Over the last several weeks, The Analytic Hospitality Executive has been exploring why we feel that today’s revenue management systems aren’t working anymore. Two weeks ago, Kelly wrote about how the market has changed. Last week, I wrote about why revenue management analytics are becoming outdated. Today, I’m going to delve into the changing role of the revenue manager, and how our revenue management systems that have not been kept up with these changes.
The role of the revenue manager
Two years ago, Sherri Kimes published The Future of Revenue Management - “a survey of nearly 500 revenue management professionals in the hotel and related industries.” This survey predicted a series of significant changes to the role of the revenue manager, including:
- A shift in emphasis from tactical to strategic revenue management
- An increased need for analytical and communication skills
- Increased interactions with pricing analytics, and
- Increased emphasis on total property performance, and engaging in non-room revenues
As I interact with revenue management professionals across a range of industries today, it is not hard to see these changes taking effect.
Strategic and Analytic
As Dr. Kimes’ survey foresaw, the role of the revenue manager is becoming more strategic and more analytic. The revenue manager’s job is just bigger than it used to be. Today’s revenue manager is no longer simply focused on what to charge for a room on January 30 for a three night stay. Today’s revenue manager supports important corporate strategy questions with far-reaching effects such as “Should we change our corporate rate structure?” or, “Do we benefit by allowing this particular channel access to our inventory?” or even, “Are group commission levels appropriate for the type of business that is materializing?”
Today’s revenue management systems, with their narrow focus on tactical price management, do not support these types of analyses. Instead, these systems continue to focus on daily reporting on what has already happened, or on supporting the day to day, tactical room decisions – and they do so using interfaces that enforce pre-specified workflows and data usage that simply don’t support the more strategic decisions that the modern revenue manager encounters. The result: revenue managers spend too much time on rote activities or on data collection – and too little time on analysis and strategy.
Flexibility is the Key
The modern revenue manager needs flexibility: flexibility in what data they can access and flexibility in how they can manipulate, aggregate, and analyze that data. Finally, they need flexibility in how they can present the data – after all, the strategic revenue manager is not sitting on an island; they need to communicate with the GM, as well as personnel from marketing, sales, operations, and corporate headquarters. Screen shots and canned reports from their revenue management system are not going to cut it anymore.
Unfortunately, today’s revenue management systems are inflexible and restrictive. They provide a fixed data model, which does not allow users to incorporate external factors that could influence their decisions. Most of us would agree that CRM and social media are having a significant impact on hospitality – but are these factors considered in our revenue management systems? Can the revenue manager pull together data from these different sources in their revenue management system? If the revenue manager finds relationships in this data that is driving demand or profitability, can they use this knowledge to influence their revenue management system? Probably not. What inevitably happens is that the modern revenue manager is driven from their revenue management system and into the murky world of spreadsheets – the IT manager’s nightmare.
Action in the real time
Finally, our revenue management systems have been designed as batch systems, whose analytics run on a prescheduled basis, and which cannot be accessed in between. In my dealings with revenue managers, I find that this inadequacy within most existing revenue management systems causes the most frustration for revenue managers; they can’t see the impact of their interactions with the system on a real-time basis.
Just imagine: most revenue managers (at least those that are lucky enough to have a system) are told that the best course of action is to interact with “system inputs” – for example, demand forecasts. But, when they take these interactions, and make changes, does the system tell them what is going to happen to their decisions as a result? Again, probably not. Rather, the revenue manager must make their change, hope that they will like the end result, and come back the next day to see if this time they got it right. And if they didn’t – well then there’s a chance that the decisions they don’t like are already out there, and revenue has already been compromised.
If we are going to tell our revenue managers that they need to interact with “system inputs,” then we need to give them a way to see the impact of these actions before they can impact revenue. We need to give the revenue manager, who – although she doesn’t have the title – is now more like a marketing/strategy/operations/analytics manager a solution that truly supports her job responsibilities.
Kimes, Sheryl E., “The Future of Hotel Revenue Management,” Cornell Hospitality Report, Vol. 10, No. 14 (October 2010)