that influence will spread and the impact it will have.