The Different Approaches to Revenue Management
Revenue Management is defined as “selling the right room, to the right person, at the right time, for the right price, through the right distribution channel, with the best cost efficiency”.
Ensuring your hotel gets all of those factors correct involves a considerable amount of data and analytics. That is where your Revenue Manager steps in. They combine your past performance with technology and expertise to anticipate demand and create the best strategy to reach your goals.
The overall focus of all Revenue Managers is to use these forecasts to adopt the best pricing, distribution and revenue strategies. By doing this, they can help your hotel generate maximum revenue and market share. However, there are three different approaches to operating revenue management: On-Property, Centralised and Outsourced Revenue Management.
In this article, we’ll explore how each works and look at the benefits of outsourcing revenue management.
Revenue Management Structures
On-Property Revenue Management
On property Revenue Managers work at each property, allowing them to be hands-on and promote revenue culture throughout the hotel. Traditionally, these on-property structures positioned revenue management as part of their sales and marketing departments.
More recently, hotels have seen the benefits of moving revenue management to the same level as sales and marketing. Many Revenue Managers now report directly to the GM and form part of the executive committee.
Centralised Revenue Management
For large groups, revenue management can be moved away from individual properties and reallocated to a central team. Responsibilities in the team will be segmented by brand, market, type of hotel, or location.
Revenue coordinators or managers for each segment will report to a highly experienced corporate revenue executive. This executive needs to have superior revenue management skills and be able to deploy strategies across large numbers of hotels.
Outsourced Revenue Management
Outsourcing revenue management takes the centralised approach a step further. A team of experienced revenue managers will take responsibility for all aspects of planning and delivering your hotel’s revenue management.
However, instead of full-time employees, the hotel engages a third-party consultancy. The consultancy provides a team of revenue professionals who operate virtually and visit the hotel on a predetermined schedule.
What are the Benefits of Revenue Management Outsourcing?
The most obvious challenge to on-property and centralised teams is the cost associated with full-time employees. Salary and expenses add up quickly, not to mention the additional facilities needed for each new employee and employer costs like National Insurance.
Despite a clear return on investment, these costs can be prohibitive for many hotels. Revenue management may then be given to another team to manage. Or worse; it may not happen at all.
Outsourcing revenue management can be a far less expensive option. You only pay for the resource and support you need, without any additional overheads. This approach allows your hotel to work with highly skilled revenue managers at a fraction of the cost of employing them.
Outsourcing revenue management also provides a more flexible approach.
At Catala Consulting, we work with clients where we can make the most significant impact for the good of their business. For some, that means conducting a revenue management audit and providing a strategy which they can implement in-house. For others, we offer a fully outsourced revenue management service.
We provide tailored support to suit your needs, with all services scalable. For new and growing hotels, this means we can grow as you do. For larger groups, we can provide additional resources on demand.
When you outsource your revenue management, you are allocating the task to specialised consultants with vast amounts of experience and expertise.
These revenue managers will use the latest tools, technologies and techniques. They’ll be focused solely on growing your revenue and market share, without any distractions that come from working inside the hotel.
Their expertise is likely to drive better results and increase your ROI. Perhaps more importantly, it also frees up your internal teams to focus on operations, business development and customer service.
Networks & Partnerships
Revenue Management Consultants have oversight of the whole industry. We work with hotels and providers across the globe, allowing us to build up networks of trusted partners.
We can facilitate brand partnerships, recommend our preferred suppliers, and help you get the best possible prices for revenue management software.
Staff turnover can be hugely disruptive. There is always a loss of knowledge and disruption while you recruit a new revenue manager. The same challenge occurs with annual leave – particularly if the role cannot be easily picked up by another member of your team.
Our outsourced revenue management consultants are always here when you need us. We pride ourselves on our reliability and dependability, supporting you through the good times and the bad times.
Passion & Perspective
As revenue management experts, we strive to be thought leaders and champions for revenue management culture. We are passionate that your entire workforce should understand and embrace revenue management. That’s why we provide on-site and virtual training for our clients.
We also believe that two-way communication and inclusion is vital. A good example is front desk personnel. These members of staff need to be trained and equipped to support revenue management. However, it is also essential to include their feedback and insights into your revenue management strategy.
Having an advocate for revenue management puts it at the forefront of your operations, helping to grow your revenue culture throughout the organisation.
Creativity & Innovation
Some hotels provide very structured training and procedures. While this is great for brand consistency, it can result in employees following in the footsteps of the predecessors. This can mean revenue managers focus on day-to-day tactics, without the creativity and strategy required to grow your revenue.
Third-party revenue management consultants bring passion, creativity and innovation to their clients’ businesses. We work with hotels of all shapes and sizes, ensuring we are consistently perfecting our problem-solving skills and developing new approaches.
No Recruitment Process
One of the biggest challenges with in-house revenue managers comes from the recruitment process. Your hotel will need to hire a talented individual willing to work for you and live where your hotel is based. They will need to be a highly-skilled revenue manager, with excellent strategic, communication and leadership skills.
Many hotels struggle to find the best talent and are in constant competition for them. The whole process can be time-consuming and expensive – particularly if recruitment agencies are involved.
Outsourcing your revenue management, on the other hand, can be as simple as a consultation and proposal. We strive be flexible and can begin working with new clients in just a few days.
Which Approach is Right for You?
We are passionate that every hotel should have access to skilled revenue managers. There is no one-size-fits-all when it comes to finding the best structure. When considering the options for your business, you’ll need to weigh up your budget, internal resources and your ability to recruit and retain the right people.
Outsourced revenue management allows your hotel to tap into expert resources without having to make long term commitments or significant investments. This approach is flexible, cost-effective and maximises your return on investment. If you’d like to find out more, please contact us to arrange a free, no-obligation consultation.