Revenue Management SpecialRevenue Management cannot achieve its full potential if the support is missing from whatever area.

Published: 03 Jun 2008

Revenue Management Special

Revenue Management cannot achieve its full potential if the support is missing from whatever area.

And one big challenge for Revenue Managers in the Asia Pacific region is the lack of understanding of the RM process, according to Stefan Wolf, Director of Corporate Revenue Management, Shangri-La Hotels & Resorts.

Wolf, in a recent interview with EyeforTravel.com's Ritesh Gupta, said: "It is important that Revenue Management professionals continuously remind other departments of the benefits and explain the methodology of RM. The resulting increase in support would in return improve the financial results."

Excerpts from the interview:

Ritesh Gupta: RM leaders and professionals within the hotel business have generally come through the ranks significantly lacking formal education and experience in microeconomics, which defines RM. Do you agree with this?

Stefan Wolf: Having received a formal education in microeconomics would definitely be helpful, especially for the statistical aspects of Revenue Management, but it doesn't define RM. In today's complex environment of interdependencies it is far more important to have an understanding of the areas you are trying to influence with RM principles allowing the RM professional to communicate more effectively.

Ritesh Gupta: When it comes to the development of RM programme for the General Managers, Directors of RM and Directors of Sales and developing RM standards, suppliers need to focus on developing ongoing learning programmes, both on-site and online, that allow the attendees to test the theory and feedback on the results. Do you think this is happening?

Stefan Wolf: It certainly would be beneficial if a program exists allowing the RM professional to test certain scenarios before implementing them, but I am not sure if the cost of developing such a software would be justifiable considering the amount of variables it needs to incorporate (to give an example of just one variable: price sensitivity of multiple source markets combined with lead time). It is however important to develop (internally or externally) a training program for the key positions if an organization is serious about implementing successful RM strategies.

Ritesh Gupta: An expert says: "the very words 'revenue' and 'yield' create the biggest problems in establishing an RM culture within a hotel organisation, due to the combination of fear and apathy they generate. Unifying titles such as 'business development' or 'marketing operations' are better placed to achieve an integrated strategy, plus they are better suited for employees who maintain customer facing roles." Do you agree with this?

Stefan Wolf: A challenge of creating a succesful RM culture is to establish causality between an achieved RevPAR increase and the implemented Revenue Strategy, because of so many factors possibly contributing to that RevPAR increase (e.g. improvement of service delivery over the last 6 months, an image ad campaign, higher repeat guest ratio, a new office park opening, ...). Proving the positive impact of RM strategies will take care of any fear or apathy, which might exist towards RM.

Ritesh Gupta: Many of the hotels are choosing to train and develop internal resources to work with them in building a revenue culture. Which is the best way to approach this?

Stefan Wolf: If an employee in a hotel is interested to pursue a career in Revenue Management and sees that the RM professional in that hotel is supported and respected, an internal talent pool would naturally grow. On the other hand if RM is an after-thought, the hotel is not only constantly looking for new candidates, it is also near impossible to develop from within.

Ritesh Gupta: RM in the smaller chains and independent hotels in Asia is taking on more importance as hotels realise the benefits involved in effectively revenue managing their businesses. How tough it is for such chains to develop RM team? Is there any striking difference in the way these hotels are managed and accordingly different approach is needed for RM?

Stefan Wolf: The principles of RM apply to any size hotel in any market, chain-affiliated or not. It might be cost prohibitive in markets with lower demand to have a dedicated RM professional, but then a combined position might be an alternative. If the management of a smaller chain or independent hotel believes in the proven success of RM, but doesn't have the expertise internally or cannot afford to hire a full-time expert, there are options of outsourcing available in the market.