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Approaches Revenue Management Must Evolve to Succeed in 2023

Travel & Hospitality Tech Outlook | Friday, February 10, 2023

Recent attention has gone to Revenue Management. RM demonstrated creativity and resilience in finding business wherever possible, leading to high ADRs in some markets and much-needed cash flow for owners.

FREMONT, CA: Recently, Revenue Management has received a great deal of deserved praise. After displaying ingenuity and tenacity in seeking business wherever possible, RM maintained or even increased rates during the recovery demand surges, resulting in record-high ADRs in several regions and much-needed cash flow for owners. But let's not break our arms yet by congratulating ourselves. The demand increase was a gift, but 2023 will not be kind to us. From here on, it will become more complex.

In the past three years, the importance of people in RM has been highlighted. Human judgment is required to develop strategy and manage exceptions, and the travel and hospitality sector just experienced a fairly dramatic illustration of this. Despite advancements in AI and analytics, even the most advanced technology of today excels at making conclusions that require a large amount of past data. Humans must remain at the center of revenue management, with the business acumen to design and argue for the strategy while utilizing cutting-edge technology when possible.

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Unfortunately, the travel and hospitality sector is still mired in old behavior patterns that impede our ability to advance the discipline further and more rapidly. Despite the availability of technology to automate routine decisions and facilitate strategic planning, resource managers continue to override, blame the system, fight about methods, and revert to their large, intricate spreadsheets. In many instances, our connections with our stakeholders are not optimal, and our teams end up "taking pricing orders" instead of aligning on strategy.

Check Out This : Hospitality Business Review

Cease throwing "the system" under the bus

In revenue management,  the travel and Hospitality sector has a horrible habit of using "well, the system said" to explain every problematic, doubtful, or contested choice. While this was worsened during the pandemic's aftermath, it is not a new phenomenon. The sector tends to cite unstable judgments or perceived inaccuracy in forecasting as an explanation or even a justification for unwanted or inexplicable outcomes. At the same time, the revenue manager should bear the ultimate responsibility for decisions and consequences. The "system" is merely a decision-making tool and not the decision-maker. Why should anyone other than the revenue manager be concerned with what the "system" says? They must pay attention to what their revenue manager says. The revenue manager's statements should be based on various inputs, including the system, filtered by their discretion and business savvy. Stop throwing this system under the bus and assume responsibility for the strategy and results.

This implies that the revenue manager must comprehend how market inputs influence the outputs of the revenue management system and how these outputs should be analyzed and applied in the context of market opportunities. And they must be able to explain this to their stakeholders without using the phrase "the system dictates that hotels should increase the pricing on the weekend." The system did not make up this information. The revenue manager should be aware of the considerations the system evaluated while making this suggestion and the strategic ramifications of this decision. This implies that hotels must spend on ongoing training, encourage vendor partners to continue enhancing both outputs and the visibility of impacts on recommendations, and invest in tools and automation outside the RMS to assist ongoing decision-making. Only when the revenue manager can communicate at this level of strategic assurance will they become the strategic trusted counsel to owners and general managers that this function should be.

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