Over the past five years, revenue management has undergone a significant evolution, expanding far beyond traditional pricing strategies. The discipline now encompasses advanced segmentation and sub-segmentation techniques, integrating channel management and geographic source analysis to develop a comprehensive, data-driven approach. This transformation has enabled revenue managers to adopt a more holistic view, leveraging granular insights across multiple dimensions to optimize revenue streams more effectively and dynamically.
Within this we have seen growth in the technological tools available, which can show you not just demand and not just what your competition is doing but whether you are pacing ahead and which channels you are missing, all helping you understand how you need to change your approach.
The modern revenue manager has to take a 360-degree view, including all departments. Revenue management — as the name implies — used to be all about revenue, but now it’s more aligned to profitability and the bottom line. Revenue managers should oversee everything: food and beverage, banquets, meetings and events. There is a higher degree of analysis, accompanied by the need to communicate across the property.
They now have to engage with the rest of the team. The role is more integrated into the hotel and its operations. It is no longer just about creating and capturing demand; it’s about understanding demand and the possibilities of your hotel.
You can develop guest satisfaction tools to analyze guest feedback and to understand, for example, whether one group of guests from one location is missing a type of food or service, which, if addressed, could help drive demand from that location. This knowledge can then be integrated into the hotel's operations.
In this way, you can use technology as your co-pilot. Extracting data is so much easier than it was 10 years ago, and in terms of pricing, it is almost all automated. Where you lean on your experience and your knowledge of the market and the segment is in the interpretation and how this can drive profits on the property.
This is particularly relevant in luxury, where one of the main problems is profitability. In luxury hotels, your strategies have to be profitable because the fixed costs tend to be higher, so you have to give greater consideration to cost, not just revenue. This means that the revenue manager has to have a much greater involvement and knowledge of the balance sheet when they are making decisions.
Hence, we recommend ownership groups to bring on board external asset managers with their own revenue management experts. This will have a major impact on the performance of your hotel assets.
This extends to the brand, if you have one. Something we work with in hotels is ensuring that they leverage the association with the brand so they are squeezing every single thing that the brand can provide. You have to embrace and understand the brand.
Once you do this, you have to leverage the tools that the brand gives you. It’s not just the hotel itself, but it's every aspect of the hotel. Brands are created as marketing tools, and you have to leverage this marketing tool in order to capture the maximum demand.
The good news in the luxury segment is that you also have plenty of opportunities to create ancillary revenue because the hotels are not just beds. They could be urban resorts, they could have spas or destination restaurants, and there are extensive services which they are likely to be offering in addition to somewhere to sleep. If you are able to find those gaps in the demand, you can have a distinct impact on profit.
So, for example, imagine that you're missing food-and-beverage revenue. But when you start investigating, you realize that it’s not just food and beverage; it’s the different venues.
Maybe your specialty and fine dining restaurants are working pretty well because they have an incredible brand, but the main restaurant is not keeping up. You can create promotions for some guests when they book directly, but this extra credit is applied solely to the main restaurant, which is struggling to convert their dinners.
At the end of the day, whenever you have more outlets and services, you can play around a little bit more with the strategy, and obviously in the luxury segment, you tend to have more opportunities to create extra revenue. And that’s the beauty of high-end hotels and having independent asset management experts.
Jordi Izquierdo is a hotel asset manager with Global Asset Solutions and based in Madrid.
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