Total Revenue Management and the Mi$$ed Opportunities

Written by: Katerina Papadima

Total revenue management is not a new concept, but it is one that hoteliers will embrace more for the years to come. To implement it, though, we first need to define it. What is total revenue management?

Extending Revenue Strategy Across All Departments and Guest Journeys

Revenue managers have been focused on maximizing room revenue, and for a good reason: it is the highest contributing revenue stream. In the post-pandemic era, as travel levels surged and properties were running below full capacity given the staff shortages, we saw hoteliers pushing rates. As the effect of revenge travel wears out, business travel is yet to recover and inflation is rising, revenue leaders need to seek new ways to maximize revenue other than just pushing room rates.

Revenue managers should seek customer data to yield insights into the organization’s most valuable customers in terms of profitability and lifetime value (CLV) with an end goal of developing a profitable customer base for many years to come. Hoteliers tend to be myopic, focusing on room bookings and measuring the short-term transactional value of a guest. Wrong! A traveler’s relative worth to the hotel goes beyond the price they are willing to pay for a room night stay and includes ancillary purchases on property, long-term loyalty relationships, and in today’s digital world, their ability to influence other potential guests through social media platforms and guest ratings.

Hotels should provide options for guests to customize their stay throughout the guest journey. What do guests want? When? The time to sell is important for conversion. Hotels that are relevant win. Every touch point in the guest journey provides an opportunity to provide something relevant, gather important insights for guests, and improve revenue strategies.

Take the first stage, for example: Inspiration/Research/Shopping. Data regarding property-related search frequencies by region or time of year can help revenue leaders answer the questions of “who” and “when” to target, respectively. Having access to related queries can also help hoteliers understand what guests are looking for in relation to the subject property. Are they searching for other competitor hotels? If so, who are those, and do they match the ones already in the compset? Are guests searching for the hotel’s amenities or F&B establishments? Hotels should update their online descriptions and seasonal offerings to align with the keywords guests search for. SEO is instrumental to driving bookings, and accordingly revenue, to the hotel.

Let’s look at another stage: Review/Post Stay. In today’s digital ecosystem, travelers are becoming more accustomed to reading reviews or relying on recommendations from KOLs on where to stay. Since customers’ choices are impacted by social media sentiment, the latter should be incorporated into the demand forecasting models used for pricing decisions. Moreover, a good social media presence can give hotels the opportunity to request premium rates. Social media and guest ratings could also help hotels do a better job defining their comp-set based on how they are positioned on a reputation level.

These are some examples of how and why hoteliers need to evolve away from siloed business models and extend their revenue strategy beyond the booking stage and encompass the whole guest journey.

New Key Performance Indicators

As hoteliers adopt a more holistic approach to driving bottom-line revenue for the whole asset, momentum should be given towards driving new, more applicable performance indicators. The traditional RevPAR-focused approach will become obsolete, and revenue leaders should look toward driving TRevPAR, ProfPAR, and RevPAG (Revenue Per Available Guest) instead. Most notably, RevPAG measures a hotel’s revenue performance in conjunction with guests’ total spending. As revenue management is transitioning away from the traditional inventory-centric approach to a more customer-centric orientation, it’s not just about filling up rooms anymore. Shifting the attention towards RevPAG will ensure hoteliers change their focus away from selling rooms to targeting the right guests and maximizing spending per guest.

A Single Interconnected System

Unfortunately, many hotels do not have their tech stack aligned in a manner allowing them to reach their total revenue potential. As some put it, we have an “infrastructure problem.” The core challenge facing Revenue managers today is fragmented data across countless disconnected systems including PMS, CRS, RMS, DCs, F&B reservations systems, spa software, reputational management systems (ie, Revinate, ReviewPro, TrustYou, etc.), group management systems ( ie, CVENT, Event Planner, etc.) — the list is endless. Taking complete control of revenue management strategies across all commercial functions and the whole guest journey requires a single interconnected system with a holistic view across a hotel’s entire ecosystem. Whoever is next to design such a system will change the industry.

This blog post was awarded First Place in the Spring 2023 HFTP/MS Global Hospitality Business Graduate Student Blog Competition presented by the HFTP Foundation. Participants are students participating in the Master of Science in Global Hospitality Business, a partnership between the Conrad N. Hilton College of Global Hospitality Leadership at the University of Houston, the School of Hotel and Tourism Management at Hong Kong Polytechnic University and EHL. The blog posts that received the top scores will be published on HFTP Connect through July 2023. Learn more at HFTP News.

Katerina Papadima joined the Master of Science in Global Hospitality Business program with more than three years of experience in revenue management. She holds a Bachelor’s degree from the Cornell University School of Hotel Administration; during her time there, she held multiple hotel revenue management internships, including Preferred Hotels & Resorts, First Hospitality Group and Starwood Hotels. She has also worked as a revenue management analyst/revenue manager with Choice Hotels in Washington, DC and was part of the Marriott APEC Revenue Management team based in Singapore.

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