Welcome back to 3 Forward Questions—a series in which I invite renowned hotel industry leaders to answer a trio of queries about the ever-changing field of revenue management.
In an effort to better understand and prepare for the lasting impact COVID-19 will have on the hotel industry, particularly in regard to revenue management and its expanding role in the commercial area, I’ve posed three questions to a series of experts in the field to pulse their sentiment.
Last time, I questioned Bürgenstock Hotels & Resort’s director of revenue, Gabriela Cojocaru, who discussed the many obstacles revenue managers have faced in trying to rise to higher organizational aspirations and how a newly emerging commercial function might change that.
This time around, Christian Boerger, CRME, CHDM, CHBA, has graciously shared his own insightful take on these matters. Christian is a revenue leader with a wealth of experience, a member of HSMAI’s Revenue Optimization Consulting Board, a serious world traveler, and recently joined the Total Customized Revenue Management team in the midst of this pandemic as their executive director of strategy.
With a passion for uncovering untapped opportunities in business to drive sustainable profit growth, some of Christian’s core competencies include total revenue optimization, change management, and crisis recovery.
Now, without further ado, let’s get to his answers to three key, forward-looking questions.
Question 1: When we look at the discipline of revenue management and the role of revenue managers before COVID-19, why were they struggling in securing a leading spot in the commercial area?
Christian Boerger (CB): When we look at the evolution of revenue management as a discipline, we have to be cognizant of the fact that the stage of this “evolution” depends on overall company culture and the ability of the individual revenue professional to think and operate multi-dimensionally.
Several hospitality companies, most notably the multi-national chains, started the process of elevating revenue management within their organizations early on. This progress is reflected in the hiring of exquisite leadership, instituting a multi-level revenue hierarchy, substantial training opportunities, and advanced technological resources.
On the contrary, independent operators and management companies have struggled to keep up with that progress. Not only did they have challenges sourcing and hiring the right talent, but they also found it challenging to articulate what the ideal revenue leader and their respective tasks should look like.
So, why did so many revenue professionals struggle to expand into other areas of the commercial realm?
From a brand perspective, the challenge lies with that lack of multi-dimensional thinking. Fueled by a set of outdated performance metrics such as the RevPAR index (market share), brand-centric revenue professionals traditionally put an all too heavy focus on the underlying drivers. Instead, they should have taken a more holistic interest by including items such as GOP, expense ratios, or TRevPAR.
Not realizing that current tasks will become redundant with the advancement of artificial intelligence, these individuals will find it increasingly difficult to differentiate themselves from their more versatile and nimble counterparts.
Now, I am not saying revenue professionals working for independent organizations are generally better suited to evolve into fully-fledged commercial leaders. After all, it depends on the individual’s mindset. But there seems to have been a bigger appetite to venture out into non-revenue management related tasks. I should point out that we have seen more corporate or multi-unit revenue professionals expand their roles to encompass certain sales & marketing responsibilities than unit-level revenue personnel.
The natural curiosity to know and do more, coupled with the empowerment of senior leadership and essential training opportunities, has helped certain revenue professionals to expand their roles into other parts of the commercial organization. But similar to successful companies in other industries, change had to be instigated from the top down. It also needed the buy-in from all critical stakeholders to become sustainable.
So, in summary, personal attitude and leadership support are critical, and appropriate training in areas such as digital marketing or next-level sales skills has to be provided to nurture the individual’s development.
Question 2: Will the pandemic threaten the existence of revenue managers and the revenue management discipline as such, or will it offer a unique opportunity to gain the position they’ve sought for so long?
CB: Crises accelerate change. And while not every change is initially perceived as positive, I am optimistic the changes related to revenue management and its stakeholders will turn out to be positive, eventually.
There is a saying in business and life about complacency breeding mediocrity. As stated previously, we still had a vast number of revenue professionals operating comfortably in their silo with clearly defined boundaries related to their roles and responsibilities. Industry-wide demand was strong, and life was good.
However, in a post-COVID-19 world, this approach will no longer work.
During this crisis, revenue professionals who embraced the unknown and challenged their status quo early and effectively are bound to succeed. In reference to Charles Darwin, it’s not only the most adaptable to change who survives but also the fastest to adapt.
With our environment, industry, and global travel changing rapidly, it is paramount to have leaders in the right places to anticipate what is essential to consumers tomorrow and adapt their modus operandi accordingly.
As we have seen around the world, countries, governments, municipalities, and organizations that reacted swiftly and decisively to this new situation will not only recover much faster from the socioeconomic impacts. They will also be in a much stronger positions compared to their peers.
The same can be said for the community of revenue professionals and the discipline itself. To preserve cash flow, hotel operators and management companies consolidated critical positions early on. Wherever they felt revenue professionals could rise to and above the occasion and take on additional responsibilities, we have seen the discipline elevate.
As a result, revenue leaders affiliated with those organizations should be able to sustain broader job descriptions. They have expanded their existing skillset exponentially by proactively acquiring new knowledge in a variety of areas. Using their expansive interpersonal abilities and technological savviness, they will grow into a new breed of commercial leaders.
On the other hand, we are likely to see the departure of a fair number of revenue professionals who struggle to fathom the full extent of the change required. Over time this will lead to talent consolidation and a potential shortage of experienced revenue professionals. That consolidation will also apply to organizations.
So, yes, this pandemic will create unique opportunities for some—but not all—individuals and organizations.
Question 3: Will the commercial structure in the hospitality industry change after COVID-19 and if so, how?
CB: I do expect changes to the commercial structure in the hospitality industry. However, those changes will not happen everywhere at the same time. Forward-thinking organizations that had initiated the consolidation process before this pandemic should see a much faster transition than others.
And again, a change of the commercial structure is likely to start at the corporate and multi-unit level first before similar initiatives transcend to the unit level.
In terms of sequence, I see the discipline of marketing, especially digital marketing, added to a newly created commercial division alongside revenue management first. With several tasks ranging from analytics to demand-driving initiatives already handled in close collaboration, this process should happen organically.
As for sales and business development, those areas were traditionally more interpersonal and relationship-driven. Thanks to COVID-19, I foresee those processes changing for good by adding a significant amount of technology and back-end analytics to this area of the business.
And with revenue management at the core of all things analytics, and with data being the currency of the future, I do expect this discipline to play an integral leadership role in forming a new commercial strategy division.
Thank you, Christian, for your thoughtful perspective.
Stay tuned for more industry-leading insights in this ongoing series.