Revenue Management: Play To Win!
As I observe my two-year-old son hurling balls into a four-foot basketball hoop I notice his joy as balls hit their target. But I also notice his frustration and anger when a random shot misses wide of his target or falls horribly short. I quickly realize two things, number one: My son has inherited his father’s competitive drive because I too hate to lose, and number two: I probably should not bet my retirement on my son’s NBA career (mostly due to his slim chance of achieving NBA All-Star height). Competition has always drawn my interest. As a child, I took pleasure in all games and sports, particularly those I could win. When becoming a professional athlete was no longer an option and because I did not have a well laid plan to become rich and famous, I chose Plan C…Revenue Management. And the parallels between Revenue Management and Sports make it easy to see why I was drawn to it.
Just like Sports, Revenue Management is extremely competitive and has always seemed like a competition to me. My competitive nature and desire to win has always motivated me to drive performance. In Revenue Management, we are always measuring our performance by comparison. We are always in competition with ourselves trying to exceed our previous year’s revenues. We compete against other hotels we have identified as our competitive sets. We compete with other hotels within our respective Brands and take pride in our individual rankings among those hotels. We look for ways to gain a competitive advantage by identifying and promoting our strengths while exploiting or selling against the weaknesses of our competition. We strive to be number one within our competitive sets and within the Hospitality Industry and unlike Championships won by professional sports teams, no one is throwing us parades with millions in attendance or receiving Champagne showers, but we still celebrate our achievements.
To be successful in Sports you must have a shared goal and a strategic Game Plan to achieve that goal. An example of a Sports Goal would be to win a Championship or in my case as a Cleveland Sports Fan, not to have the #1 draft pick in the following year’s draft. In Revenue Management, our Game Plan is our revenue strategy and our goals can take many different forms. Achieving Budgeted Top Line Revenue and Profit or gaining a specific percentage of Revenue Share in your competitive set are good examples of Revenue Management goals. Our strategies can be as broad as focusing on growing occupancy, increasing ADR, or stealing share from our competition. Or they can drill down into specifics such as targeting an individual market segment or local account to penetrate and increase room night production. The strategy for both Sports and Revenue Management focus on what it is we want to achieve and how we are going to achieve it. The strategy is then communicated and agreed upon before being carried out by our Team Members. Communication and leadership skills are important to both coaches and Revenue Managers to be successful at communicating strategies and gaining your team’s support and confidence in your strategy. Hospitality Team Members can consist of (but are not limited to) Executive Leadership, Revenue Management, Sales & Marketing, General Managers, and even line level associates. Those who do not buy into the strategy and believe, “There is no ‘I’ in Teamwork, but there is an ‘M’ and an ‘E’.” can create roadblocks preventing our organization from achieving our goals.
Sports and Revenue Management both need to be nimble and adjust Game Plans when necessary. Football games have a half time not only to rest but to make strategic adjustments to help their teams achieve their goal of winning a game. Teams anticipate these adjustments and adjust their own strategies to combat them. If Revenue Strategies are not working Revenue Management needs to investigate why and change strategies where needed. As NHL Hall of Famer Wayne Gretzky said, “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” Revenue Management needs to anticipate market demand changes and adjust strategies to capitalize on additional demand or reduce financial loss. Successful coaches and Revenue Managers anticipate strategy changes and make great adjustments and failure to do so can cause a team to lose a game or fail to achieve financial goals. If a professional coach does not achieve expected goals they usually end up unemployed and a Revenue Manager who does not achieve expected goals could also suffer the same fate.
In Sports scores and statistics are used to measure performance and the same can be said about Revenue Management. We use revenue comparisons to Budget, percentage variances from our profit and loss statements, and STR Report Performances vs. our competitive sets. In the past Revenue Managers complained of not having enough data and statistics to make educated revenue management decisions. Most Revenue Managers now have access to an unlimited amount of data and statistics and must be careful to avoid the pitfall of over-analyzing or what I have heard referred to as “Paralysis by Analysis”. Hoteliers will still depend on reports and statistics like a 6th grade report card to validate all their hard work and although a Fantasy Hotel League sounds fantastic I do not anticipate any being organized any time soon.
Revenue Management is extremely competitive and requires a team working together, using data and statistics to identify and execute a strategy focused on achieving a goal. We play games to win and Sports and Revenue Management can both be fun when you are winning. So, play on and if anyone decides to organize that Fantasy Hotel League, I’m in.