The Changing Role and Future of Revenue Management in the Hotel Industry in 5 Steps

Changing roleRevenue management in the hotel industry is still relatively young. While it began in the 1990s, it has really bloomed and grown exponentially in the last decade, particularly in the last few years. In this time, it has been overshadowed by other departmental functions within the industry, such as sales and marketing. Revenue managers, in comparison, have worked behind the scenes and tended to report to these departments.Revenue management in the hotel industry is still relatively young. While it began in the 1990s, it has really bloomed and grown exponentially in the last decade, particularly in the last few years.

 In this time, it has been overshadowed by other departmental functions within the industry, such as sales and marketing. Revenue managers, in comparison, have worked behind the scenes and tended to report to these departments.

But not anymore. 

Hotel revenue management is moving front and centre of the overarching business model for many hotels, and this trend is only set to rise further. In this article, I discuss its changing role in the hotel industry and what we can expect to happen in the near future.

1. Revenue management is levelling up

At Xotels we have seen a growing trend of hotels elevating revenue management’s role. Many now look to take advantage of analytical insight and strategic knowhow that uniquely come from revenue management. 

This insight and knowhow supports key business decision-making. Increasingly, revenue managers are sitting in on executive committees, equal in status and stature to the marketing and sales department heads.

Many hotels no longer have a revenue manager but rather a director of revenue management, having upgraded the importance and weight of the role. No longer are they reporting into the DOSM. They have a straight line to the general manager.

2. The role will continue to expand

Revenue management undergoes constant change, more so than other departments. This is because it is rooted in technological capability. Technology will continue to evolve and more sophisticated methods of guest analysis will come to the fore, as revenue managers keep searching for ways of becoming more competitive. 

This constant change has contributed in large part to the expanding roles that today’s hotel revenue manager is charged with carrying out. After all, it is through inventive marketing strategies that hotels can generate business. Ecommerce, social media, client engagement and relationship management have all become central to the revenue manager’s job in order to drive business.

Some additional roles include:

  • Managing the hotel’s online presence and reputation
  • Overseeing website digital marketing strategies
  • Customer communication and engagement initiatives
  • Technological development of the hotel services, facilities and procedures
  • Identifying new markets and new opportunities within current markets
  • Product evaluation, business development and  capital investment recommendations

Today’s successful revenue manager must wear many different hats. And it is exciting to see how this will evolve further with new technologies, customer trends and industry innovation.

marketing foto

3. Total hotel revenue management will be unleashed

This is a concept that has been discussed for a few years, but it looks like it can really begin to take hold soon. Total hotel revenue management expands from a focus only on room rate revenue to encompass all other hotel revenue generators. 

These include the hotel restaurant, space rental, room service and leisure facilities. According to a recent study by Cornell University, 63 percent of revenue managers believe that the concept is on the verge of breakthrough. 

Can you imagine how important this will be for revenue management? Its development could make it the kingmaker department in the industry at large.

4. Profit management will take centre stage

The elevation of revenue managers in importance to hotels comes down to one thing: they are uniquely positioned to help drive profits. The function is increasingly seen as profit generation rather than revenue management. 

Revenue managers are pivoting to a focus on increasing profit margins rather than on increasing revenue. The ideal is of course to do both. It’s great to grow, but it’s better to do so with higher profit KPI's.

This focus on profits will sharpen in 2018 and beyond, as revenue management uses new methods to understand guests better and improve margins.

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5. Revenue managers will focus on guest analytics

The hotel sector is probably more competitive than ever before. Hotels aren’t only competing with their cross-town rivals, but inter-city and even international counterparts. Online travel agencies, the rise of hostels, and high guest demands make the industry even more competitive. So, hotels are turning to guest analytics; and new technology is making efficient analysis that produces unique, valuable insights possible.


The final word: Get used to constant change

‘The only constant in business is change’ is an old business maxim. But for revenue managers, it is particularly applicable. Let’s look at just some of the recent changes to the role: adapting to the new guest expectancy of unique hotel experiences and nothing but the best service; the rise of technology-driven solutions; data analysis and use of communication channels to build relationships with guests long after they have checked out; and not least, the importance of mobile strategy to hotel success. 

These represent a lot of changes, but revenue managers must continue to adapt and anticipate future trends. The most thrilling thing of all is that most hotels still don’t use a revenue management system, but they are catching on to the benefits that they are missing out on. This is great news, as revenue management is set to continue growing and to play an even more important role in driving the success of hotels.

At Xotels we are actually not talking about revenue management, but consider our work to be business development, going way beyond pricing ...

The key to the future is Business Acumen!

Business acumen ("Business savvy" and "business sense" are often used as synonyms) is keenness and quickness in understanding and dealing with a "business situation" (risks and opportunities) in a manner that is likely to lead to a good outcome.

Cheers,

Patrick Landman @ Xotels

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