By Ahmed Mahmoud
Recently hospitality industry has encountered the Russia-Ukraine conflict with no end in sight along with the sanctions imposed on Russia. The political and economic implications of the conflict have just started to manifest themselves and it may take us a long time to realize the actual damage cost of the conflict. It has, nonetheless, led to an increase in global oil prices and led to a disruption (shortage) in global food production and supply chains. It will lead to an increase in flight prices and the cost of travel and will delay demand recovery.
The above means the global hotel industry will continue to navigate challenges stemming from the pandemic as well as more recent headwinds from labor shortages, inflation, and geopolitical concerns. While tourism and hotel performance recovery forges ahead in much of the world, the need for timely data and analysis remains as great as ever.
Revenue management challenges in the hospitality industry
Like the global hotel industry, and indeed the entire world, the hotel Revenue Management profession is experiencing unprecedented upheaval, and disruption that is changing its every facet.
The techniques, data sources, seemingly unchangeable booking patterns, and deep ranks of Revenue Management professionals have all been disrupted and dramatically reshaped by the pandemic.
Managing revenue and building effective strategies is a lengthy and laborious process. But time is not the only factor that adds up to the complexity.
This year and within our series of “How to Get Revenue Management Right” will evaluate the much-changed mid-pandemic hotel operating environment, focusing especially on the new priorities, tools and resources of today’s Revenue Managers, here are the main revenue management-related challenges hoteliers face today and how to get it right.
Lack of experienced specialists. During the Covid crisis, the hospitality industry is particularly affected by labor shortages. But labor market tightness is not just due to COVID. Plenty of qualified revenue managers have been quitting in search of better pay and conditions. And now things are gradually returning to normal, low pay, bad benefits and a stressful workplace are putting off former hotel staff from returning to the industry. The effect has touched all areas from operations to revenue management, where revenue management is a highly intricate process that requires professionals with deep knowledge of the industry and exceptional skills in data analysis, consumer psychology, communication, and critical thinking, as you can see revenue managers need quite some particular skills, which we do not find in the average hotelier. So, when we think, we would like to promote someone internally, we should really consider if they fit the profile and have the right skills, if not we should provide training or start looking outside our organization.
Demand may be returning but they lack the personnel to service rooms or manage ancillary revenue outlets. If you open up all your inventory, you run the risk of a lot of unhappy guests at check-in time. If you go from being a full-service to a limited-service operation, you could harm your brand reputation
Suggestion:
Properties are having to find ways to reduce reliance on labor so that they can reduce their hiring needs – automation and process redesign will be key. In order to support a lean staff, it’s critical to automate as many repetitive administrative functions as possible.
The current labor shortage and rising costs can be solved, in part, through the optimization and adoption of technology in hotels. We know automation creates efficiency savings. But as with the use of any technology, to reap its full benefits you need a solid backbone with the right infrastructure and mindset means you still need a good human revenue manager behind the desk.
Lack of technology. Revenue management is a somewhat novel role in the hospitality industry and it takes a lot of data analytics experience to make quick decisions from your data. It’s important that you build your know-how and utilize tools that can boost your skillset. Without comprehensive software that is connected to other internal and external systems, it’s impossible to conduct efficient data analysis, get a holistic picture, and make data-driven strategic decisions. The transition from manual calculations or legacy systems to modern technologies is a major industry problem, especially for small and medium businesses. It requires investment, development effort, and more importantly, a change of mindset.
Suggestion:
A rapidly changing consumer mindset has forced hoteliers to adopt technology that makes the guest experience seamless and convenient. From the accurate representation of preferred OTAs via a channel manager to an easy-to-use and secure website booking engine data collection, revenue management and online review management, anything that gets you a step closer to making the guest experience better, is a must-have for modern hoteliers.
Modern RM tools can help you keep productivity high, stress low, and efficiency maximized. While making the revenue manager job easier, they can also help you grow your data analytics knowledge. Look for RM software that offers you both ease of use and flexibility. Software that’s easy to use will allow you to focus on gaining insights and building your knowledge without a clumsy user experience. Flexible software will give you the ability to explore different methods of data visualization without holding you back as you build your skillset.
Unstable demand and market conditions. The COVID-19 outbreak showed how unpredictable things can be and the global economic slowdown is impacting hotel demand hence consumer behavior, competition, and macroeconomic conditions are changing so rapidly that making accurate predictions is almost impossible. At the same time, revenue managers have to develop a long-term strategy and decide on pricing, distribution, and marketing well in advance (and under the pressure of realizing the costs of possible mistakes), in order to generate optimum growth and revenue.
Struggling with attracting guests and reaching maximum hotel occupancy is the harsh reality and the most distinctive feature of the global hospitality industry. So, hoteliers like you need to have a good understanding of seasonality to increase low-season hotel occupancy. As a result, you can avoid irregular cash flow, low returns on capital investment, and underutilization of staff and facilities.
Suggestion: Travel intent is on the rise and we’re seeing increased hotel occupancy across every region. To capture demand, hotel marketing strategies should be in place to reach the ideal traveler at each stage of the booking process. although there is plenty of suggestion to overcome the low demand i.e., review your pricing strategy, distribution channels optimization, advertising strategy optimization, market strategy optimization, Use unutilized spaces for a different purpose, Up-Selling & Cross-Selling, etc. but hoteliers need to remember to not obsess in acquiring more bookings during the low season if it doesn’t make sense financially or if there simply isn’t enough demand.
Also while targeting low-season guests, you need to equally stand out amongst the competitors too! Likewise, every hotel business has its own strengths and weaknesses, and I’m sure you know what yours are. So, start with the techniques and applications that are closer to your needs, and then move to the other ones. No need to rush to apply the tips all at once that we’ve given here.
Distribution Channels Costs. There is still a lot of talk in the hospitality industry regarding the rising costs of distribution (Examples of hotel distribution channels include hotel websites, online travel agencies (OTAs), global distribution systems (GDS), metasearch sites, direct phone bookings, and more. ) . Calculating distribution costs for hotels is very essential to be earn profit. While encouraging guests to book direct can help hotels bypass some commissions and fees, there are still many hotels that rely on the distribution and marketing reach of online travel agencies (OTAs). When we talk about revenue, it’s not only about the incoming money flow, it’s also the expenses that matter. When developing a distribution strategy, it’s easy to overlook the costs that varied channels bring along. For example, paid ads on metasearch websites and social media increase the cost of direct bookings, but also improve brand awareness. Establishing the most effective mix of channels requires thorough analysis and close cooperation with the marketing and sales teams.
Suggestion: The next question should be “Which channels to use for Distribution?” What should be the channel mix for distributing the hotel inventory in the most efficient way to maximize the hotel’s profit?
Your hotel has a number of options when it comes to distribution. You can receive direct bookings through your website or the phone, advertise on online travel agency (OTA) booking sites, and utilize a plethora of other channels to grow your business. But to maximize your hotel’s revenue, it’s of vital importance to use a mixture of channels that meet the needs of your target market(s).
Lack of communication and trust. One of the most important — and challenging — factors that goes into increasing hotel revenue is establishing good, consistent communication between hotel departments. Managers of other departments might have a different vision of a hotel revenue management strategy and development. Every department has its own goals and processes for meeting them and getting these departments and goals to align can be tough. Communicating to other hotel departments the main revenue goals for the organization and how each department can contribute to the hotel revenue and profit will significantly reduce the misalignment between teams’ priorities and directions.
Suggestion:
Changing the hotel culture is never easy. A revenue manager has to break through the internal silos and explain the effectiveness of actions and measures taken.
Good work relationships create more productive and efficient work environments. Likewise, excellent communication keeps everyone updated and informed on what will increase revenue and how they can contribute to that business goal.
The revenue manager can schedule weekly or bi-weekly revenue meetings with other departments to stay updated and work through roadblocks together. The revenue manager needs to be clear about his availability throughout the day and send consistent updates so everyone is in the know.
Creating communication channels that allow round-the-clock access to each other quicker will ensure everyone is not only on the same page but able to share valuable insights, answers, advice, and collaborations.
Key Takeaways
Overcome those challenges and implementation of the above suggestions will only be possible if the right tools are used. A booking engine and channel manager for sales channel development will also be required. In addition, thorough marketing and competition analysis will be necessary to identify market segments. Using an efficient revenue management system will help in handling and making use of all the data obtained.
The market opportunity in 2023 for revenue management technology is tremendous. There are many high-growth areas that are currently developing around new technologies, cloud computing, big data, machine learning, as well as business intelligence and revenue management. There are also many areas of opportunity in the way we run our businesses using technology, build our teams and approach customer acquisition and retention.
