[VIDEO] Mathlete Mondays- 5 Things I Wish I’d Known Before Entering Revenue Management Pt. 1

A couple weeks ago I had an opportunity to speak to hospitality revenue management students at Purdue University about the five things I wish I’d known before embarking on a career in revenue optimization.

Over the course of the next several Mathlete Monday episodes I’m going to share these lessons with you, in the hope that you can learn from some of the mistakes I’ve made throughout my career.

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#5. Pricing and compiling reports is NOT revenue optimization. 

True, they are both key components of the revenue manager’s skill set. However, revenue optimization is so much more.

The most successful revenue managers spend very little time updating rates and creating reports in Excel. Rather, they are focused on identifying the fundamental strategy changes they can make that will drive results moving forward.

First, the savviest revenue managers I know are relentlessly focused on competitive differentiation. They understand their hotel’s core customer base and how their property’s unique characteristics position them against the competitive set, and use this insight to guide their pricing strategies rather than simply updating rates when their competitors do.

The best revenue managers are also focused on building teams and motivating across organizational lines. They realize they can’t accomplish everything themselves, and that true revenue optimization works best when everyone on property is focused on how they can contribute to operating results.

Third, talented revenue managers focus on managing up. It can be tough to tell your General Manager or owner rep that they may not have all the answers. However, those that I’ve observed as the most effective in their jobs recognize that they possess a specialized skill set, and they know how to effectively manage up to get those above them onboard with the strategies needed to generate success.

As we move forward, I see these skills only becoming more important.  A lot of people are still locked into an old school way of thinking. I consistently speak with revenue managers that believe their job primarily consists of updating rates and compiling reports. They believe that if they don’t spend 40+ hours per week on the tactical items, there won’t be a need for their position.

To me, this is the wrong way to look at it. As technology continues to evolve, datasets become more rich, and machine learning becomes more relevant, the tactical aspects of the job will go away. Machines will make rate decisions and reports will be delivered to our teams automatically. We will no longer need to worry about sufficiency of data, but rather, how we are going to use our data to drive real results.

The soft skill aspects of the job can’t be replaced. Revenue management will evolve from pulling levers, to helping hospitality organizations isolate the signal from the noise and take action.

#4. Understand incentives.

It wasn’t until a few years into my career that I began to understand the difference between all the parties involved in the hospitality industry including management companies, franchisor groups, asset managers, and owners. Often I would receive conflicting instructions based on whether I was speaking with my general manager, management company, or ownership constituents.

I had a tough time knowing who to listen to, and as a result I often followed the guidance of my management company’s regional VP, figuring they would be most responsible for my career growth moving forward. However, this would often create tension during the day to day with my GM, as well as with our ownership group during our monthly and quarterly reviews.

As I gained exposure to other properties and management or ownership constituencies, I began to realize that the goals were different at each level. Our general manager, for example, was primarily compensated for hotel profitability, while our management company was incentivized on revenues and certain performance targets I didn’t even know about. Additionally, ownership groups are compensated differently based on their funding mechanisms and investment horizon.  Some are interested in harvesting sustainable cash flows and building long term brand equity, while others are focused on repositioning an underperforming asset in order to flip it for a higher price within a few years.

Even within constituencies that theoretically have the same goals, often the incentives are different between disciplines. For example, at the management company level I’ve seen many disagreements occur because sales is compensated based on group revenue production, while revenue management is compensated primarily on total revenue production.  In addition, marketing, the front office, food and beverage, and other operating departments are all focused on different goals that are often times at odds with each other.

Now in an ideal world, we’d be able to achieve perfect harmony between the incentives of all parties, but as of right now that’s a pipe dream. However, what we can do is take some time to better understand the goals and desires of each person you work with. As a result, you’ll be able to speak their language and partner together to create more win/win scenarios.

Closing

Thank you for joining me for this week’s Mathlete Monday episode. You’ll have to wait for future episodes for lessons three through one, but I promise they’re worth the wait.

If you enjoyed this week’s episode, please share it with your colleagues and friends. For more Mathlete Monday episodes, please head over focalrevenue.com/content, where you’ll find a link to subscribe to future updates. As a bonus, when you sign up I’ll add you to our monthly digest containing links to the top revenue optimization articles and white papers, which we’ve curated specifically for Focal’s fanbase.

Thank you for joining me, and until next time- good luck outrunning the competition!

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