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How business intelligence help revenue managers become strategic

04 October 2022
Revenue managers focus on following processes and procedures to do things right. Many hotels have automated these processes to make it easier for revenue managers. One example is implementing a revenue management system (RMS) that follows a strict approach to forecast, setting, and updating rates. Revenue managers are primarily operational and sometimes tactical when overriding the RMS, adding restrictions to rates, and pricing a group. However, at revenue management conferences, everyone talks about becoming more strategic, but it doesn't seem easy to move up from the operational and tactical levels. How could a revenue manager become more strategic?

Automate data collection

The first step is to automate all mundane manual tasks, such as data collection, preparing and distributing reports, and answering ad-hoc questions from everyone in the hotel. Set up a system that collects the data, automatically updates and distributes reports, and gives access to everyone in the hotel to retrieve the information they need. Implementation will require a one-time effort, but once the basics are in place, the revenue manager will have instant access to hotel business intelligence and has freed up time to focus on strategy.

Get insights

The second step is to get insights from the data from all departments in the hotel. Every guest leaves traces in all the different systems used by the hotel. Every little hint says something about buying behavior and provides insights enlightening the revenue manager. A well-thought-out strategy should deliver more revenue and increase profit over time. A revenue manager needs insights about market segments, feeder markets, distribution channels, booking windows, booking- and stay patterns, average revenue per stay, customer acquisition costs, and production from contracted and other B2B customers (Corporate and Travel Agents) to mention a few insights needed to create a winning strategy. In addition, if the hotel has other outlets, such as restaurants, bars, meeting spaces, spas, golf courses, etc., the revenue manager must understand the total value proposition to different segments to find the optimum business mix.

Create a strategy

In the third step, based on the gained insights, the revenue manager creates a strategy to capture the most attractive market segments with a perfect fit for what the hotel offers. Part of the strategy is also to develop the hotel product, including the room types, outlets, offerings, additional products, and services to attract an audience that is prepared to pay a premium compared to competing hotels. The third step also involves increasing the average revenue per stay to maximize the Customer Lifetime Value (CLV).
Here are three essential strategic questions every revenue manager needs to answer.
  • Which segment has the highest average spend? The insight is that guests in this segment are satisfied and spend more than other guests. Therefore, the strategy is to find more guests in this segment.
  • Hotels must focus on more than one segment, so the hotel must analyze several segments based on average spending. The plan to attract each segment is probably not the same since guests are different and have different needs.
  • Which is the most cost-efficient way to reach and sell the hotel to each segment? Of course, the strategy starts with the segment, but the hotel should minimize the cost to acquire the revenue.

Track the performance

Finally, the revenue manager executes the strategy and starts to track the outcome to ensure that the plan is working and producing the expected results.
The revenue manager should keep an eye on the following metrics to confirm that the strategy is working.
  • RGI (until there is a better KPI) to make sure that the hotel gets its fair share of the market. RGI is less critical for hotels with a high additional average guest spend above the room revenue since a higher percentage comes from other sources.
  • The total average revenue per guest or a similar KPI. Tracking the development over time, the hotel will know that the offering continues attracting guests. If the average revenue per guest starts to slip, it is time to revisit the total hotel offering.
  • Customer Acquisition Cost (CAC) to keep the cost under strict control. If the hotel focuses on total revenue management, the CAC should be related to the total revenue.

Demand Calendar is a strategic tool

Demand Calendar provides hotel business intelligence and additional features to make it easy for revenue managers to reach the strategic level. The system collects data from the hotel PMS and many other sources and stores everything in an easily accessible system for all roles in the commercial team and the hotel management. Demand Calendar provides high-level insights with drill-down capabilities to the smallest detail. In addition, full CAC calculations on auto-pilot and other dynamically updated KPIs and reports will help the revenue manager to make strategic decisions to increase revenue and maximize profits.