Revenue Managers these days have a tough job. Often not fully understood by their colleagues and provided with limited resources, these individuals are expected to have answers for financial top-line performance, dictate or influence guest policies, be a super user for most of the hotel’s technology, communicate with everyone from front desk agents to ownership executives, and predict consumer behavior in a rapidly-changing environment.
In the interim, however, many companies have kept salary ranges stagnant despite these new, higher expectations. Recent job postings offer between $50-$75K while other executives are making at least 25% more. This is enough to dishearten any great Director of Revenue Management.
When the COVID-19 pandemic struck, there was more pressure to create cashflow and many revenue teams were furloughed. But in a way, the slate has been wiped clean. Companies have a golden opportunity to consider what kind of Revenue Manager will move them forward, and how to adequately compensate a talented Revenue Manager.
What’s in a name?
The hospitality industry has spent a lot of time trying to rename the Revenue Management discipline. Profit Optimization? Revenue Maximization? Commercial Strategy? This discussion needs to include more than a new title. The discipline needs to make important changes to create a different path.
- Strategy meetings often become stale, repetitive discussions without much actual strategy involved.
- Owners’ meetings become politicized showcases in which the positive is highlighted and as many negative things as possible are swept under the rug.
- An inordinate amount of time is spent hashing and rehashing whether Best Available Rate should be at $239 or $219 on a specific date.
- Optimal mix and flow-through discussions are rare.
The sudden economic downturn from the COVID-19 crisis temporarily or permanently closed many hotels and put a significant financial strain on ownership resources. Focus that was slowly turning towards profitability versus just top-line revenue is making a much faster swing. As the saying goes, cash is king, and many companies had inadequate resources to weather such a drastic event. While no one could have foreseen or prepared for something like this, a profitability focus when things were good for the industry could have prevented some of the economic carnage that followed in the path of the virus. Despite the importance of profitability, top-line revenue was still considered the primary metric.
Without carefully focusing on cashflow and profitability, however, there’s a danger that companies could “revenue themselves out of business”. Watching occupancy numbers can be addictive, that addiction growing stronger as the numbers increase.
Savvy business teams should take a step back and ask, “At what cost is this occupancy coming to us?” This is where the revenue manager of the future comes in – part accountant, part marketer, part guardian. This revenue manager is the gatekeeper of revenue, making sure that there is a strategic plan to convert those dollars to profit.
Five strong foundations for the revenue manager of the future
1. Keen understanding of consumer psychology
Revenue Management definitely utilizes the practice of psychology, but it is not really seen as such. Perhaps this is because we, too, are subject to the rules of consumer psychology, so it seems natural to us after experiencing it from the standpoint of the consumer; it’s just what people do.
- prices which end in a 9
- slash-through pricing to promote value for a deal
- products positioned in a certain order or placement on the page
All harken back to basic rules of consumer psychology.
Without understanding that psychology should be at the center of revenue strategy, a revenue manager can be prone to the “spaghetti method” – throw everything at the wall and see what sticks. This inconsistent approach and lack of positioning can damage the customer’s perception of the hotel and generate a decline in overall revenue over time.
A revenue manager who knows how to apply consumer psychology knows that the first question to ask is, “Who is our target audience?” Too many hotel executive teams struggle to appeal to every type of business, which results in diluted messaging and strategy. While a hotel may indeed have more than one target, it is not reasonable to expect a hotel to appeal to couples looking for romance, families with small children, party crowds, corporate, business travelers and Comicon groups all at once.
This is where integration between revenue, marketing and sales is imperative. All three teams need to agree on the target market of the hotel. Only from there can psychology, creative marketing, and solution-based selling be effective in addressing each team’s needs and desires. Which leads us to our next foundation…
2. Excellent communication skills
A strong revenue manager is able to communicate at any level of the organization in terms they will understand and absorb.
- explaining an upsell strategy with a front desk agent
- working alongside sales and marketing teams to create buy-in for a strategy
- discussing financials with an owner
- communicating with stakeholders
A revenue manager should never expect a team member to approach them on their own terms. They must be able to communicate with the constituent’s relevant method of communication, such as metaphors, straight talk, charts and graphs instead of sheets of numbers, or even crayon drawings, if that’s what it takes.
In addition, the revenue manager must be a storyteller. We’ve all had to sit through a meeting in which someone reads numbers from a STR report that we could have read for ourselves. What matters is the story behind those numbers. Why did we achieve this good/bad/mediocre result? What strategies did we apply, and were they successful? How will we use this information to lead us towards an even brighter financial future?
With these things in mind, the revenue manager must paint a picture, support it with a backbone of solid data, and use language that helps the end-user understand and buy into the end goal that is being proposed, along with the plan proposed to reach that goal.
Of course, to do this, the revenue manager must have foundation #3…
3. High-level strategic mindset
Strategy is a word that has been so overused, it has lost some of its impact. Strategic revenue managers set a vision and goal for the hotel’s performance, gain buy-in using their second foundational skill of communication and evaluate everything by the measuring stick of their progress towards that goal. Strategic revenue managers never lose sight of their goal, constantly demanding progress. In fact, they are almost ruthless in measuring their own performance.
Of course, to be truly strategic, one must also be able to change course when indicators present an obstacle or alternative data becomes available. This again means creating more buy-in, presenting new data, and creating a strategic alteration to the course. Strategic is again the key word. Setting a new strategy, then implementing a knee-jerk reaction three days later because of less than immediate results is definitely not the same thing as a strategic course correction. Actions must be measured, windows of impact must be defined to determine how long a strategy will continue until results are expected, and restless coworkers and managers may need to be managed to ensure that each strategy has time to work.
Additionally, the revenue manager of the future sees their strategy not just through the lens of their own department, but takes the time to work closely with sales, marketing, operations and finance to ensure understanding of the full impact of the strategy. Further, each department’s goals must be aligned and complementary in timelines, goals, and tactics deployed so that the effectiveness of the end result can clearly be measured, with no blurred lines between competing strategies or misaligned goals by department. In order to measure this effectiveness, a revenue manager must also possess foundational skill #4….
4. Sharp analytical skills and financial acumen
Unfortunately, it is still all too common for organizations to struggle to find someone who has both strategic and analytical mindsets. This is not necessarily a fault of the hiring process; these gems are simply few and far between. The ability to simultaneously work with big-picture strategy and analytical drilldowns is rare, despite many people believing they are good at it. The first three foundational skills need to be combined with the ability to quickly and deftly dissect performance, pace and many other areas of business in a way that allows for critical, unbiased analysis of what went well, what went wrong, and what can be enhanced.
But for the revenue manager of the future, this goes far beyond standard production reports and top-line revenue analysis. These revenue managers have a persistent desire to understand how each booking, channel or market segment flows through to the bottom line. They delight in designing promotions using Cost Per Occupied Room and whipping up spreadsheets at a moment’s notice to create what-if scenarios or support conclusions with strong data that specifies exactly what profit margins can be expected for each.
Now what would really make these highly valuable team members most successful is a strong understanding of the accounting world. Although being able to use profit and loss metrics during strategy meetings as well as understanding the balance sheet and cashflow, many organizations have made these nearly inaccessible to their revenue managers. The emphasis on integrating revenue with sales and marketing is very important, to be sure, but falls short of the importance that profitability metrics and an understanding of the financials plays in the skillset of the revenue manager of the future.
While it may be difficult to find someone with all five foundations including this financial acumen and understanding right out of the gate, organizations can immediately begin to foster this understanding through a closer alliance between their revenue managers and accounting departments. Eventually, in revenue management strategies of the future, every expense, every advertisement, and even every position will be measured by overall Return on Investment, but this will only become possible as revenue managers gain the skills required to deeply understand financial profitability metrics.
5. Drive to succeed and insatiable curiosity
While this is actually two things, they are really inseparable. To see the best possible recovery from this pandemic and achieve truly industry-leading results, it is imperative to hire a curious person with drive.
Maybe this person took advantage of several of the free courses that were available during their furlough. Perhaps they’ve developed some new hypotheses about how to impact revenue results as they reviewed the opportunities that the pandemic brought for a clean slate. Maybe they seem like a toddler, incessantly asking why about everything from the sky being blue to the reason behind the fact that your nose is a little crooked. But no matter how this manifests itself, curiosity has long been key to finding new opportunities. Coupled with a focus and drive to succeed, this one-two punch becomes a formidable force in achieving organizational change and results.
It can be very difficult to hire for this, but the hallmarks are there. Do they light up when they talk about the future of revenue management? Do they see possibilities where others see only problems? Did they spend their time in furlough bettering themselves in some way? These are just a few ways curiosity and drive could exhibit, but if you look for others, you will find them!
Technology is noticeably missing from this list. This was a difficult choice, because indeed the revenue manager is often responsible for management of technology. But when we discuss the revenue manager of the future, it is important to recognize that one person simply can’t do it all! In fact, hiring for technical skills with systems knowledge and the ability to put together basic reports is much easier than finding these unique candidates who truly fulfill all five foundational skills. If there is a definite need for technical skills, outsource some tasks. Hire an analyst, or a distribution expert, or a consultant, or teach a front desk agent who wants a path to growth.
We have the perfect candidate!
You have found one of these elusive and unique revenue managers of the future, and you’re ready to offer them the position. But wait, there are a few final considerations.
Creating an environment in which this highly-skilled revenue manager is constantly pressed for time, pulled away from their core work in these five foundations and is required to sit through unnecessary meetings simply means you will either kill their spirit, or lose them to another organization who values their time. Be as protective of their time as they are of their metrics and performance, and you will allow them to shine.
Give some serious thought to that compensation package. To fairly compensate this team member, they warrant a competitive salary. Currently, depending on market, $90-$150K plus bonus is appropriate.
Room to grow and thrive is also imperative. This would include a budget with room to take part in educational organizations, conferences and events, time for ongoing education, as well as to follow current events and the latest thought leaders for new strategies.
A flexible working environment is best, allowing at least 2-3 days per week to provide the opportunity to distance themselves from the distractions of the corporate office and water-cooler chit-chat. If a company is not prepared to make this kind of investment into a single team member, consider an outside service that can provide talent at this level.
Certainly, there are many “good enough” revenue managers that do a “pretty good” job. But when you are ready to transform your bottom line, look for the revenue manager of the future. You won’t be disappointed.