The rise in automation and an increasing focus on profitability instead of just the top line are driving much-needed evolution for the discipline formerly known as revenue management.
REPORT FROM THE U.S.—Revenue management is a role that is growing ever more sophisticated, according to experts in the field.
Revenue leaders from several prominent hotel companies stated that the revenue discipline, which they noted is moving away from day-to-day management and into more holistic strategy, is evolving largely through a greater focus on profitability and automation.
Monica Xuereb, chief revenue officer for Loews Hotels & Co., said the field is reaching a point of sophistication unseen up to this point.
“We’re really slowly inching away from managing segments and rate codes and discounts,” she said. “And now we’re truly optimizing revenue.”
She said revenue experts are also growing in importance within companies like her own.
“I think revenue has really stepped up to the table,” she said. “And now (people in revenue positions are) consulted in most major decisions that happen at the company level and the property level.”
A focus on profitability and non-rooms revenue
Xuereb said the greater focus on profitability and understanding the things that drive it, like channel mix and the structure of contracts, also go hand in hand with a growing focus on revenue outside roomnights. Loews in particular is blazing the trail in how to best handle revenue management for “function space and group revenue management,” she said.
“We’re building tools for people at hotels to really optimize what is also perishable inventory,” she said.
All of this will require better and more specific data for revenue experts to make their decisions.
Kelly McGuire, SVP of revenue management for MGM Resorts International, said revenue managers still have a hunger for “more data, better data and cleaner data,” but while that remains a pressing need, the industry is “moving faster down that path than we have had before.”
“As a data analytics person, that’s exciting to see,” she said.
Xuereb said good data is available for benchmarking function spaces, but “you really have to go looking for it.”
McGuire noted all of this change doesn’t make the traditional hotel key performance indicators—occupancy, average daily rate and revenue per available room—in any way obsolete.
“In a lot of ways, I’m a traditionalist,” she said. “The data that is useful is the stuff that’s always useful.”
But McGuire also said it’s important to look at data streams around things like social reputation and how that affects performance. She said success in refining the data hoteliers look at is less driven by finding new types of data but finding better ways to visualize it and compare it.
She said that translates to “more productive conversations with stakeholders across the business” and a greater ability to be “more dynamic in drilling in” to what that data means.
“I believe that we’ve got stakeholders in 2018 that feel like they should understand reports (from revenue experts),” she said.
Kim Snow, VP of revenue strategy at Interstate Hotels & Resorts, said it can often be a daunting task for revenue managers and leaders to stay on top of tech trends.
“Staying informed about technology trends is head-spinning, so having a network of tech partners is essential,” she said in an email interview. “I encourage our revenue leaders to be curious about industry trends, attend webinars and trainings, conferences and use the resources available.”
Snow noted automation is now commonplace in many revenue-management systems, so revenue managers must be well-versed in how to make the most out of it.
McGuire said she’s excited about the possibility of artificial intelligence and automation and how it can remove human bias from the process.
She said that’s helpful because the availability of various forms of data makes it difficult for a person to synthesize all of that information “at the speed of business.”
It also frees up revenue managers to be more strategic.
“It’s not a paradigm shift, but more of an evolution,” she said. “It’s the one we’ve been talking about for the last 10 to 15 years as being on the horizon. … But with these tools, we’re going to get their sooner rather than later.”
Xuereb said there’s clearly a place in the industry for revenue-management automation but she is “still very much a believer that a human being is important for the decision-making process.” She said Loews focuses on providing “the tools to make great decisions.”
“But there’s still to this day, some limitation to really letting the system make 100% of the decision,” she said. “There’s a balance. The system is able to process information far more quickly than the human mind, but the human element is still needed from a critical perspective.”