Building the Bench: Developing the Next Generation of Revenue Leaders
At the HSMAI Revenue Optimization Conference this year, there was a “great debate” over the future of Revenue Management. Will hotels in the future rely on Directors of Revenue Management (DORM) to implement the strategy, or will machines rule the world as revenue management systems such as Ideas, Duetto, and One Yield become more and more sophisticated?
I was firmly in the camp that believes that DORM’s are here to stay, but there is no doubt that advanced algorithms using the enormous volume of data now available will make decisions more quickly and accurately than the human mind. Fortunately for those of us in the discipline, we are not merely number crunchers; the skills needed for success have evolved along with the technology.
The changing landscape of hotel revenue management requires a new approach to training and development in which the next generation of revenue leaders cannot be chosen solely based on their knowledge of the property management system (PMS) and central reservations system (CRS). Reservations Supervisors or Managers and Revenue Analysts will continue to be a pipeline for talent, with the most critical skills including communication to all stakeholders, driving hotel revenue and generating profits for owners, willingness to take risks, and the ability to lead integrated marketing efforts. The hospitality industry has always valued the training and development of the Sales team, but it is now time to expand that focus to the DORM’s.
Communication
One of the traditional weaknesses of revenue leaders is translating highly technical revenue strategies to those that may not share the love of data, such as the Director of Sales and Marketing who doesn’t want to stare at 15 spreadsheets. Asset Managers need to understand how market conditions, pace, and business mix are impacting their pocketbook or stock price, often in meetings that are limited to an hour a week. General Managers need to understand how occupancy percentage will determine staffing levels and how distribution costs will impact flow through.
The first step to improving communication is to open the weekly revenue meetings, profit and loss reviews, and ownership meetings to a broader audience. Exposing less seasoned managers to the entire process pulls back the curtain, revealing the mystery of pricing and positioning while adding diverse voices to the conversation. The sharing of skills is also an essential part of developing well-rounded team members, and at Pivot Hotels & Resorts we have paired Revenue Managers of varied yet overlapping backgrounds that communicate on an informal and regular basis. From a practical standpoint, the buddy system helps cover vacations and provides backup, but we have also found the exchange of ideas offers a perspective from outside the individual hotels.
Total Revenue and Profitability
Too often, the top line performance of the rooms department is the sole focus of revenue managers. Do your DORM’s consider distribution costs, commissions, and ancillary revenue across all channels? The next generation must look beyond guest rooms and make a habit of applying the concepts of revenue management to all revenue streams, including parking, F&B, spa, meeting space, beach amenities, and more depending on the offerings of the particular property which can significantly enhance the bottom line and value of the hotel.
The most obvious area where total revenue management principles can make an impact is group sales and catering. It is surprising how many hotels still make group decisions in a vacuum, but a daily business review led by the DORM is the perfect forum where the entire team can gather to discuss new business. DORM’s must be trained to look at all aspects of a group and how it will flow to the bottom line, as groups cannot be evaluated strictly on transient displacement. The DORM must be able to asses the bottom line, taking into consideration the profit margin of food and beverage, commissions, rebates and additional labor costs, and train sales managers accordingly. As such, RevPAR cannot be the only measurement of success. Below are a few metrics every revenue leader should be reviewing.
Total Revenue Per Occupied Room (TrevPOR) – A measure of total operating Revenue Per Occupied Room, calculated by the sum of room, food and beverage (Director of Revenue Management) and all other operating revenue divided by total rooms sold.
Total Revenue Per Available Room (TrevPAR) – A measure of total operating Revenue Per Available Room (RevPAR), calculated by the sum of room, F&B and all other operating revenue divided by total available rooms.
Revenue Per Available Space (RevPAS) – (also known as RevPASF/M, or Revenue Per Available Square Foot/Meter). This concept takes the full revenue for the day from all events, divided by the total area of available space and is much like the ADR metric for space.
Gross Operation Profit Per Available Room (GOPPAR) – Gross operating profit can be calculated by taking your gross revenue and subtracting your total expenditure. This figure can then be divided by the number of rooms available in your hotel to give you your GOPPAR. Many owners are becoming increasingly concerned with this metric because it gives them an idea of the bigger picture regarding how valuable their hotel is as an asset.
Risk Taking
An environment that fosters innovation and risk taking is key to a driving market share growth, and embodies one of the core values at Pivot Hotels “Greatness Requires Risk.” In January of this year, one of the leisure heavy hotels within our portfolio identified a year over year decline from international bookings in June and July, so the team deployed a free night offer, reversed the pace deficit and built a base for the summer at a slightly lower year over year rate. Unfortunately, the short-term demand was stronger than expected and the competitive set was able to drive last minute rate, and the hotel experienced a small decline in the RevPAR index. While no one was happy about the result, the team took lessons from the experience and revised the selling strategy for the 2019 high summer season.
Not all strategies pay off; however, the key is to test new initiatives, learn from the results and not be afraid to admit that a change in direction is needed. Creativity, courage, and inquisitiveness may not be the first qualities that come to mind when recruiting and developing future DORM’s, but those are the qualities that will set your property apart from the competition and the reason asking “why” is essential. The best book you can give someone interested in revenue management is Moneyball by Michael Lewis because it is an excellent example of how questioning everything and taking risks can pay off in the end.
Analytics, Training, and Technical Skills
Systems expertise will always be a part of the job description, along with knowing how to add a minimum length of stay. Directors of Revenue Management must be aware of how guests are receiving the hotel strategies through multi-channel distribution. Does your revenue team understand the returns on ad spend and industry averages? Do they know the open percentage and the click-thru-rate for the last email blast? Even more importantly, do they use what they have learned to make the next offer better?
Knowledge of sales and integrated marketing is essential and technical skills are equally important. The rate management system (RMS) is only as good as the data it receives, so DORM’s must focus on ensuring the guest data in the PMS is correct and collected in compliance with the payment card industry data security and general data protection regulations to keep the data “clean.” The cliche is true, “Garbage in, garbage out.”
When budgets get tight, employee training is often the first thing to go, which is why it remains essential to keep up with evolving technology and strengthen any weaknesses a team member may have. Skills-based training is typically only undertaken when required, and internal resources are often the most underutilized, including the vast libraries of courses and reference materials major brands have on their internal websites. Online travel agencies offer a variety of training and market data for those who are willing to sit through a short pitch on the latest promotion your market manager wants your hotel to join.
Outside the industry, there are advanced Excel courses and public speaking seminars. Instead of limiting learning to a new feature in the RMS, DORM’s should be encouraged to take online sales and operations courses to understand other disciplines better. The bottom line is training must be a priority if Revenue Managers are to become a driving force for their properties.
I think everyone will agree that the days of a Revenue Manager hiding in a back office, pulling levers and buried in Excel spreadsheets is over. For current team members to be successful and develop the next generation of revenue leaders, a broader focus is needed. The Director of Revenue must be the center of all revenue activity of the property and drive the conversation with all stakeholders. By understanding the market across all channels and how the hotel interacts with guests, a well-trained Director of Revenue Management can translate the data into a unique strategy, with the help of state of the art algorithms to drive both top and bottom lines.
source: Hotel Executive
