This article looks at the single most important role in a Hotel Management Team (at least in our view).
First of all some short news articles;
Now to our Main Article - Revenue Managers Rule
We have covered this topic several times in the past, but a few events recently have made us think it might be worth raising again. Its true that as a company we are focussed on the narrow area of Online Room Sales, having said that we are still often surprised at how little regard is given to the role of a Revenue Manager.
Online Room Sales has in the last 12 months become a key driver of hotels profitability as a larger share of a hotels business comes via the online route. Even those customers who ring or e mail, have probably found the hotel via an internet search. Revenue Managers, whether they are aware or not, sit at the gateway of this channel and exercise direct control over hotels profitability.
We have a screen on the wall of our office that traces hotel revenue on a daily basis. If we see a hotels room sales rising or falling, from long experience we know its probably a Revenue Management issue that is causing it. For example the Revenue Manager of one of our customers was absent due to illness for 8 months. During this period the role was taken over partly by the Manager and partly by the Receptionist, neither of whom understood the industry, knew how to identify what the demand was for the rooms, understood how to set the pricing to suit the market or had the contacts to the OTA's to simply ring them, ask whats 'working' and optimise their rooms and rates accordingly. The sales of the property plunged drastically, and when the Revenue Manager returned to the hotel they had to fight a rear-guard action to adjust pricing and re-engage with the various OTA's. 2 months later this hotels sales rocketed back, but probably too late to prevent a dent in the years financial results.
In another example last month we identified a property that had not had a booking for 2 days, we sent an e mail to the Revenue Manager asking if there were any particular issues. 2 hours later they had received 3 bookings and we sent another e mail apologising for 'jumping the gun', in fact they had seen our e mail, realised they had not been maintaining their rates, adjusted the prices accordingly and sales had started to roll in. (just 3 bookings may not seem like a lot, but they are working with up to 10 different booking engines and this increase is likely to be replicated across all those channels).
In a 3rd example a property lost their Reservations Manager is November 2010. This position was never re filled. We saw the sales gradually declining and raised the issue with the property. However this person was not replaced until May when they spotted that the pricing across all channels was set at rack rates (210€ for a room instead of 110€). This error is likely to have cost them at least 100,000€ in online sales, and possibly 3 times as much in offline sales. (we continue to use the dubious statistic that for every online sales there is another 3 made offline ie Telephone/Email/Fax, where the customer found the property ONLINE). Many hotels assume that by not getting to grips online they lose the chance to sell a room online. Maybe, but they are also losing a corresponding amount of telephone sales from customers who simply dont bother to even ring and query a rate if they dont look competitive online.
One of our charts plots demand (blue line) vs price (red line). Most Revenue Managers know instinctively that price has to match demand, yet in the chart below we can see demand dropping off heavily for this anonymous property as the summer passes. yet the rates take a step increase on September 1st? Someone is asleep.
Revenue Management is not confined to large properties. We work with one small 8 room B&B that this year rang us and asked up to set up a lower rate midweek than weekends online, except July and August where she was expecting fairly even demand throughout the summer. We also get the odd phone call now and again when she says something like 'Town Festival on next weekend, but i dont have any bookings so far, can you do anything?’ Whereupon we may set up a package specifically for that date, e mail her customers, or make sure the festival is listed on her website. Without having heard of the term Revenue Management, that is exactly what she is practising, albeit on a smaller scale.
If this article is a little intangible for you, here is a list of very tangible tools that a Revenue Manager could use to maximise a hotels revenue. We will assume that a hotel has just had a Tour cancel for a date 2 weeks hence;
A Revenue Manager could;
- Create a special package for that date
- Optimise Rates across all booking engines.
- Post the package on FaceBook.
- Post the package on Twitter.
- Set up a Google Adword Campaign for that date.
- Send an E zine to customers with offer for that date.
- Send a Text Message to customers with offer for that date.
In our view a Revenue Manager can not make a struggling property suddenly improve, but they can make most properties become more profitable.
Given the weight of evidence, its hard to understand why more Hotels do not create a clear Revenue Management Role in their organisation. Possibly because like all businesses they are faced with more immediate day to day problems in House Keeping and the Bar or Restaurant, and online sales or the lack of them, is not an area immediately in front of their eyes, at least not until too late.
(If anyone wishes to comment on this article please e mail us at info@accubook.net and we may publish it in our next Newsletter).
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