Just over a year ago we wrote an article announcing the increase in outsourcing specialist areas in hotels like revenue management. In the aftermath and recovery from the global economic crisis the eyes of real estate investors and hotel owners should have been opened acknowledging the need for structural change. We would like to benchmark our insight from last year against a recently published survey of Cornell University by Sheryl Kimes titled the Future of Revenue Management.
It seems this survey of 500 professionals in fields related to revenue management for the hotel and travel industry share our outlook from 1 year ago. The articles I am referring to is ‘The Time for Outsourcing is Now’.
6.4% of the respondents feel revenue management would be outsourced. This is a higher number then we have seen before, and according to our estimates we will only see this level to continue to grow.
But why? What is at the basis for this trend of outsourcing hotel yield strategies?
The biggest challenges in revenue management identified by the group are the qualifications of revenue managers as well as owner pressure and senior management. We fundamentally share their belief that there is a disconnect between the level of expertise of revenue managers in general (read: many revenue managers lack basic skills) as well as true understanding by senior management of this strategic part of the hotel business.
Below you will find a graph that illustrates the main concerns we will be facing over the years to come:
Respondents feel the industry will become more strategy driven and we utilize more specialized technology to do so. The hotel industry is in need for a change to become more professional if we want to be able to foresee in the financial needs of investors and deliver appropriate ROI. Revenue management will be one of the main drivers of this fundamental change.
Below a graph illustrating what we expect revenue management to look like in the next 5 years:
Revenue management will expand its role within hotels from a focus on room revenue only and will also cover areas like F&B, meeting rooms, groups, catering, spa, golf, parking, mini bar, etc. Measurement of resutls will change from REVPAR to GOPPAR and TotRevPar. Revenue management will not only cover more revenue generating and operational departments, but will also become a driving force behind marketing, budgeting and property design.
The new role of revenue management requires a more sophisticated background and profile. We have noticed in 2010 that investors and owners are acknowledging the fact that more expertise is needed to generate a competitive level of ROI on their properties. The demand for revenue management outsourcing has clearly increased.
Outsourcing in itself might not be the right word. The part ‘OUT’ makes is it sound a bit negative, where in fact a management company you contract works together closely with your on site team.