5 Life Lessons Learned from Revenue Management
One of the many miracles in my life is my work as a Director of Revenue Management. If you’d told me when I was younger that that is what I’d end up doing every day for eight + hours a day…I would have been terrified and I would have laughed. Me? The kid who royally failed most of every math class I ever took? Me? The kid who failed the same sixth grade math test six times? Impossible; no one in his right mind would ever dream of hiring me.
And, yet, here I am. Overseeing five very different properties in very different markets from beachfront towns to busy cities to desert valleys to snowy mountaintops. And, surprisingly, they are doing well. I have a team that reports directly to me—they help me oversee each property day to day. My role is to teach them in Revenue Management, provide direction for their forecasts and create strategy and yielding plans to help achieve forecasts.
My speciality, my heart, is in teaching. My career started in Reservations at a luxury, boutique hotel that specialized in curated experiences for the guests and very high expectations for the staff. I thrived there because I was able to lead a team my way: through games and creativity. I loved catering to the guests because I love surprising people, I love helping them. When I moved to the Revenue side of things, I was lucky because I was still leading a Reservations team as well—so I was learning something new while excelling I’m what I loved.
The strangest thing happened, though. As much I loved Reservations—I found I quite enjoyed setting strategy. The psychology behind guest behavior, first predicting behavior and then tailoring pricing to be the most profitable was a mental game of chess that I found myself enjoying. Along the way, I’ve discovered a few lessons that apply not only to Revenue Management but also to life.
5. Preparedness helps.
Revenue Management is about trying to sell the right product to the right customer at the right time for the right price. I might be willing to pay $300 for a hotel room today if it’s close to a Taylor Swift concert I just spent on. I might not be willing to spend $300 for the same hotel room on a Tuesday when I’m there on business. So, the person setting the prices for that hotel needs to not only know about the Taylor Swift concert, and when tickets went on sale for it, so that he can set rates high since demand for the hotel’s location will be high, but also he needs to know how many of his guests are typically traveling to his city on a Tuesday and what rates are attractive to them. He also needs to know his comp set—what are others who have a similar product charging — so that he knows a ballpark for what rates are “attractive.” How do I, as the Regional, know this? I research the markets. Currently I have several markets who could not be more different from each other. My beachfront property can attract rates in the thousands—because they are one of only a few similar hotels that are beachfront. The other property is 5 minutes from the beach and cannot demand the same rates—because they are 5 minutes from the water. My city hotel has a 0-3 booking window—which means most of my guests here book last minute. This means I have to rely on historical trends, current pacing and available inventory information and, also, my comp set to know if the rates I set will be perceived as an appropriate rate. In order to know that, I have to study the historical data, do a full comp set analysis twice a year because hotels are popping up like wildflowers in the city. Yet another hotel is 2K feet above sea level which means they are a ski destination. If I get snow, I can drive rate, but if I don’t get snow, I cannot. This means I have to be part time meteorologist; it also means I did weird things like look up snow fall in inches for the last 5 years to see if snowfall has gotten less. Yes, it has. Bottom line: I have to understand the area if I expect to be able to understand guest behavior.
Similarly, being prepared in life helps you meet the unexpected. Having a back up to your back up plan may take a little extra time, but it then saves you time and frustration in the long run. Being prepared is just taking the time to think through possible scenarios so that you are able to adapt efficiently if they should become reality.
4. Forecasting is about goals.
Each month, I present forecasts for each property. Forecasts are snapshots of the amount of revenue I expect a property to produce for the rest of this year—-and next. It’s very detailed: I forecast for each segment—which means I have to anticipate accurate revenue for my OTAs (these are places like Expedia, Booking.com, etc), from my groups, from my discount segment (AAA, Advance Saver, etc) , from my FIT partners (wholesale), from my website, from all the places. Once I figure out how each segment is performing, I then set both a “room night” number and dollar amount for each segment. These numbers are my goal for the rest of the month; they flash like a neon sign in my head.
It reminds me of the importance of setting goals, and working towards them. We spend all month trying to get as close to our forecast numbers as possible, preferably within 3% of what actually happens. I set goals in life, outside of work, too. Some of these goals are small and there have been times when the goal was simply to get up out of bed the next day. But some goals are loftier. I really wanted to take my girls out of the country—that was a goal I had no idea how I was ever going to see to reality… and, yet, we are set to go on a grand European tour in April. Goals give us motivation. Goals give us hope because they give us something to look forward to. Sometimes goals can give us a reason to do something hard—because the reward of obtaining the goal is worth the sacrifices along the way. Goals matter because they give us inspiration.
3. Creativity yields success.
In my work, yielding is one part of setting strategy. The idea is, again, right product to the right guest at the right time at the right price. Yielding is how you do that. There are different ways to yield: I can raise my hurdle points if I want to keep lower rates from being booked, I can flex my discounts if I need to create more demand by offering a more attractive price, I can create a unique promotion or package to increase the perceived value, I can adjust my rates, I can implement an LOS (length of stay restriction) to force guests to stay an longer—these are just a few yielding strategies. Which ones I use depends on seasonality, current demand, pace and inventory, historical trends and market behavior (which can include unpredictable things like weather). While most people don’t see Revenue management as a creative profession, yielding can be. Because you can create as many yielding strategies as you want. For instance, I love the “shoulder dates” one that I thought of when I noticed one of my properties was pacing ahead (this means we had a lot more room nights on the book compared to the same time last year) during a 12 day stretch. Pick up was great. But the two days leading into the stretch were pacing behind by about five or six. I wanted to decrease the pace deficiency of those “shoulder dates.” So instead of putting my 2 night min on the first day where I was pacing ahead, I put it on the day I was pacing behind. I also, counter intuitively, flexed my discounts a little more. I could get a higher rate, but I wanted folks to book a Wednesday night that they don’t particularly want in order to stay on the Thursday that they do want. In one market, this works brilliantly. In another, it backfires and hurts my week that is pacing ahead. My point: bring able to think creatively and outside the box can help you create strategies and ultimately get you closer to your goal. Creativity matters.
In my life, creativity is the fabric that makes me me. I use imagination as a tool: it helps me feel better when I am down, it helps me feel surrounded when I am alone, it sparks ideas that ultimately contribute to healing and it makes me happy. Creativity looks like many things: storytelling, arts, strategy, music, leadership and so much more. It is a resource that allows us to do more than survive; feeding our passions and living life with curiosity opens doors that otherwise would not have opened. Did you know that, if you trace it back far enough, the word author literally means one who causes to grow? Authors write ideas. Ideas inspire more ideas in readers and eventually those ideas lead to changes—changes within the person and changes within the world. Creativity, then, is essential.
2. Adaptability is crucial.
My city hotel is a prime example of this. It’s got a booking window of 0-3 days. This means I have to be on top of this property each week—I have to be willing and ready to change my yielding strategy very quickly as, depending on the year, 47-60% of my bookings come last minute. If I set a strategy and forget about it, without adapting to the majority of my booking guests, I will not be profitable here. Being flexible is also important in other arenas in the workplace. Without it, everything suffers.
In the real world, the world outside of work, I like structure and predictability. I like to know what’s coming next so that I can plan for it. I usually have a back up plan. I used to plan the girls’ and my days out by the hour. But I did so with the understanding that that plan was the back up. I would ride the waves of the day, allowing spontaneity to support us… until there was a lull. Before boredom could set in, I’d revert to the schedule, and it helped us be both structured and flexible. Adapting to the world around us is critical for mental well-being, and allows you, ultimately, to relax and enjoy the life you have.
1. Relationships matter.
I can be good at my setting pricing, implementing strategies, creating forecasts that are accurate writin 3% or less. I can tell you more than you want to know about ADR, occupancy, optimization factors, and RevPar. I can identify trends. I am really good at doing a full blown market analysis and identifying who should be in my primary and secondary comp sets (and if I even need a secondary comp set). I have experience working with over a dozen states, everything from the archaic (“Marsha, Marsha…”) to the popular (I printed out the manual for Opera and can troubleshoot you in my sleep) to the weird (looking at you, TSW) to the plain migraine inducing. I can read the STR reports just fine, and know my way around OTA Insights, Salesforce and about a half dozen other systems. I’ve worked on cutting edge technology and I’ve cried my way through Excel based systems until I mastered it.
But being good at the job in and of itself isn’t enough. Relationships matter. A huge part of my job is building relationships. Relationships with my front of house leadership matters because what I want and what they want don’t always match, so I have to be able to understand how to compromise, prioritize, cajole and teach so that we find common purpose. Good relationships with my OTA partners and my FIT partners mean I can position myself with people who are capable of making my brand appear higher on searches, take advantage of promotions I wouldn’t otherwise know about if I didn’t first develop friendships with my contacts at my OTAs. Relationships Sales means I can better help secure profitable groups while gently refusing others because my transient sales are more profitable. And, my team….
It is ultimately my job to train those who report to me so that they can eventually take my place. Maintaining a culture of education, of support, of authentic care for them as people will ultimately inspire (instead of force) them to challenge themselves and to strive for excellence. If I am good at my job, but I’m not good at cultivating positive relationships and at being a good team player, then my work will only be mediocre because I’m not taking full advantage of the greatest resource I have: the people around me.
Likewise, life is ultimately not about trends, patterns, money or anything work related. Life is about caring for the people who love you. It’s about building relationships that will support you when you are hurt, inspire you when you are down, and carry you when you fall. The relationships I have with my family, and with a few very special friends, are worth more than any paycheck. What I want to be remembered for are the relationships; that I cared, that I gave a hundred percent to those around me and that I put people first.
Revenue Management can be a lot of things—fun, challenging, exciting. It’s rarely, if ever , boring because it’s always changing. Properties are fed by people and, because of that, they don’t always follow anticipated trends. It matters because, ultimately, I believe the revenue department is impacting the guest just as much as the front of house by helping to ensure the right room is available at the right time and the right price.