Predicting Profitability: Leadership in Revenue Management

Revenue Management has been a hospitality industry buzzword for many years. The challenge is to sell the right rooms to the right customer at the right time for the right price. So are hotels in Australia getting it right? We sat down with Harold Kopelowitz, Chief Operating Officer for the Denwol Group, and Shaizeen Contractor, Group Director of Sales & Distribution for TFE Hotels and alumnus of BMIHMS, to discuss their top ten tips for succeeding as a revenue manager in the hospitality industry.

  1. Owner relationships are crucial: “Managers need to get on with owners. Both need to understand each other’s requirements. After profit, this is the single most important aspect of revenue management. You’re only a sum of the people; you can be a big, shiny brand but unless you have that connectivity with staff, you simply won’t succeed. Sometimes as an owner you need to make an investment even though there’s no immediate pay off,” Harold says.
  2. You need to think like an owner: “I think like an owner and do what has to be done in the best interest of the business. It has a lot to do with trust. Owners have to feel confident in you as managers. Be upfront if you’ve made a mistake; be honest and then move forward and try and fix it. Transparency is extremely important,” Shaizeen notes.
  3. Adopt a hands-on approach: “Being involved in all aspects of the business makes it much easier to approach revenue management and decide on the most efficient room configurations for properties,” says Shaizeen.
  4. Research, research, research: “Research is absolutely crucial to revenue management. We do market research to ensure that we have in depth knowledge. We build an entire market analysis and then decide what segments will actually fill the hotel. This varies greatly between properties. We will change configurations depending on need and demand from customers – whether its business trips, families, and so on,” Shaizeen says.
  5. Recognise the importance of location: “The location of your hotel is a huge factor in revenue management decision making and will always impact your bottom line. If your property is city centric, you may sell a lot of rooms and meals due to conference bookings. At the airport, you may find you struggle to sell breakfast because people have early flights. Location is absolutely crucial to your revenue management strategy,” says Harold.
  6. Dynamic pricing is the way of the future: “Dynamic pricing is the price point that revenue managers or hotel managers decide to put on for a particular day in the future, depending on demand. For example, in a Sydney hotel during winter on a Sunday night, the rate might be $150, but if there’s an event on the following Sunday, like the City 2 Surf, I can charge $350. How often is that room actually sold at the increment it’s priced at? Would you rather your suite sold five times a year at $1000, or would you rather reconfigure that room to be two separate rooms sold 80% of the time for $350 each time? Part of a revenue managers job is understanding all those drivers, and being prepared to change price points frequently. In my opinion, everything is moving towards dynamic pricing,” Shaizeen says.
  7. Be cautious when offering hotel discounts: “I think you have to really understand where and why you’re offering that discount. If you are marketing it to people who don’t normally stay with you, a 20% discount might reel them in. Sometimes customers prefer value –for example, a ‘buy one get one free’ meal instead of a cheaper room rate is more appealing. You just need to understand the customer and cater to their needs,” Harold and Shaizeen note.
  8. How to measure success: “We measure our returns based on net REVPAR and net profit. REVPAR (Revenue Per Available Room) is a hotel industry financial metric calculated by multiplying the average daily rate by the percentage occupancy. We look at cost of distribution of every channel, commissions booking fees etcetera – who is giving us the best return at the end of the day? Once we’ve worked that out, we base decisions around this,” Harold says.
  9. Qualities to look for in a revenue manager: “If you’ve got someone who is a brilliant statistician, it just isn’t enough. You need to understand the industry and have a more holistic approach, not just focus purely on numbers. The hospitality industry is an exciting industry. Its so dynamic; you want someone who shares that excitement,” Harold says.
  10. Advice for people interested in a career in revenue management: “If you want a career in revenue management, you need true passion in terms of the hotel industry – you genuinely have to love what you do. You also really need to understand ‘ driving your business; a thorough understanding of the distribution channels; some finance knowledge and finally, the ability to sell your strategy,” Shaizeen advises.

“At the end of the day, it’s all about the passion. If I were living my life again I would love to have gone and studied hotel management. There’s so much opportunity in this industry now for revenue managers.” Harold says.

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