It’s time to grab revenue by the horns
- What’s next for the US economy?
- The expanding expectations of revenue managers
- Good revenue management needs a human, a computer and…a dog?
What happens to hotel prices in the US when over 600 pricing and revenue managers spend a day away from their jobs to get educated on the future of the discipline? Well, hopefully nothing if they have systems which autonomously make sure their hotel’s prices are optimized whether they are in their office or not.
Man vs. machine (or rather man and machine) was one of the big themes at last week’s HSMAI Revenue Optimization Conference (ROC) in Houston, Texas. The largest gathering of its kind worldwide, this annual event provides a forum for the revenue management community to hear about the latest trends, experience innovation firsthand and network. To suit its Texas locale, this year’s slogan was “Grab Revenue by the Horns.”
HSMAI ROC also takes the time to celebrate exceptional individuals who have demonstrated a lifetime of accomplishments in the industry—like Robert Cross, chairman and founder of Revenue Analytics—or promising individuals just beginning their careers, like Derek Brewster, director of revenue management at Lotte New York Palace and Cassandra Bond, regional vice president of revenue management for Chesapeake Hospitality.
This year’s event was exceptionally rich on content, addressing four critical and relevant areas:
1) What will (might?) happen to the economy
2) The owner’s perspective of revenue management
3) Man vs. Machine
4) Achieving the right balance between revenue, distribution and loyalty
A common thread amongst all the sessions was that change is happening, and it is happening fast.
The US economy has been going strong for almost ten years; however, signs are emerging that we might enter a recession by 2020. In a subsequent Q&A session at the HSMAI Chief Revenue Officer Roundtable, Bernard Baumohl, chief global economist, The Economic Outlook Group, LLC was asked just how painful this recession might be on a scale of one to ten. He anticipates a “mild seven.”
Owners and asset managers increasingly expect that revenue managers do more than just present numbers. They count on a strategic business leader at the table who, instead of flooding them with reams of data, brings clear strategies and solutions and ensures the relevant strategies are executed to achieve the most optimal outcomes for the business.
Revenue management and pricing technology has advanced to the point that anyone who thinks manual, rules-based systems (or Excel) will help them maximize their potential is wrong. With hundreds of thousands of decisions required on a daily basis, revenue leaders must be ready to let their systems do the grunt work of pricing decisions autonomously and be ready to step in when exceptional circumstances require it. Machine learning and artificial intelligence may seem like overused buzzwords today, but revenue managers must learn to trust their systems to price correctly and focus on the strategic aspects of their jobs.
As Dave Roberts, SVP revenue strategy and solutions at Marriott International put it in a recent Unconstrained Conversations video shown during HSMAI ROC, “In the organization of the future, there’s a human, a dog and a computer. The human’s job is to feed the dog, and the dog’s job is to make sure the human doesn’t touch the computer.” Good revenue management may not actually require a dog, but the concept is the same: don’t interfere with the system. Let the machine do its job, so humans can focus on revenue strategy instead of revenue management.
With systems ready to take over the daily pricing decisions, revenue strategists of tomorrow must increasingly look toward the trifecta for hoteliers: loyalty, distribution and revenue. As rate parity becomes a thing of the past, and the hotel industry is still “in an absolute war for who owns the customer,” informed, strategic decisions about what product to make available to whom (loyalty or non-loyalty guests), through which channel (direct or indirect) is increasingly the essence of revenue management.
Revenue managers must keep pace with the changing expectations to stay relevant. Putting their ego (and love for numbers, charts and graphs) aside, they must expand their role to think strategically, utilizing the tools at their disposal to free up time away from mundane, operational tasks. They must establish a voice at the table with owners and operators as commercial strategists and must look at the changing industry landscape to expand their focus beyond the traditional boundaries of revenue management. As usual, HSMAI’s 2018 ROC in Houston proved to be a great starting point to “grab revenue by the horns” and look to the future of revenue management.