The way guests book hotels has changed dramatically in recent years, particularly thanks to the emergence of social media and new booking channels such as online travel agents (OTAs).
But at the same time, competition is increasing for hotel operators, not just because more and more hotels are being built, but also from new forms of competition from home rental sites, such as AirBnb.
Revenue management has therefore become an absolutely indispensable part of how successful hoteliers do business. "Delivering incremental market share is no longer just about competitive pricing," says Patricia Page-Champion, vice-president, revenue management, EMEA, Hilton Worldwide.
"Success is achieved through constant and dedicated management of commercial strategy, supported through the insight of systems and led by dedicated revenue management professionals."
Basically, their job is to analyse market trends to help hotels sell the right product at the right price, to the right customer at the right time, thereby maximising top-line sales and resulting in bottom-line profit. And we're not just talking about hotel bedrooms. "Revenue management also spans meeting spaces, food and beverage and spa offerings - really, any product you are presenting to the customer," Page-Champion explains.
Revenue management ins and outs It's certainly not an easy gig. To be successful, revenue managers need to not only have a wealth of knowledge about trends and customer needs; they must be well-versed in marketing, sales strategies, digital and social media and IT functionality, as well as being able to work as part of a team to implement a revenue strategy that relies on other departments.
"Every day sees a new challenge landing at the door of the revenue manager," says Warren Mandelbaum, chairman of the Hospitality Revenue Management Community at HOSPA, the association for hospitality finance, revenue and IT professionals.
"Whether that's for their interpretation of a piece of analysis, some advice on changing a particular marketing activity or how much to invest in an online promotion targeting a competitor who has just dropped their rate.
"For many hotels, the revenue manager is becoming the go-to person to steer new initiatives. They carry a responsibility to keep up to date with the information they have at hand, as well as understanding the technological advances within the industry. These include online ways to book rooms, emerging competitors renting out people's homes and the social, local and mobile (SoLoMo) environment that generation Y and Z 'live in'."
On top of having a high level of business acumen, great analytical skills and an ability to think outside the box, revenue managers must also possess excellent influential skills "Revenue managers are part of any senior team in a hotel and always represented at executive levels, especially where decisions are made about pricing, distribution and commercial strategy," Mandelbaum says.
What to look out for in 2014
In today's climate, Page-Champion believes there are four key things revenue managers need to be aware of: "One of the key trends is the constant evolution of social media and the need to be in tune with how to use it to your hotel's potential," she says. "It is also noticeable that booking patterns are getting shorter, making it more challenging to predict trends."
Channel revenue management has also become much more important, as well as the need to ensure the availability of key products, such as spa treatments or food and beverage offerings, at all customer touchpoints.
"Customers increasingly want to be reminded along the journey of what can be booked and what their experience will look like," Page-Champion says.
Mandelbaum adds: "Other factors which are always at the back of a revenue manager's mind include how to outperform the competition, reducing commission and costs that come with OTAs and maximising the benefits of innovations in hotel technology to bring in more business and ensure guests spend more."
Speed and creativity: crucial to success
"Revenue managers need to be adaptable and spot changes in demand and trends quickly. Even though long-term strategies are vital, they also have to ensure by constant forward analysis that strategies are valid and will positively affect the market," Page-Champion says.
"Guests book properties online 24/7 and things are never the same from one week to the next. The outlook can change in seconds and revenue managers need to be aware of that."
Creative thinking is what it all comes down to. "The increasing numbers of hotels and new openings within any competitor set drives more capacity, forcing hoteliers to become more creative and, importantly, selling their products at the best value for money proposition they can offer," Mandelbaum says.
"With so much choice available to the booker, hotels must act innovatively to attract an unfair market share, making them as profitable as possible."
Five attributes every revenue manager needs to have
By Warren Mandelbaum, chairman of the Hospitality Revenue Management Community at HOSPA
1 Relationship skills The ability to build excellent relationships with team members and suppliers is essential.
2 Creative thinking Revenue managers need to be innovative thinkers with cognitive abilities and vision, and able to develop strategies to increase chain
3 Effective sales ability Convincing general managers to accept rate recommendations handed down from a corporate office hundreds or even thousands
of miles away requires a skilled sales professional, not a computer programmer.
4 Solid communication skills Good revenue managers are excellent communicators and listeners who are as effective in the conference room presenting
their ideas to operations teams as they are at using a computer.
5 Training experience To avoid high turnover, good teaching skills are critical to the successful implementation of revenue managers' recommendations.
They need to be able to explain to property managers the factors that go into their recommendations, otherwise managers might disregard pricing guidelines and lose money.
The revenue manager's view
Suzie Wotton, vice-president, marketing, Red Carnation Hotels, explains how the group sets its revenue strategy
How do you ensure your hotels stand out against the competition?
It is important to focus on our differences and not purely on price. Red Carnation Hotels is well known for its commitment to exceptional service, unbeatable locations, traditional and inventive cuisine, generous hospitality and a family- (including pet-) friendly approach to hospitality. It is only by communicating these differences that we stand out against a very impressive competitor set.
How do you maximise your hotel distribution?
We try to ensure our hotels are as visible and well represented as possible wherever our guests are researching and consuming travel. We ensure we adhere to rate and content parity to ensure a consistent experience for our guests.
How do you work with online travel agents (OTAs) as part of a balanced distribution strategy?
We value our partnerships with OTAs very highly and appreciate the distribution opportunities they bring, especially in new markets and through multilingual content.
How do you maximise your direct business?
To ensure that the OTAs' aggressive marketing strategies don't dilute our own direct distribution, we participate in pay-for-performance marketing initiatives
such as Google PPC advertising and meta search listings to ensure our direct channels have a presence alongside our OTA partners.
We also work hard to ensure that customer relationship management remains part of our culture so that guests stay loyal.
How do you measure success of your online marketing activity?
We use Google Analytics to understand the acquisition, behaviour and conversion activity of our online guests. We use multi-funnel channel reporting to understand how each marketing channel (social, email, pay per click) plays a part in each guest reservation.
How do you communicate less tangible assets such as customer service?
We let our customers do the talking.