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Revenue Management: What to Expect in the Next 24 Months

31 Oct. 2018

EHL senior lecturer Scott Dahl, who had some 15 years’ experience in revenue management leadership roles, says four major themes were discernable at two recent Hospitality Sales and Marketing Association International events: its Revenue Optimization Conference (ROC) in Houston; and an HSMAI Advisory Board meeting in London.

 

The extended period of strong market conditions is expected to cool in the next 12 to 24 months

Our industry has experienced the longest period of consistent prosperity but that is likely to turn a little more difficult in the next couple years.  This theme has been popping up more and more lately, but no one has done a better job of explaining it than Bernard Baumohl, chief global economist at The Economic Outlook Group.

Speaking to an audience that, while perhaps not experts in global politics is clearly capable of understanding the impact of events on forecasts, Baumohl outlined a succession of recent global events, many seemingly unrelated.  Then, after saying the words ‘causation’ and ‘correlation’ over and over again, he connected these events to a series of similar historical events, all leading to the most recent downturn that was in full swing globally in 2008.  The effect on the room was quite sobering.

The point, though, is that while the water is calm we should make preparations for the next storm.  If things have been good since 2009, it only stands to reason that many of our newer strategy leaders have never managed under challenging market conditions.  Many of these leaders have never been forced to justify their existence with the “we won, by losing less” argument when addressing a gain in market share despite declining revenue on their monthly STR report.  And many of them will be forced to seek advice from new sources or learn new lessons, often at their owner’s expense.

There is a “changing of the guard” taking place at the top

As revenue management continues to mature as a discipline, it is only natural that some of its “founding fathers” (and mothers) step aside, allowing the next generation of leaders the opportunity to shape the future of the industry. 

Perhaps most significantly, Robert Cross, who said “right product to the right customer at the right time for the right price” is retiring.  He was honored with a lifetime achievement award in Houston in a ceremony that I personally found very meaningful, as I am sure did anyone else who has ever held the title Revenue Manager.  SVPs of major hotel companies lined up to have their photos taken with him.  And he’s not the only one.  Greg Cross retired recently.  Stalwarts Kelly McGuire, Neil Fagan and Calvin Anderson are still involved, but now stepping back to allow others to do some of the heavy lifting.

Industry is increasingly looking to academia for help with manpower development

While the maturing of the revenue management discipline has led to refinement in organizational structure and roles, the pipeline needed to feed it with the right candidates has not kept pace. 

In the early days, hotels had one revenue manager, who did everything from develop an annual strategy to tallying up the little tick marks used to use to track unconstrained demand.  This usually resulted in either poor strategy or over-paying for tick marks.  More often than not, they got the job because they were the best Excel user at the front desk. 

Not anymore. Most hotels have now implemented a far more sophisticated hierarchy, which allows the experienced strategist to focus on money-making decisions while junior analysts prepare for meetings and key-stroke strategy changes.  Yet many hotels still look only to the front desk, and their competitors’ revenue management departments, when addressing a vacancy.

Now industry, and more specifically HSMAI, is addressing the lack of a deep pool for these entry-level positions by partnering more closely with academia.  HSMAI North America has implemented a faculty advisory group and HSMAI Europe has invited a total of six hospitality school faculty members to join their various advisory boards.  This alignment will not only result in guidance being offered on what should be included in curricula, but should also mean additional mentoring and internship opportunities, just to name a few.

Big data is not new, nor is it going away

There is currently so much data out there and new sources are being offered to revenue managers almost daily.  While there is more than ever before, the fact that there is new data available has been a constant in revenue management since its inception.  I remember being blown away when my property received its first STR report (in 1988!).  And it was a single page.  Then TravelClick came along.  Then many more.  The point is it is always expanding and dealing with new data is a skill that revenue managers have always had to, and will continue to, employ routinely. 

Personally, I think the call for property management system providers to be the solution to the big data challenge is misinformed.  It is not realistic to expect companies whose core expertise is data security and interface protocols to assess data to see what matters and what is noise.  Any hotel that has to wait for the next enhancement release from its PMS provider is going to be left at a significant disadvantage.

Data visualization is emerging as a key skill for effective revenue managers.  For a while, Excel was every revenue manager’s best friend.  While most revenue managers now agree there is only a limited role for Excel, visualization programs like Tableau are gaining traction.  For an experienced user, it only takes a few minutes to format new information in a way to determine if it warrants a deeper look, and this ability is going to be what separates those who use every bit of information available to them for their forecasts, from those who are forced only to react.

 

The HSMAI’s Revenue Optimization Conference (ROC) was staged in Houston June 19-21, 2018. 

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Scott Dahl
About the author

Scott Dahl has held various senior level leadership positions in Revenue Management including VP of Revenue Management at Hersha Hospitality Management and SVP of Revenue Management at Sunstone Hotel Properties. Most recently he was Corporate Director of Revenue Management at Apple Leisure Group, before moving to Switzerland to join EHL in 2016.

He founded Hotel Revenue Resources, Inc. in 2006, and the company continues to successfully provide Revenue Management technology and services to several hospitality management companies throughout the United States.

Possessing direct experience with all segments of the North American lodging industry, Scott also held a total of 12 hotel operations and sales positions at ten different hotels throughout the U.S. before specializing in Revenue Management.

A 1986 graduate of The University of Massachusetts, Scott was recognized in 2005 among the 25 Outstanding Minds in Hospitality Sales and Marketing by HSMAI (Hotel Sales and Marketing Association International).

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