It has been said that revenue management is part art and part science. All too often the practice of managing revenues, setting prices and using rate and inventory controls is done based primarily on intuition, gut instinct and “knowing” the hotel and market. These methods—the art—have validity but should be backed up with data and facts: the science.
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Jon Eliot |
With the ever-evolving distribution landscape, more dynamic pricing, changes to the competitive environment and changes in guest behaviors, it is more important than ever to make data-driven, fact-based decisions in the practice of revenue management. Part of the revenue management professional’s role is to use historical and forward-looking data to mold and support their strategies and tactics. Data-driven decisions also serve to remove much of the emotion and conflict involved with determining long- and short-term revenue strategies. The use of data around history, demand, booking pace, segmentation and competitive intelligence will help move revenue management decisions from “I think we should do …” to “We need to do … .”
Making data-driven revenue decisions is not as simple as printing a stack of reports from the property management system. It also goes beyond having a number of subscription-based reports and tools as well as a mass of spreadsheets the revenue manager spends a large percentage of their time updating. It is really about how you utilize the wealth of available information.
To bring more of the science of revenue management into the mix, it is important to evaluate where you are now. A first step is to understand how many of your revenue team’s decisions are made based on facts versus how many are made based solely on intuition and instinct. Take a step back and look at the process behind recent choices made. Were these choices the result of analysis, instinct or a combination of both? This will give you a baseline of where your team is currently.
A next step would be to take a critical look at the tools and reports you are currently pulling together on a regular basis. It is important to understand the value of these reports. It is not uncommon for revenue managers to spend a great deal of their time updating spreadsheets and pulling reports from various systems. Which of these reports are actually being used in the decision-making process? Ideally, revenue managers should be spending more time analyzing data than compiling data. Efficiencies can be found when it is determined what is truly needed for the business as opposed to what is being done because it has always been done.
Another area of tools and reports to evaluate would be those purchased from a data services vendor. There are some excellent tools available from a variety of sources that provide a great deal of competitive and market intelligence, both historical and forward-looking. These tools can be complex and are not always used to their potential. In evaluating the tools you currently subscribe to, ask yourself if you fully understand them and feel you are using all of the features. If you are not completely comfortable with the tool and all of its features, contact the vendor to get more information and additional training. These can be very powerful tools to aid in setting your property up for success. Make sure you are getting as much benefit from them as possible.
Once you have evaluated both your team’s use of data in making revenue decisions and the data you have, it is time to bring it all together. Go back to the decisions you are typically making based on instinct, intuition and just “knowing.” Consider how you can use the data available to you to support these decisions. Do you have the right data? Do these decisions make sense when filtered by history, trend, market conditions, competitive response, etc.? This is not to say these instinctual decisions are wrong, but having the facts to back them up adds credibility. Revenue managers should not only use data to support what they bring to the table, they should also challenge others to back up their assumptions with data.
Utilizing the data to make decisions will also aid in determining success factors. Whatever strategic or tactical choices are made, there should be an end result in mind. Without a sense of what your expectations are, you will not be able to determine if the decisions made were effective or not. This is another place where the use of data comes into play: measuring results. By measuring results, you can enable better future decisions by understanding what works well and what doesn’t. To analyze your performance, ask yourself what you expected to happen, what did happen, what worked, what didn’t work, and what you could do differently next time. This should all be backed up with data.
Bringing the science of revenue management into the forefront of decision-making is vital. There are many systems and tools available to aid in decision-making that are all data-based. Embrace the use of data and the science of revenue management to make effective, revenue-positive decisions.
Want to Learn More?
Topics like this one are being addressed as part of the 10-part Revenue Management Webinar Series produced by the HSMAI University, HotelNewsNow, and STR. Begun in February 2010, and going through December, each month a webinar will cover various aspects of cutting edge revenue management in today's economy in conjunction with articles written by members of the HSMAI Revenue Management Advisory Board. If you’re not able to attend a live program or the date has passed, archives are available.
Jon Eliot brings 20 years of hospitality industry experience to his role as Director of Revenue Optimization with Carlson Hotels. In this role, Jon is responsible for the development and delivery of revenue enhancing programs and processes. Jon also serves on the HSMAI Revenue Management Advisory Board. In addition to earning the CHA and CRME designations, he has completed a Certificate in Revenue Management through the Cornell University School of Hotel Administration. Jon graduated from Penn State University with a BA in History.
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