News for the Hospitality Executive
Small companies and independent hotel chains refer to lack of resources and a limited budget to invest in high-end technology as major challenges associated with revenue management.
Key executives in such organisations manage several roles simultaneously. They oversee all revenue divisions, including sales, marketing, e-commerce, revenue and reservations. They need to ensure that these departments are communicating and working together so that revenue can be maximised across the company. On the other hand, large hotel chains have more money to invest in technology and people, so their roles within the revenue division are more defined.
The range of hotel management structures vary from complete independence with a private chain code to GDS/Internet Technology connectivity with a generic chain code to soft branded representation with CRS technology and a branded chain code to “hard brands” that provide technology and also manage hotel operations.
Independent hotels may combat budget and resources constraints by choosing a “soft brand” that provides technology and resource savings through economies of scale, yet allowing independent management and identity,” says John Enright, executive director - revenue account management, Preferred Hotel Group.
The difficult trading environment has forced more and more independent hotel groups to analyse their technology and distribution strategy and costs.
For his part, Enright says he has focused on retention of loyalty base customers, broadening of distribution strategy for acquisition, and market-centric focus for rational competitive price positioning.
It is an economic reality that downsizing in our economy requires a broadening scope of responsibility for reduced management resources.
At the same time, Enright says it is important to retain the resources that already possess the technical and analytical skills to continue to manage pricing and distribution.
“A skilled revenue manager may be more capable to broaden responsibilities to cover operational departments than the other way around, where technical skills are inadequate and revenue could suffer as a result,” Enright told EyeforTravel.com’s Ritesh Gupta.
In terms of advantages, one of the bonuses of working for any small company is that there tends to be better communication between different departments. Working for a small hotel chain, you have the flexibility for open lines of communication so all team members can work closely together.
Enright pointed out that smaller organisations are likely to be more nimble and may have less barriers for expeditious adaptation to new strategies in a rapidly changing marketplace. Conversely, a smaller management staff has a broader scope of responsibilities across many departments, so expertise in any one area could be lower.
“The managers selected must be appropriate for the environment, big or small,” added Enright.
Integration is quite critical for any successful revenue management strategy. Last year, an executive in an interview with EyeforTravel.com acknowledged that not all systems integrate into property management system (PMS). Integration remained to be a challenge and it was hoped that technology would improve the situation.
To truly boost revenue one needs to have a fully integrated RM system and put RM at the core of business decisions. The situation is only expected to improve as more and more small hotel companies have structure in place for better communication between different departments.
Enright feels more independent hotels are installing fully integrated RM systems because of broadening interfaces between PMS, RMS and CRS and lowered costs
Moreover, the technology is improving and is more affordable.
Profitability of each segment
Measuring performance across channels consists of tracking metrics like costs or margins, LOS / Booking window / Seasonality statistics, measuring revenue share from each channel and trends over time, impact on net ADR due to varying channel mix, measuring booking pace by channel to be able to focus on the right channel and finally making pricing/inventory decisions to impact the dominant channel at the optimal booking lead time.
A section of the industry also acknowledges that revenue management systems have not yet evolved to the point where they can consider all variables related to price, LOS, demand and competitive pricing – the components of distribution costs and ancillary spend are not yet considered in most versions. In many cases costs of distribution can and should be negotiated on a larger scale through contractual agreements.
Enright agrees and says revenue management must value the profitability of each segment where the displaced customer is the least profitable.
Enright, along with other 25 speakers including ones from Continental Airlines, Hilton Hotels Corporation and InterContinental Hotels Group, is scheduled to speak at Revenue Management and Pricing in Travel USA conference, to be held as a part of the Travel Distribution Summit N. America 2009.