Exclusive Q&A: ARMA founder talks revenue management, says it’s “not a set-and-forget process”

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The science of revenue management is one that’s difficult to master. There’s no easy way to consistently maximise revenue, because market demand is always fluctuating.

What hoteliers can do is reach out to industry peers to keep expanding their knowledge.

We were fortunate enough speak to Melissa Kalan, Founding Director at the Australian Revenue Management Association (ARMA). Melissa has over 20 years of revenue management experience under her belt, and now provides yield management training solutions for industry and student education through the Australian-based organisation.

What do you think are the biggest challenges being faced by today’s revenue managers?

MK: Rapid technological advancement has resulted in changes in customer purchasing behaviour and booking lead times.

This has changed the traditional approach to market segmentation, as identifying the type of customer or their purpose of travel has become more difficult, particularly with the transient segment. This has a knock-on effect to price positioning, forecasting and offering the right initiatives at the right time.

Being flexible and quick to react to change is critical, as is shaking up the traditional way of operating to keep up with the pace of change.

How do you think they should try to solve these challenges?

MK: Although the changing booking landscape has caused disruption to the process of revenue management, an effective strategy is achievable, provided sufficient time is dedicated to the process.

Time has always been a huge challenge for the revenue management process in the accommodation space, but the fact remains that revenue management is not a set-and-forget process, it is a constant work in progress. The good news with technological advancements is that we have access to so much more information to support and guide our analysis and decision-making.

We have the ability to learn so much more about our customers, their wants and needs than ever before and use this to our advantage, especially with creative price-driven initiatives and driving ancillary revenue – still a large source of untapped revenue for many operators.

The integration of revenue teams with sales and marketing as one fluid unit is incredibly important to keep up with the pace of change. These two areas must work in unison particularly as the traditional 5 Ps of marketing (price, product, place, promotion and people) are today very much intertwined with the function of revenue management and the insight they can provide through quality data-driven analysis.

Education of all revenue-generating teams to foster understanding of the goals of each area should also be a high priority.

What are your top tips for independents who may not have the resources on how to get started?

MK: There is software available to automate the process of revenue management, which is incredibly valuable as it works off unconstrained demand. However, independents and smaller operators can still take advantage of revenue management techniques without the use of specialised software if this is not an option.

Many smaller operators juggle a number of roles at the same time and don’t necessarily have the structure of larger properties where staff have defined functions. Under such circumstances, the one key area of focus should be to ensure regular forecasting is in place and reviewed by observing booking trends in relation to price initiatives.

Looking at trends by day in some detail for at least three months in advance will allow properties to detect opportunities and react in a timely manner with pricing changes and initiatives before peak booking windows are missed. If this doesn’t occur, we often find ourselves in a reactive position and increase our dependency on some channels that we may have otherwise avoided, resulting in a sub-optimal revenue outcome.

Making sure you get access to good quality data from your PMS and that the PMS has useful reports from a revenue management perspective would also be very helpful for smaller independents.
Driving ancillary revenue and training and education of all staff are just as important as are book direct campaigns and loyalty programs, however, the cost of these needs to be balanced, particularly for smaller independents.

Maintaining good relations with third party operators and working with them to ensure you are getting the best exposure and volume where and when you most need it is also vital.

What are the biggest benefits of joining an association geared towards revenue managers?

MK: Education is the biggest benefit of joining an association focused purely on revenue management, which is the key purpose of ARMA’s (Australian Revenue Management Association) existence.

We offer independent training and advice to a global platform of customers from a variety of accommodation operators hotels, motels, apartments, cruise and holiday parks via our online “Yield Academy” supported by dedicated revenue management specialists and trainers.

We also offer face-to-face workshops and are hosting the APAC Revenue Management Summit in Melbourne later this year which will be a fantastic opportunity for education and discussion in this discipline.

With a view to the future, what trends do you see coming in revenue management?

MK: An increasing awareness of the importance of the revenue manager, within the hierarchy of a property. It is vital that people in this important role are properly remunerated so we retain and groom talent to succeed in these roles.

Many of Australia’s top revenue managers are now being hired by OTAs who value the incredible knowledge and skill-set of such employees. I believe we need to establish a defined career path for revenue managers to succeed into senior executive roles and general manager roles within all properties.

In addition, it is my view that all executive positions within a property should have some knowledge and access to education on revenue management. Creating an internal structure where time is set aside and made a priority to dedicate to the process of revenue management will be of utmost importance for all operators. Use of technology will grow to drive ancillary revenue and capitalise on the business that has already booked by offering attractive value-adds and upsell incentives. The goal will be to maximise revenue potential from each booking, with a continued focus on total revenue management incorporating all revenue streams.

Food and beverage revenue management is also largely untapped as is outlet and conferencing space. I believe we will see greater emphasis placed on these areas as skill level increases.

To survive in the booking world today, operators need to accept change, treat all customers equally in terms of their perceived value from a hospitality perspective – regardless of what channel they booked through. While encouraging such guests to book direct and rewarding them with loyalty programs for doing so is incredibly important, it is worth remembering that the customer selected you over any other property regardless of how they booked.

However, from a revenue management perspective, the value we place on all booking channels changes over certain times of the year and days of week. Understanding the net value of all channels, being flexible and adaptable to manage our channel-mix and use all channels to our advantage will become more critical.

Time committed to the process, regular reviews of price-positioning and effectiveness of market initiatives, forecasting with a degree of detail to detect opportunities with a view to improve on original forecasts and adapting strategies so as not to stay confined to a set of fixed numbers will all be of importance going forward. This way we can aim to effectively extract the most value from the various channels.

Embracing a revenue management culture and creating “RM Ambassadors” in all our employees through education will also be vital, not only to drive profits, but also to uncover up and coming revenue management talent. This will also assist with retaining talented individuals that exhibit the innovation and critical thinking skills to perform at their best as revenue managers.

As the value of revenue management increases across our industry, so will the competition for quality software to support this function. This could lead to an increase in competitively-priced revenue management software for some operators that could not previously afford a system, however, one should ensure quality is not compromised by price.

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