When Jonathan met his old pal Patrick at a travel event, Patrick’s business model took him by surprise. Patrick was acting as a hotel revenue manager for multiple hotels owned by different owners at the same time. This concept was unheard of; and very fascinating for Jonathan.
Later over drinks and dinner, they talked it out, and by the end of it; Jonathan had a consulting revenue manager taking care of Hotel Glasgow at 7th Ave in NYC. In a short period, Hotel Glasgow saw a 15% growth in revenue.
What did Patrick do differently than Jonathan?
What more did he do than apply pricing strategy and compset analysis?
Through this blog, I will tell the course of actions, an ideal hotel revenue management service, (AKA RM service provider) undertakes for any property they work with.
Table of contents
What is Hotel Revenue Management?
The two most commonly accepted definitions of revenue management are as follows.
“Selling the Right Room to the Right Client at the Right Moment at the Right Price on the Right Distribution Channel with the best commission efficiency.”
&
“Revenue management is the process of understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable resource”
For me, Hotel Revenue Management is
Improving saleability of a hotel by making it visible and bookable on as many sales channels as possible, implementing efficient and affordable technology, exploring new business opportunities for the hotel and also being the first point of contact for OTAs and offline agents if any.
The History of Hotel Revenue Management
The concept of revenue management in hotels is a gift from the airlines. The airline industry conceptualized and introduced revenue management (yield management) in the form of dynamic pricing in the 1950s. The idea was to use the basic law of demand and supply for their benefit.
The hotel industry too was suffering from the problem of perishable inventory. There were other issues like an advance purchase at a lesser rate, and lower selling competition too.
In the 90s, J.W. Marriott Jr. took the lead and invested in a system to provide a daily demand forecast for all properties. It has taken about three decades for the hotel industry to adopt the methods of modern-day revenue management.
A concept limited to airlines and five-star hotels has now reached the smallest accommodation providers across the globe.
Today, the revenue managers have taken the driving wheel of hotels’ growth.
They make pricing decisions for every sales channel based on detailed analysis. Their skills, however, are expensive.
Owing to the prices, the budget properties could not afford a full-time revenue manager. Until the rise of revenue management service provider companies and software, they heavily depended on their agents and OTA managers to guide them. While some of these agents helped the hotels, most of them only saw personal gains.
This malpractice slowed down after the entry of revenue management service providers into the market. They brought the expertise and experience to manage the revenue from online channels.
Let us understand how the revenue management service providers get you good visibility and better conversion.
The Hotel Revenue and Marketing Management Service Providers
Commonly known as revenue consultants or revenue management firms, modern-day revenue managers are growth hacking ninjas. Their primary goal is to ensure optimum revenue and room night generation for the accommodation.
The virtual revenue managers supervise your property remotely whilst having complete access to your hotel data. They are the primary point of contact for OTAs for any issues like price disparity, a new campaign an OTA is planning, uneven cancellation policies, etc.
Coming back to the most important question: What do hotel revenue management service providers do and how fast do they turn around the hotel sales?
Contrary to a popular myth, hotel revenue and marketing management is NOT a plug-and-play activity. It involves creating many reports, doing analysis, and strategizing before you see any improvement in your bookings.
I have been a hotel revenue manager for over half a decade. I initially started off in a chain of hotels. Afterward, I moved to a company that provides revenue management services. Subsequently, I started my own hotel revenue management service firm.
One thing I have followed religiously over all these years is the checklist of one-time and all-the-time to-do things.
Below is my holier-than-thou checklist for your benefit.
How do Hotel Revenue Managers Initiate the Turnaround Process?
Once the commercials are agreed upon and the contract is signed, the hotel revenue and marketing management service providers start with a sequential flow of tasks. These tasks lay the foundation for the regular exercise an RM service provider takes up.
1. Understanding the Property
The very first step of revenue management is to understand the property before one can improve the visibility and the bookings. The RM service provider looks into the hotel’s occupancy, ADR, Revenue, and RevPAR reports for the most and least productive quarters. This exercise helps the revenue manager to set goals and expectations for the property.
2. Performing an Online Hotel Audit
After getting a general idea of the hotel, the next step is to perform a complete audit on OTAs and metasearch engines to understand the gaps in pricing, content, availability, guest satisfaction, cancellation policies, discounts, etc.
The hotel revenue management service provider then creates a comprehensive report mentioning all these details and shares it with the hotel to establish a timeline for betterment. A typical hotel Audit took looks something like this.
3. Gathering Data with Global Hotel Sheet
I call this my hotel encyclopedia. It is a comprehensive sheet that contains every detail about the hotel from its inception to the current date.
It includes the details about check-in check-out time, number of rooms, types of rooms and rate plans, amenities and facilities, point of contact, rack rate, broad cancellation policies, and more.
OTAs, offline agents, and even metasearch engines like Google, Trivago, and TripAdvisor; they all love current, complete, and useful data. In a nutshell, a good revenue manager does not proceed without this sheet.
4. Correcting the Content
Once the RM service provider has the global hotel sheet, they compare it with the audit report and add the missing details (if any) on OTAs and metasearch engines to create a sense of uniformity. This ensures trust from both the OTAs and prospective guests.
5. Identifying the Compset
While one person is busy correcting the content, the other member of the RM company already begins identifying the competition for analysis. It is important to know the key competitors, their strengths, and their weaknesses.
Compset analysis helps the RM service provider in pricing and helps the hotel improve its amenities, facilities, and guest services.
6. Setting the Rack Rate
The rack rate is the published rate before any discounts. After the competition analysis is complete, the RM goes back to the reports created during the first step. The RM service provider adds the hotel’s budget into the picture and sets the rack rate for the next 365 days. It helps the RM form the pricing strategy.
7. Technology Implementation
Quick and reliable channel manager and property management systems are crucial for changing rates and inventory in real-time on different OTAs. The RM service provider must identify the best suitable technology for the property and implement it.
It is the RM service provider’s duty to see that the transition is smooth and error-free. Not just that, the RM service provider also implements necessary rate shopper and revenue management tools.
As soon as they implement the fourth step, RMs begin with their routine exercises to boost hotel revenue. Because sometimes the hotel already has the technology in place but doesn’t know the techniques to implement it.
Routine tasks of revenue management service provider
The fun part or what they call the hustle begins when the property is given to a revenue manager to manage. From that point, he becomes the first point of contact for the hotel and the OTAs. The revenue manager performs certain exercises on a daily, or let us say, regular basis for the hotel.
Let us look at the tasks a revenue manager takes up on a daily or regular basis.
1. Studying Reports
Reports to an RM service provider are what photosynthesis is to plants. It’s a morning ritual. Every revenue manager starts their day by looking at different reports like the previous night’s room nights and revenue, the present day’s occupancy and inventory availability, and Business on the books for the month, quarter, and year. Another report the RM looks at daily is the rate shopping report.
The RM also looks at the daily forecast report. These reports help the RM form a pricing strategy on a daily and long-term basis.
2. Sharing Reports
Without delay, the RM has to quickly share certain reports with the owners. This process can be automated with the help of the channel manager tool. It ensures that even if the RM is not at the desk or is taking care of some urgent business, the relevant people have reports in front of them for their purposes.
The pricing decisions made by a revenue manager have a direct impact on the hotel business. It is only fair that as a hotelier; you get a daily, monthly, and yearly revenue report, pace report, forecast report, budgeted vs actual revenue report, EBITDA report, ARR, and RevPAR report.
Revenue managers also share YoY and MoM reports so that one can understand the impact of their business decisions.
3. Creating Pricing Strategy
In an ideal scenario, the hotel gets optimum occupancy rates for 365 days a year. In a real scenario, unusual events happen every day. Certain days you see a sudden spike in the bookings, while other days see a low pick up.
In order to ensure that the hotel gets optimum occupancy at the best price, the revenue manager creates pricing strategies on the basis of the reports; to pick up business for the same day if there is availability and advance business for future dates.
Basically, the revenue manager even fine-tunes the revenue goals as per emerging situations. Here’s a detailed guide to pricing strategies that you might want to look at.
4. Offering Discounts and Commissions
Discounts and commissions are a part of the pricing strategy. Everyone likes discounts, even the algorithms of OTAs. A revenue manager floats timely discounts to meet the shortfall in revenue and boost the visibility of the hotel.
A revenue manager also negotiates TAC on your behalf with the OTA.
5. Maintaining Rate Parity
Along with creating a pricing strategy, the RM service provider has to ensure rate parity across all the OTAs. A major factor that determines your hotel’s visibility and position on an OTA is rate parity.
OTAs run a constant checker to see your selling price on their competitors’ websites. If a hotel is regularly flagged as an offender to the rate parity agreement, it loses visibility on the online portals.
A revenue manager ensures that your rates are in parity across all the OTAs. He ensures that your hotel is ranked high on different OTAs.
6. Curating and Updating New Content
Though you are selling your rooms online; it is a human buying it from a computer on the other side. It is therefore a revenue management service provider’s duty to ensure that new information is updated online regularly.
Simply put, the RM service provider has to update new amenities & facilities of the hotel online. If any services are under renovation or closed down, the RM has to take them down. If you decide to upgrade the rooms, the RM has to ensure that new images of the same are uploaded across all the OTAs.
7. Social Media Presence
An average person spends around 40 minutes daily scrolling through his social media accounts. It is therefore imperative for a revenue manager to ensure that the hotel is present on platforms like Facebook and Instagram so that users can tag the place in their posts. This helps the hotel reach more potential guests.
8. Initiating Website
A good revenue manager must also ensure that the hotel has an updated website with correct information, the newest images, and a booking engine from which the customers can make direct bookings.
If the hotel does not have a website, it is the revenue manager’s duty to initiate the process of getting a website created. There are many affordable website-building tools available in the market.
Furthermore, a revenue management service provider should try making a website more conversion-friendly by adding booking widgets and other tools.
9. New OTA and Metasearch Listing
It is a revenue manager’s purview to explore new business sources for the hotel regularly. If a new OTA comes into the market, it is the revenue manager who will reach out to them to initiate the contracting and negotiate the commissions on your behalf.
10. Guiding the Hotels with New Operating Procedures
The OTAs regularly update their extranet, booking policies, and payment policies for the betterment of the guests and hotels alike.
However, many times certain amendments are to be made as per new policies OTAs roll out.
For example: There has been a complete turnaround in the check-in, check-out and stay process post the Covid. Every state rolls new guidelines for the accommodation providers. The RM has to share the same with the accommodation providers to ensure everyone is on the same page.
Flagging Negative Reviews
Certain revenue managers also take up tasks like online review & reputation management as a part of their service package. Even if an RM service provider is not taking it up, it is the RM’s job to inform the owner about negative reviews that are published on any OTA.
It is critical for the RM service provider to do so, as all the pricing strategies or long-term goals created will fall flat if the hotel constantly gets customer service complaints. There are tools available in the market that RM should look to implement for managing hotel’s reputation online.
Representing the hotel
Though not on your payroll, the RM service provider represents you and is the first point of contact for the OTAs. They reach out to the OTAs regularly to get market insights, solve disparity, and learn OTAs’ strategies for certain high season dates.
When OTA needs to reach out to someone in the hotel for more reasons like new updates on the extranet, new policies for pricing, etc, they reach out to the RM service provider. Apart from that, the RM provider also attends OTA meets whenever possible to represent the hotels managed by them.
Though they cost you half of what a full-time revenue manager does, you should look for the above-mentioned checklist when you want to hire a hotel revenue management service provider.
If they follow all these processes, and more; Congratulations!!! You have found the right revenue management services provider for your hotel.
In conclusion
In a cut-throat competition, it is always better to let someone experienced take on revenue management while you focus on the operational aspect of the business.
These RM service providers carry with them an experience of many hotels under their belt. A standalone revenue manager would never be able to do so.
The key to hiring a good virtual revenue manager is to do a thorough background check on OTAs and testimony of a proven track record from their existing clients.
