Are You Prepared For Revenue Management 2.0?

April 13, 2021 | Lloyd Biddle, Director of Enterprise Solutions

What the hotel industry experienced during the COVID-19 pandemic, first in China, then Europe and then the US, is that Revenue Management was one of the hardest hit disciplines in terms of furloughs and layoffs, both on-property and above-property at corporate offices. There were many reasons for this, such as technology rapidly changing the hotel pricing function, so I canvassed hotel industry staff to find out how they are better collaborating and morphing into what I call - Revenue Management 2.0.

These commercial strategy leaders most commonly listed the following top 5 opportunities:

  1. Commercial teams (Revenue, Distribution, Sales & Marketing) need to bring strategy to the mindset of the entire team.
  2. There is an opportunity for joint planning 5 years out, which means creating a long-term vision that the entire hotel can work towards.
  3. Be data driven. The entire commercial team now needs to understand how to analyze and interpret data and trends and can solve the problems this intelligence enables them to do.
  4. Speaking with one voice – no more working in silos, now everyone is working as one team.
  5. Everyone is focused on total revenue management, meaning all ancillary revenue streams and the profitability of each. In a nutshell the entire commercial strategy team must understand the value of every booking. 

Challenges To Embracing RM 2.0

The idea of Revenue, Distribution, Sales & Marketing all working as one commercial strategy team is fantastic. Directors of Revenue Management and Directors of Sales sitting around a metaphorical hotel campfire singing kumbaya and toasting smores. However, the reality is that everyone I have spoken with indicates that there are challenges to overcome, including the following top 5:

  1. Tradition – It’s hard to change people’s mindset. Most hotel staff don’t understand or fail to fully embrace their new responsibilities in a combined commercial team structure.
  2. Process Re-engineering - Some salespeople can feel swept aside. For example, before the hotel may have accepted a group that didn’t quite fit the bill because they needed the win. Now, it’s about total profitability and what will most positively impact the bottom line.
  3. Staffing - Doing more with less is likely the new norm. Hotels need very strong managers and directors in all key roles. General Managers can’t have a weak link commercially. They need to trust the entire team to get the daily work done and lead the hotel in the right direction.
  4. Unrealistic expectations - Most hotels created a combined commercial strategy team during the pandemic as a cost savings exercise, but this makes it impossible to meet previous productivity levels even though there’s reduced demand.
  5. Leadership - It’s vital to find the right commercial leader. This role is for someone highly strategic and analytical, but who can also work with people, close deals and rise above the data. A lot of Revenue Managers and Sales Managers now see Director of Commercial Strategy (DOCS) roles as their career development path within the hotel.

Duetto, and specifically our Customer Success team, have played a part in helping hotels overcome some of these challenges over the past 12 long months. It’s Duetto’s primary purpose to get to know our customers and their pain points and help them find solutions. For example, we all know that the performance of a hotel or portfolio of hotels is attributable to many key drivers, including people, process, and platform.

A revenue strategy platform is where the contributing factors come together. It is where commercial teams put to use best practices in a state-of-the-art application to improve hotel performance. This collaborative venue is where hotels forecast and deploy pricing and inventory selling strategies across all market segments and channels.

Beat The Competition

One of the primary goals of a commercial strategy team is to beat the competition. Hotel companies utilize performance benchmarking services like Smith Travel Research (STR) and TravelClick to assess if their strategies are working or not. According to STR data, hotels that run on Duetto outperformed their competitors in 2020. The Duetto global portfolio posted a +7% YoY RevPAR index gain during the pandemic year of 2020. The Duetto portfolio also reported an annual average RevPAR index that exceeded fair share. After a mixed start to the year, Duetto customer aggregate RevPAR index increased over the prior year every month starting in March 2020, which underscores the importance of a next-gen revenue strategy platform like Duetto after the pandemic began.

During the pandemic, commercial strategy teams were formed out of necessity, primarily as a downsizing exercise. But, a positive outcome is that this forced revenue management teams to explore better ways of collaborating with traditional sales and marketing teams, and embrace Revenue Management 2.0.

Want more insight and news on hotel revenue management strategy? Sign up for the Duetto Digest, a weekly newsletter featuring our top content every Friday: https://www.duettocloud.com/sign-up-for-duetto-digest 

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