When was the last time you flew in an airplane and found an empty seat next to you, where you could actually stretch out and relax? Have you checked an online fare one day, and then returned a day later and found it had gone up $75? These are the down sides of yield management, a tool that has been used in the airline industry since the early 1980s: packed planes and dozens of different fares for the same seats.
Hotel revenue management has been taking a parallel, though not as drastic, course in the past few years, spurred on by market forces such as ownership changes that have created enormous pressure to drive profits at the property level. Transient and business travelers have seen the effects mostly through higher rates. But the issues for planners are far more complex, as our cover story shows.
Corporate groups can use the same property many times over, and each stay will be different. A meeting group brings many layers of revenue to a hotel, which need to be accounted for as much as possible when determining the meeting's value. Strictly going by the numbers and rejecting a piece of meeting business can harm the relationship between a planner and salesperson — and potentially with the entire chain.
Planner Michael Schron of Robert P. Schron Associates, New York, describes the growing influence of hotel revenue management: “Its importance is surpassing that of any of the customer-facing management positions and contributing to the lack of hospitality in the hospitality industry.”
The good news is that as more sophisticated hotel chains align their sales managers' goals with those of the revenue manager — and when the two work more as partners than adversaries — planners will find more give and take in their negotiations. One great model is Peabody Hotels, where the revenue management team evaluates not only the overall value of the group, including ancillary spending, but also the lifetime value of groups and the cost of acquiring a new customer.
Peabody's Barbara Bowden, our cover subject and one of the most visible revenue managers in the hotel industry, puts it best. “Revenue management is meant to be a business intelligence tool,” she said, “not the final word.”
For more on the relationship between revenue managers and sales managers — and what you can do to get through to both — see our story by senior writer Dave Kovaleski, starting on page 12.
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