The evolution of Revenue Management - from intuition to data-driven decisions
I am incredibly proud of the fact that I can count myself as one of the very early hotel Revenue Managers (probably dating back to a time before most readers of this article may have even been born!)
Twenty seven years have passed incredibly quickly and although I would never class myself as a ‘revenue dinosaur’, as the script of Jurassic Park says; much like life… revenue does find a way…
My earliest memories of revenue was as a Sales Manager for Hilton, taking a contract for a large piece of negotiated business to this very interesting man called Wael who had the title ‘Revenue Manager’. I thought he was the most interesting man in the world because he had three screens, and I wanted three screens! What on earth did you have to do to get three screens? He told me to ‘walk’ this valuable piece of business (as I thought) as he neither wanted it or needed it. Whilst I was distraught at the thought of not winning this elusive contract, he very calmly explained the concept of displaced business… I was hooked!
From that point on, my career has never strayed too far from Revenue Management but if we rewind back to that time (when we all wanted coffee from Central Perk and Ant and Dec were still young), most hotels had never even heard of Revenue Management, or have the luxury (as Hilton did) of having a dedicated revenue professional.
Those early days saw Reservations or Front Office people moved to a back office, given three screens and a mug of coffee and told not to come out until they had ‘yielded’. As an industry, we bred a generation of statisticians who relied heavily on intuition and a mountain of Excel spreadsheets.
No-one else in the hotel really understood what these Revenue Managers did but over time they started to understand the results. This new role was critical to the success of the hotel. These Revenue Managers began to impact not only occupancy and rate growth but also over time, clever owners and managers started to see that these incredible individuals could also reduce the cost of customer acquisition; impact marketing campaigns when the hotel actually needed the business; grow successful distribution strategies and impact the profitability of other departments with their clever forecasting and strategies.
These amazing individuals made us realise that optimising rates and profitability was not about moving rates once you reached a certain occupancy, but that with really useful data, they could forecast demand and set strong pricing strategies which impacted every single department…
Move into the early 2000’s Revenue Managers had a respected seat at the table. And whilst all of this was quite literally groundbreaking, pricing was limited firstly by the subjective nature of human judgement but also by the lack of relevant data; the time taken to pull this data together and then the very obvious issue that once all of this had been completed (which took hours), it was immediately out of date and decisions were often re-active rather than pro-active.
There is a very famous statistic, often quoted by Revenue Managers that if you had to make a decision on a rate for just 5 room types, over 5 market segments and on 5 distribution channels for just one year, that would equate to over 45,000 decisions to be made every single day! That is just not possible for a human being to make.
So now we enter the time (thankfully) when we see a shift to making data-driven decisions with technology to back up those decisions.
Advanced analytics and revenue management technology has revolutionised Revenue Management. Hotels now have access to vast amounts of data and powerful tools to analyse it, leading to more informed and effective decision-making processes.
Key Drivers of the Shift
Big Data: The explosion of data from various sources — social media, competitor behaviour, web traffic, events, guest reviews, even the weather —all provide a rich dataset for analysis.
Advanced Analytics: Techniques such as machine learning, predictive analytics, and real-time data processing enable deeper insights and more accurate forecasts.
Automation: Modern revenue management systems can automate routine tasks, allowing managers to focus on strategic decision-making. In short, revenue management technology does the ‘smarts’, so that clever revenue people can do the ‘strategy’.
There are many benefits of Data-Driven Revenue Management
Improved Accuracy: Data-driven approaches reduce the reliance on human intuition, minimising errors and biases.
Real-Time Insights: Advanced analytics provide real-time insights, allowing for more agile and responsive decision-making.
Comprehensive Analysis: The ability to analyse large datasets from multiple sources offers a more comprehensive understanding of market dynamics and customer behaviour.
My favourite revenue quote is ‘without data you are just another person with an opinion and without an opinion, you are just another person with data…’ Clever hoteliers leverage both, investing in technology whilst mentoring their valuable team members to allow them to grow and expand their revenue knowledge.
So, if we fast forward to a time when Central Perk has finally closed its doors (and Ant and Dec, by some miracle, are still young!!!) Where are we today and where must we be in the future? The answer is simple… hotels have no choice but to invest in technology.
Us proud dinosaur Revenue Managers now see a whole new generation of commercial leaders coming behind us. These Commercial Managers (in whatever shape they take – whether they are lucky enough to have that title or remain as Front Office Managers, Reservation Managers or even General Managers) belong to a generation where technology is not only part of their lives but is critical in their lives.
This new generation cannot even begin to understand life in a dark room, drowning in out-of-date spreadsheets and spending hours and hours pulling reports. They want actionable data at their fingertips and with such an important role in the business, don’t they deserve that?
We have less and less people, expected to do more and more within their roles. We have brands opening in locations which were once dominated by independent hotels. We have revenue professionals who use tech in every other part of their lives and cannot fathom why tech would not and should not be part of their job roles.
The fact is that to retain this new generation of hoteliers; to operate on a level playing field with the brands and crucially to futureproof your business, technology is no longer an option, it is a must have.
Those who know me, know that I firmly believe that Revenue Management is the best job in the world and keeping the Jurassic Park theme, much like dinosaurs, Revenue Managers Rule the World – so as in industry, isn’t it time we gave these amazing people the tools to help them do their job better - and of course ensure a more profitable and efficient business…
And a final ‘thank you’ to Wael and that one chance encounter… you shaped my life and I could never have chosen a better career… and for that I will be eternally grateful.
How Right Revenue can help:
Right Revenue offers a comprehensive suite of tools designed specifically for independent hotels. Their platform includes:
AI-Driven Rate Recommendations: Using advanced AI, Right Revenue provides strategic rate recommendations, accompanied by predicted revenue gains.
Accurate forecasting: Right Revenue will predict demand every day, for up to two years in advance.
Real-Time Data Dashboards: The platform collates data from Property Management Systems (PMS) and external data providers, presenting it in an easily digestible format for quick decision-making.
Reporting and Analytical Tools: Detailed reporting modules allow users to analyse various aspects of their business, from booking patterns to cancellations, helping optimise pricing and availability
Group Displacement Analysis: This tool helps evaluate the profitability of group bookings, considering net and gross values to support decision-making
Competitor Analysis: Right Revenue's rate shopping tool keeps users informed of local market trends and competitor pricing, reducing the need for manual data collection.
Multi-Hotel Reporting: If you operate with more than one hotel, Right Revenue an collate all of your key data in one place
Calculate Hub: A unique module to help you understand costs and profitability.
Training and Mentoring: Right Revenue partners with both HOSPA and Revenue Academy to ensure your team members are trained, mentored and supported.
Get in touch with us to chat through what you need and how we can help you out.
