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Why would Hotels Outsource Revenue Management?

revenue management outsourcing

It is a question I often hear when explaining what we do at Xotels. People seem surprised hotels are willing to hand over a vital part of their strategies to a 3rd party. Such a sensitive and key part to the success of your business as revenue management should not be left to an ‘outside’ company many hoteliers respond.

The first question I usually ask, do you have a lawyer or an accountant? They are external service providers correct? Why not keep this internal as it is of a very sensitive nature?

The answer usually boils down to the fact that such expertise cannot be qualified or hired internally and because of cost. The skills are very specific and its best to rely on specialist service provides like law and accounting firms.

For this same reasoning revenue management would qualify to be an outsourced function within your hotel. The question actually is, 'why shouldn't independent hotels outsource revenue management?'.

I am often surprised by the initial reaction of many hoteliers. In general we are willing to outsource specialist fields like legal, accounting and payroll, but not are averse to getting professional help when it comes to improving our strategies to generate more income.

Why I wonder? It seems it is more an emotional response, than one based on business requirements. Unfortunately too many hotel managers seem to be of the opinion they can perfectly well qualify a revenue manager for his skills and strategic vision.

How to qualify a revenue manager

I beg to differ with that. Based on my experiences I must actually strongly disagree. Objectively how can someone qualify a specialist, if he or she have not actually do not have the technical qualifications themselves? On basis of what would you qualify a revenue manager, if you do not know what the job really entails?

And no, it’s not just simply about changing some rates here and there, which seems to be a common misunderstanding with many hoteliers. Mind you and even with that there are complexities involved on which you need to be certain a potential revenue manager candidate has the right skills and experience.

Of course the HR manager, DOS or GM can have a great philosophical discussion about yield management and business vision. Still it will not tell you if the person in front of you has the right experience and skills (read more on that topic here: most revenue managers lack basic skills).

Talking about revenue management is actually quite easy. It’s all a bunch of mumbo jumbo theory with interesting terminology and concepts. Anyone that has done his fare share of reading can sell it. The question is how good the candidate’s skills are, and does his profile match your particular properties needs.

Especially at independent hotels, where there true internal technical knowledge is little, this is a big challenge. Let’s be honest, how can a General Manager who has never been a revenue manager, touched a CRS, updated a channel manager, analyzed segment pick-up curves or performed displacement calculations possibly effectively qualify a candidate for a revenue manager vacancy? 

revenue management analyst

And after comes the next challenge. How would you actually manage a revenue manager? Check the quality of his work and methodology? Trust me this is important, it’s easy to make small mistakes, which if go unchecked could lead to a loss of revenue. And many RM's do not have the tendency to audit their own work.

How will you deal with this if you do not know what your revenue manager is doing exactly? Will you simply trust he is doing the right thing? Do you want to rely on the judgment of just one person, of whom you are not sure what he / she really does?

And how will you help your revenue manager to further develop his skills? Actually we often hear from revenue managers working in independent hotels are that they feel they are not understood, and do not have enough support internally to further grow their knowledge, insight and techniques.

So why should an independent hotel outsource revenue management?

  1. It will be hard to sufficiently qualify the skills of a potential RM candidate.

  2. How can you manage a RM effectively if you have not been one yourself?

  3. It is a specialist skill for which you should rely on more than one persons experience and views.

  4. Turnover tends to be high as RM’s are always on the lookout to grow in their career.

By the way outsourcing is also not the correct word. It has too much of a negative connotation too it. I would rather call it in-sourcing. At Xotels we actually become an integral part of the hotel’s executive team and support them not only in revenue management and distribution but also on strategic decisions in other areas from marketing to front desk operations.

We go beyond the yield and revenue part and assist our clients in gaining a better understanding of their business, team performance and build their brand. Business Development is in our DNA.

We call our service Rent a Revenue Manager!

A major advantage that we offer our clients is our infrastructure. We have at our disposal a large team of hotel professional all with different core specialism’s, ranging from pricing strategies, distribution management, and ecommerce to statistics and math. So based on the needs of a particular hotel we have all the required knowledge, skills and experience available.

Moreover our revenue managers operate in teams and are managed by revenue managers. This allows for the proper checks and balances. Not would you rely on the opinion of just one person. An independent hotel gets the same level of support as a property that is part of a large international hotel chain.

hotel specialists

Our ideas tend to resonate well with owners, investors and investment funds that have a clear mission and vision of where they want to take their business. And hotel managers who are innovative and want to break boundaries are usually big fans of ours. Xotels is as we say it for a new breed of hoteliers.

Perhaps our clients could best explain why they outsource revenue management to Xotels:

Rino Soeters, General Manager at La Bergere Group, explained; ‘The difference of having Xotels as our revenue management team comes down to 23% in our revenue, these guys know how to push for results’.

And the team behind the Pantone Hotel in Brussels stated; ‘Xotels revenue management experts turned our hotel profitable with the first year of opening. I did not know hotels could generate such an ROI.

And from the Es Moli resort in Mallorca the following feedback; ‘Revenue management is not only for city hotels. The results at our resort are proof. RevPar increased with 18% in the first year and 14% in the second year.

Cheers,

Cheers,


Patrick Landman @ Xotels

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