If there’s anyone who understands the true value of a holistic and cohesive revenue strategy it’s Mike Medsker, who has worked across many of the hotel departments that touch revenue, from sales to marketing to revenue management. Mike worked his way up from the property level to the corporate level before branching off to start his own revenue strategy consultancy, Focal Revenue Solutions.
At Focal, Mike helps hoteliers understand their business analytics, helping them move past the days where they’re collating dozens of reports before even beginning analysis. He helps revenue teams move away from Excel and into more automated systems that don’t require hours of exporting and reformatting. And he puts strategies in place for hotels to increase their demand through outbound marketing efforts.
We caught up with Mike recently to discuss the evolution of the revenue management role and its increased importance throughout hotel operations.
Q: How have you seen the role of revenue management evolve?
Medsker: Over the past 40 years we’ve witnessed an evolution of revenue optimization. What started out as yield management – some of the tactics that airlines were using – then became more of an ecommerce function with a lot of focus on pricing. How do we update our prices more quickly than our competitors down the street? Then, automated revenue management systems came in to play to help hotels optimize that process and make better decisions.
I think we’ve come to an inflection point and the industry has done a really good job being able to sort and filter our customer base. But I think as we start to have these discussions around net profitability and total revenue management we need to stop looking only at inbound demand and start to focus on creating the right demand in the outbound process.
It’s no longer good enough to understand that OTAs have a certain percentage of margin. If we don’t know how to replace that business, that data does us no good. As we shift our emphasis to creating additional demand, we see more opportunity for sales and revenue to work hand-in-hand with a common access to data and a broad-based view of how to target the customer.
Q: How can the industry focus on improving the lives of revenue managers?
Medsker: I think we’ve certainly made progress – we’ve been able to take away a lot of the pain that DORMs previously experienced by appreciating the importance of price and availability. Where there’s still a lot of opportunity is on the analytics side, helping them sort through the deluge of data available today.
For the past 10 years we’ve been saying ‘We don’t have enough data’ and now we have too much data. It’s not a case of too many reports but rather we’re not getting the right reports and we aren’t taking action off the reports we have access to. Today’s DORMs are mired in Excel spreadsheets and trying to extract data; to take the next step we need to automate some of those processes.
Q: How can revenue teams shift their focus to profitability?
Medsker: I think we’re still in fairly early stages here. I like that the conversation is starting to become top of mind for management companies and franchisees. The challenge is how do we get access to the information we need. There are services out there to help you benchmark your profitability against a competitor set on a monthly basis. But the challenge is, in looking at hotel P&Ls, everything is classified differently so gaining consistency from a benchmarking perspective is difficult – we’re not always comparing apples to apples.
For example, a common narrative is that OTA business is bad and direct business is good. But that’s not necessarily applicable in all cases. We often overlook the costs to update our own site, how much we’re spending on CPC or the cost of our sales manager drumming up direct business. We’re still trying to figure some of those things out.
Q: How do you view the industry’s adoption of cloud technology?
Medsker: This is the biggest change from a hotel technology perspective – we’re now seeing major cloud partners moving into the space. They’re trying to take away a lot of the headaches we’ve had from legacy providers. Often times it’s a lower-cost approach. It’s on-demand computing and you really only dedicate the resources you need versus installing a huge server stack.
The other important benefit to the cloud is it allows us to adopt the right tools in real time. If you think about legacy technology, often times it takes six to eight months to go through the RFP cycle and another six months to roll out. It happens much more quickly with a cloud-based approach and a software-as-a-service model where you can swap out systems in real time. This also forces suppliers to back up their talk with action.
Historically, security concerns have slowed adoption of cloud-based systems. However, most organizations are starting to realize that it's more secure to harness the collective security efforts of the cloud service providers than it is to place all your trust in one or two individuals within your organization to maintain the proper security protocols.
Q: What kind of data is relevant for a hotel revenue strategy today?
Medsker: The hotel discipline has tended to be reliant on gut-level decision making. We understand the primary demand drivers but we are starting to fall behind the likes of Airbnb and other providers that have done a much better job of connecting with their customers on a one-to-one level.
Hoteliers tend to make decisions in the same way we always have. But we’re starting to see a new brand of DORM emerge – one that’s willing to push the envelope a bit and strive to meet the demands of the market.
Q: What are the challenges to personalization in hospitality?
Medsker: When we talk about personalization, the challenge that exists today is the size and scale of our data sets. So far it has been mostly profile aggregation in the hospitality industry and it’s not centralized. This introduces problems.
For example, you could have Nike as a corporate account but you’ve got the account information spelled a different way several times throughout the system. Another example: Maybe Mr. and Mrs. Smith come to a couple different hotels in our portfolio with separate reservations and separate profiles and we can’t link these instances.
I'm not sure the hotel industry has yet figured out how to normalize and consolidate their data in a way that is conducive to the big-data approach. In order to realize the untapped power lying in their data, hotels need to spend considerable time thinking through their data architecture.