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Three word sales pitches work better than a hundred

Kempinski Hotels VP distribution and revenue management Rex Demanser and IDeaS Europe, Africa and Middle East major account holder Guy Barnes discuss the science of revenue management, urging hoteliers to place a renewed focus on training and integration in 2010

How have you seen revenue management evolve over your careers in the hotel industry?

Guy Barnes: When I started out we practised inventory management. The priorities were simple - ensuring availability of rooms for sale, that rooms were priced correctly, and simple rate and sometimes length of stay controls were in place. Analysis of bookings, cancellations and even denials was underway, but all too often the quality of data available affected the outcomes.

With improvements in data quality, came a more scientific approach and more useful information. But with reporting lines often into sales and marketing, revenue management was often seen as a constraining factor rather than a guiding light. Today, revenue management is a science, providing powerful intelligence, an early warning system, accurate forecasting and finely tuned pricing and controls. In more and more cases revenue management is now given the profile it deserves, with board level presence, and understood as a function that provides firm direction to maximise hotel revenues. The future is even more exciting, as revenue management has become more than just maximising rooms, but encompasses meeting and events, is seen in managing restaurant space, and in total asset management.

Rex Demanser: I came into revenue management originally through reservations. We were doing revenue management before it was even called ‘revenue management’! At that time we were just using spreadsheets etc to try and pick up trends and in my first hotel where I really applied it (it was a small hotel in central London), we doubled the revenue in two months just by analysing demand. Five or sixth months later, we had tripled the overall revenue. I think our rack rate back then was £75 (US $121) which I kept pushing and pushing, and was relentless in selling it. After that, I became known as ‘Rack Rate Rex’!

What key challenges do you face in your sector?

RD: I guess the levels of knowledge of revenue management in the wider hotel community is the hardest and finding good people that just have a real passion for the numbers is tough. I think there’s also a lot of confusion between what revenue management is as a discipline and data analysts. Some people think that being a data analyst is being a revenue manager and it’s definitely not. Anyone can crunch the numbers. I’ve seen revenue people, across different hotel groups, that think that putting these beautiful colourful spreadsheets together is revenue management. But unless you’re setting a price point for decisions, there’s no value.

GB: I think a lot of people also confuse people in reservations with revenue managers, so you can have someone put into the position of revenue manager when they really don’t have the discipline and the skill set for it. That selection can have an impact on that situation at that time, but also on the hotel’s view on employing a revenue manager again in the future, or another third party organisation looking to evolve that property as well.

Historically there has been confusion as to what revenue management is and where it fits into a hotel organisation. Is the perception of it as a function that needs to sit at high level improving?

RD: I think the enlightened CEOs may not know what revenue management is, but they know that they need it because they’ve seen the results driven by it. In fact, a colleague was at a CEO Conference in Korea around four months ago, attended by a number of leading international hotel CEOs, many of whom said that they expect their replacements to come from the revenue management discipline and that hotel groups should have their revenue management discipline reporting directly to them. So it’s starting to get serious and ‘grow legs’ as a discipline, and it’s definitely improving.

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How important was Kempinski’s revenue management strategy and partnership with IDeaS in managing business throughout the 2009 downturn?

RD: I think it goes too far to say that IDeaS saved us in terms of overcoming the economic crisis, but I do think that with the Emirates Palace it was very clear that there was an up lift. However, IDeaS contributes as part of a collection of ordered tools, with other initiatives.

At this time [November 2009] for Kempinski, for our electronic business, we are 17 points down on 2008, primarily hit by GDS. We’ve been in recovery on web business since June, with every month showing year-on-year growth, culminating in October with 13% year-on-year growth — I think double digit growth in the current environment is impressive. Some of our packages and programmes have shown 440% year-on-year growth, which is a large chunk of change, not by changing the value proposition but rather by changing the way we operate online.

In other words, don’t say something in 100 words that you can say in three — say it in three and it will probably sell. But, as of yesterday, we are two points up on web business and we are hoping to finish 2009 up by about 5%. So I think 5% growth isn’t bad, in the current economic climate.

What is your current revenue management strategy and how do you plan to build upon it in 2010?

RD: I don’t know if it’s a revenue management strategy, but I want to look at how we can do more centralised, even though I know our company strategy is regionalisation. Can I get a passionate entrepreneurial business advisor [revenue manager], that really knows what they’re doing, in every hotel? Can they be of the right quality, calibre and passion? Maybe I’m too old fashioned but I used to, when there wasn’t a revenue management system, work 32 hours in a row because I was trying to find some formula, some pattern on pick-up and I wouldn’t go home until I had a number, or a formula or a number of rooms sold two days out, three days out, four days out and I would keep doing it until I saw the patterns.

Finding similar people with that kind of passion, or training, you just can’t beat it — it’s either there or it’s not there — but I’m still as passionate now as I was and so I’m thinking ‘bring some more in’ and find five passionate people and at least have them even if it’s not to revenue manage hotels. I do see a point where I can start bringing it much closer to home and I do think I can make a lot of money that way.