Are You Stuck In Revenue Management Hell?

 In Articles, Business, Education

When I was in high school we were assigned to read Dante’s Inferno, in which Dante Alighieri finds himself navigating through the Nine Circles of Hell before emerging on the other side to look upon the stars as a wiser man.  Throughout his journey he finds himself interacting with souls doomed to spend eternity experiencing varying levels of punishment, each corresponding with the sins they committed during their life on earth.

While the stakes are much lower in hospitality revenue management, there are a variety of “sins” committed daily by those navigating through their optimization efforts.  As business strategists, we must descend through each of the levels below before we are able to reach the revenue management promised land.

 

1. Limbo:

Upon entering the First Circle of Hell, Dante finds himself confronted by the non-believers that lived a virtuous life.

Revenue management hell often begins with the non-believers, the unindoctrinated members of the hotel’s revenue management committee.  Often these team members have lived a “virtuous career” in the pursuit for operational improvements.  They have a basic understanding of revenue management, but haven’t yet fully subscribed to the religion.  In part, this is often because nobody has ever taken the time to help them envision the role that they play, or they simply don’t have access to the tools needed to affect change.

2. Lust:

While traveling through the Second Circle of Hell, Dante encounters those guilty of falling prey to their carnal desires.

At times revenue management professionals fall guilty to lusting after the newest trends without fully nailing down the fundamentals.  New analytical and benchmarking measures such as Net RevPAR and Total Revenue Management have the ability to fundamentally change the way we are able to deliver value to our customers and owners.  However, if we haven’t fine-tuned our core sales, marketing, and revenue competencies, we can’t expect to achieve success with our revenue management efforts.

3. Gluttony:

As Dante continues onwards through the Third Circle of Hell, he interacts with the souls of those who consistently overindulged during their time on earth.

Of late, the implications of big data for hospitality revenue management have been discussed ad nauseam.  The conversation primarily revolves around how we can capture and store increasing amounts of data regarding our customers and their behaviors.  As hoteliers one of our biggest advantages is the ability to harvest and make sense out of the data the online travel agencies and vacation rental management companies aren’t able to collect.  However, it’s important to step back and consider how you can be more effective with your existing data in addition to simply increasing the volume.  After all- if you can’t take action off the data you’re analyzing, is it really all that valuable?

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4. Greed:

In the Fourth Circle of Hell, Dante encounters those that hoarded their wealth during their time on earth.   

Traditionally, revenue management data has been hoarded by third party systems providers rather than shared freely via open application programming interfaces.  As a result, departmental knowledge is often siloed and difficult to share given a lack of robust total revenue tools.  Fortunately this legacy mentality is starting to change, and a more modern approach is being adopted across the revenue management technology landscape in order to facilitate the open exchange of information.

5. Anger:

While traveling through the Fifth Circle of Hell, Dante discovers the souls of the wrathful and sullen.

At times revenue management efforts are adversely impacted when committee members become frustrated with rigid policies or misaligned incentives resulting in inequitable outcomes for members of the same team.  For example, how often do group evaluation meetings turn contentious as a result of a sales manager’s attempt to book a bad group in order to simply achieve their quota for the quarter?   Or on the flip side, because the revenue manager won’t waive the minimum available rate even though the hotel is unlikely to sell out over a given set of dates?  By reassessing old-school policies and rethinking the way key stakeholders are incentivized, the contingent of wrathful and sullen individuals in your organization will be reduced, and the sales, marketing, and revenue management disciplines can work together in harmony.

6. Heresy:  

In the Sixth Circle of Hell, Dante encounters those guilty of contradicting major religions and political norms, thus tearing apart the fabric of society.

Likewise, in hotel revenue management there are often those that disagree with a hotel’s fundamental outlook and strategy.  While debate and disagreement is healthy and mitigates groupthink, it is important that the team is ultimately able to come to an agreement on the best path forward and work together in order to achieve shared objectives.  Neither sales nor marketing nor revenue management can be successful on their own.   By working as a single team, each department will be able to achieve a greater positive impact on driving business growth.

7. Violence:

As Dante moves onwards into the Seventh Circle of Hell, he observes the souls of those that committed varying degrees of violence during their lifetimes.

The hotel revenue management battleground is often bloody, with hotels quickly matching any increases or decreases in the rate positioning of their competitors.  As a result, pricing strategies are often driven by knee jerk reactions and a herd mentality rather than an accurate assessment of supply and demand.  A winning pricing strategy takes competitive set positioning into account, but also considers additional data such as pace, unconstrained demand, business mix, and seasonal booking windows.

8. Fraud:

Upon entering the Eighth Circle of Hell, Dante encounters panderers, false prophets, hypocrites, and falsifiers.

Oftentimes in hotel revenue management we internalize narratives based on inaccurate or missing data.  It is not uncommon for data discrepancies to exist between the operational and business intelligence systems.  Without a consistent data accuracy auditing process,  the revenue management team may not be aware of the degree to which they are betting on strategies based off bad data.  In order to overcome “fraud,” revenue management leaders must verify the integrity of their data and hold their technology partners accountable for any discrepancies.

9. Treachery:  

The Ninth Circle of Hell contains those who acted as traitors against their family, nation, guests, and benefactors.

In Revenue Management Hell, the Ninth Circle is reserved for those who betray hotels through unscrupulous distribution practices.  As evidenced over the past few years, online travel agencies and even some wholesalers are known to practice deceptive pricing practices and mislead customers who think they are booking direct.  As a result, customer dissatisfaction has grown and the travel industry has grown more commoditized.  Although challenging, it is critical that hotel revenue management executives look to regain control over their distribution strategies.

BONUS:

Upon reaching the Center of Hell Dante encounters Satan, who is frozen into an icy lake deep below the Earth’s surface as a result of the cold wind created by his flapping wings.  Realizing that the great beast is not so terrifying as a result of his inability to move, Dante takes action to escape back into the world.

Similarly, while the revenue management challenges listed above may initially appear daunting, they are often easily cured once the revenue management team becomes determined to take action.

Navigating your way through Revenue Management Hell can be challenging.  However, if you remain focused on the objective at hand and constantly strive to innovate, you’ll soon find that you are able to surface and once again look upon the stars.

Contact Us today to learn a bit more about how Focal’s analytics platform can help you to transition from analyzing the “what” to understanding the “why” and impacting the “how, when, and where.”

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