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Revenue Management: Too Tactical and Not Strategic
Enough; Highlights from HSMAI's Revenue
Management Strategy Conference

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MCLEAN, VA (June 27, 2005) – Delegates at the Hospitality Sales & Marketing Association International (HSMAI) Revenue Management Strategy Conference called for the creation of a clear Revenue Management culture noting that hospitality industry pricing today is far too tactical and the challenges of multi-channel distribution and other costs need to be factored into the equation in order for companies to be profitable.

A total of 165 professionals from leading organizations in hospitality and travel attended the second annual HSMAI Revenue Management Strategy Conference, June 20, 2005 in Los Angeles, held in conjunction with the HITEC conference.  There were 53 different hotel and hotel companies represented and 63% of hotel attendees were in corporate or regional positions for their company.

Organized by HSMAI’s Revenue Management Advisory Board, the conference discussed and debated critical issues and offered viable solutions and strategies for this very specific industry segment.

Among the agenda highlights were:

Mark Bergen, Ph.D, Professor, Carlson School of Hospitality Management, University of Minnesota, set the tone for the conference with his opening Keynote Address in which he asserted that “the biggest problem with pricing and Revenue Management today is that it’s too tactical and clearly should be more strategic.  Revenue Management is rarely at the center of corporate dialogues, but I really think it should be.”

Bergen suggested that “Revenue Management strategies should take on the three capitals: human capital, systems capital and social capital,” adding: “You have to re-train the people in your organization to think more strategically about Revenue Management.”

He also noted that “Your company’s ability to do Revenue Management well may be a source of your firm’s competitive advantage.”

Other highlights included:

General Session & Panel Discussion: “Top Revenue Management Resolutions For A Recovering Market”

Andrew Oman, corporate director of Revenue Management, Carlson Hospitality, asked the crucial question: “Why haven’t we created a Revenue Management culture?”  Oman noted: “We’re in the middle ground in a recovering market, which is a time of the least creativity,” adding: “We need to break bad habits.”  He also offered the astute question: “Why discount if it’s not working?” 

Andrew Rubinacci, director of distribution planning, InterContinental Hotels Group, said: “Revenue is only good if it’s profitable and we must factor in costs for distribution and customer acquisition.”  He also strongly suggested that “you balance your distribution channels.”

Tim Kraft, director, Domestic Pricing Analysis, Northwest Airlines, said: “At Northwest, we do demand segmentation through restrictions and we are seeing ‘decontenting’ of the airline product – looking more like a bank, with fees, add-ons, such as buying meals.”

The panel was moderated by Bonnie Buckheister, principal, Buckheister Management USA, who suggested that “we have to get better at forecasting.”

Panel Discussion: “Integrating Revenue Technology Solutions with Internal Systems and Processes in the Real-World Hotel Management Environment”

John Riddell, senior vice president pricing solutions and senior research scientist, PROS Revenue Management, said: “We take actions, such as closing off rates, to ensure that our forecasts are wrong.  It’s hard to figure out true demand.”

Educational Presentation by Steve Swope from The Rubicon Group: “Effective Revenue Management: Getting the Most from Your Efforts”

In his presentation and workshop, Swope examined the various functions that must be addressed in order to make Revenue Management efforts really pay off.  Best practices in the integration of competitive information into rate decision-making, Best Rate Guarantee compliance and extranet updating (channel management) were addressed.

“Raising rates doesn’t guarantee Revenue Management success.  Rather, raising rates could cost you money,” said Swope.  “You can’t arbitrarily raise rates because as you raise rates, the market gets thinner,” he said, adding: “The mission is to not look for the best rate, but try to find what the best rate is every day to maximize revenue.”

In addition, Swope led the attendees through an interesting, thought-provoking and fun workshop on the application of contemporary Revenue Management techniques.

Panel Discussion: “Pricing Strategies for Online Distribution Channels”

Moderated by John Hach, vice president of marketing, TravelClick, who pointed out that “new intermediaries are alive and well.”

Pablo O’Brien, director of business development, Yahoo Travel, said: “There is a trend toward suppliers trying to achieve rate parity across public Internet channels.”

Drew Patterson, director of business development, Kayak, said: “The cost of participation and the ability to manage distribution channels has made it easier to be in more channels.”

Don Smith, vice president, SideStep, noted that “packaging is really taking off online.”

Round Table Discussion Highlights:

Channel Management:

Key takeaways:

   1. One platform to manage all channels – RMS, PMS, RS, etc. – with a single point of entry
   2. Know which channels provide the most benefit?  Do you add more?  Do you manage them differently?
   3. Managing extranets is still an issue 

Determining your future – an open forum for sharing your visions and challenges:

   1. Standardization: roles and responsibilities, benchmarking and measurement
   2. Need for tools to show value of Revenue Management

Developing Bench Strength:

Challenges/obstacles:

   1. Pay scale vs. skill set
   2. Lack of education/training focus on RM
   3. Newness of discipline
   4. Lack of consistency in job description
   5. Lack of career pathing
   6. Need a hiring tool
   7. Need to educate GMs/owners
   8. Need for certification program
   9. Need for professional development courses at the University level

RM Strategies for International Markets:

What it will look like in 5-10 years:

   1. Smaller world – easier to reach customers
   2. More packaging, bundling
   3. There will still be call centers/human interaction
   4. Centralized Revenue Management efforts (clustering)
   5. Partnering with vendors (for interface compatibility)
   6. Internet sites will become more specific to each country (promotions, advertising)
   7. Focus on mix management, dynamic packaging
   8. On-going terrorist threats
   9. Understanding cultural differences

Among the companies represented were: Best Western International, Carlson Hotels Worldwide, Hampton Inns, Hilton Hotels Corporation, Hyatt Hotels & Resorts, InterContinental Hotels Group, Interstate Hotels & Resorts, Marriott International, Millennium Hotels & Resorts, Radisson Hotels, Sofitel, and Starwood Hotels & Resorts.  Participants ran the gamut from chief operating officers and vice presidents of sales and marketing, Revenue Management, national accounts, operations and booking data/revenue, to directors of technology, e-commerce, national sales and brand business directors.

“We were excited with the record turnout and impressive list of both attendees and speakers, coupled with the quality of the content of the presentations and the roundtable discussions making this strategy conference a major event only in our second year,” states Robert A. Gilbert, CHME, CHA, president and CEO of HSMAI.  “This is the one time a year that professionals in the business of Revenue Management get to meet, interact and learn about this highly specialized segment of the marketplace.”

Conference partners were Aspire, Expedia, Inc., Easy Revenue Management Solutions, Hotwire, HSMAI University, OPERA Revenue Management Systems, a division of MICROS, pricegrabber.com, the Rubicon Group, and TIG Global.

The Revenue Management Advisory Board is a group of HSMAI members who advance the Revenue Management discipline through education, participation, resources and guidance, enabling leaders to optimize revenue and performance within their own organizations.  The group’s strategic intentions are to: provide education on all levels; develop a sense of community and participation; create tangible resources for Revenue Management professionals; and give guidance on industry standards and practices.  To learn more, go to www.revmanagement.org.

HSMAI is an organization of sales and marketing professionals representing all segments of the hospitality industry.  With a strong focus on education, HSMAI has become the industry champion in identifying and communicating trends in the hospitality industry, and bringing together customers and members at 15 annual events.  Founded in 1927, HSMAI is an individual membership organization comprising nearly 7,000 members worldwide, with 38 chapters in the Americas region.

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Contact:

HSMAI
8201 Greensboro Drive, Suite 300
McLean, VA 22102
phone (703) 610-9024
www.hsmai.org


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