There have been numerous articles written concerning revenue management, and how it affects the hospitality industry. We have discussed demographics, numbers, reports, and percentages till they are drilled in to the manager’s head. There are many different types of software that will crunch all of the numbers that are inputted so as to provide the best possible rate for the property. Managers spend their time looking at these numbers several times daily, for they can change very quickly. It is important to stay on top of what the numbers will tell the manager. The software will do a comparison shop of the competition set. This will let the manager know where to position the property’s rate. There can be up to 5 positions or more depending on the comp set. The price range can vary by 10.00 – 30.00 depending on position. The manager now must decide where to position the properties rate for that given time.
All of these functions are simply that a computer software program is deciding what is the best price for the property at that given time. In three hours the price could be different, due to the influx of business. Changes in the reservations will cause a spike, and rates could change. Now managers are dependent on the numbers that the computer has given them. This software is only as good as what numbers the managers put in. So far so good right? We now can sit back and let the computer do its job. Except there is a problem that keeps knawing at me, there is no human factor in this system we call revenue management.
A Sixth Sense for Revenue Management
I bring it up, because I have been working on this concept for the past year with revenue managers at properties that I advise. The software that is used creates numbers, and they are correct for the most part, but the software can’t feel, touch, or smell what is in the wind. Revenue managers need to have a feel for the system, not how it works, but what it does, and how it does it. They must know what is happening in their respective area. I mean that they must know every venue, event and meeting in their area. How the numbers affect their property, not just because the computer tells them that this is the best rate. They must feel that this is the best rate; if they don’t then they need to make adjustments. Develop an instinct for what rate will produce the best return. It is not enough to have the numbers, you must know that they are right. Are the numbers right for your property? How do you feel about them? Is your perception the same as that of your customers?
As a revenue manager you must be aware of what is going on in your area, games, events, conventions, and any other venue that will produce business. Don’t depend entirely on the software - it can’t tell you the pulse of the public, and can’t feel the vibes of the events. Be aware of changes in your area, and if possible capitalize on them. Revenue management is not an exact science, so prevail on your instincts to understand what is going on around you. By becoming aware of the human factor in our assessment of the numbers that the software is generating, properties are able to increase their Revpar, and occupancy percentages, above what the software had predicted. The human factor is in its infancy, and some tweaking is still necessary. Yet the managers who have developed a feel for the system are having fun with it. The best part is that the owners are also very happy with the results. It has taken a while to get it right; it was a little rough in the beginning.
There is a lot more that what I have outlined here, I just wanted to hit the highlights of the process. I will say this - not all managers will go along with the program. Some of the ideas run contrary to what they have been taught. It will be up to each individual if they want to step out of their comfort zone. It’s like being in a dark room and having to use your senses to navigate. The evolution of revenue management, maybe?
About the Author
Alan Campbell has been in Las Vegas for over 30 years and has worked for the major strip hotels. He has spent some time in California, Los Angeles where he worked for the Radisson and Sheraton hotels. Alan considers the hospitality industry the best job in the world - it is the only place that both king's and Paupers will visit you.