On why Revenue Managers need a seat at the table during Operations meetings
Dale: Hi, I’m speaking with Adrienne Hanna; she’s founder and Chief Executive of Right Revenue, a revenue management firm based in Northern Ireland. So, Adrienne, first question, what is hotel revenue management, what does it mean to you?
Adrienne: Well, I guess if you start across the board, Dale, you will find that people use certain words like forecasting, predicting and, you know, making great, weird recommendations. But revenue management for me is much, much more than that. Because revenue management, historically would have been someone sitting in a dark room looking at Excel spreadsheets, a number cruncher and perhaps even a data scientist. But to really to get value out of true revenue management or to get the best out of your revenue manager, it has to be much more than that. As you know, there is a lot of the buzz around the industry at the moment and hotels are really focusing on GOPPAR or TREVPAR.
Which is really looking at your Total Revenue Per Available Room and that for me is really what true revenue management is about. It is getting your Revenue Manager out of that dark room doing an Excel spreadsheets and allowing them to become a strategist and you really only become a revenue strategist and actually start to affect business and when you get involved with each department.
So, I think what a lot of really clever revenue managers are trying to do now is look at total profitability. They’re trying to get their teams to stop working in isolation and stop working in silos, to come together and actually, to look at the profit for the hotel in totality, not just individual departments such as F&B with their targets and Rooms with their targets; but instead, look at what is going to make the hotel more profitable and what is the greater good for the hotel. And I think that that is really what revenue management is about. It is understanding the value of each type of business that you have, maybe even the value of the business that you want in the future. How much it costs to bring that business in: how much are they going to spend when they get there; and really asking, what is the most profitable part of your business? And that doesn’t happen if you just have someone sitting running numbers. You need to get that person joining all those things together and looking at total revenue management for your hotel.
Dale: Well, Adrienne, you brought up a couple of acronyms and for those of us in hotels, we understand some of that. But I think they’re quite key. You mentioned TREVPAR, Total Revenue Per Available Room and you also mentioned GOPPAR. These are quite important metrics, aren’t they?
Adrienne: They are. And Dale, if you ever saw me deliver training, which is part of my background and what I’m still doing in hotels is, I always put a picture of a burger on the screen. And to me the burger represents the nice meaty juicy bit, it is the bit that we all focus on and that’s the room rate. And if we look at that rate in ADR terms, your average rate or even, REVPAR, it’s just not good enough. So, we need to look at that juicy piece of the burger as one part. The bottom piece of the bun underneath is how much that piece of business is costing you? As you know, we still work in segments (and there are arguments for and against that)
But if you look at your corporate segment or your wedding segment or the tourist segment, if they’re spending X on a rate what does that business costing you to bring in? Is that 15% commission through an OTA? Or is it costing you a lot of money to go to road shows or to do wedding open days or to have salespeople on the ground? What’s it costing you to bring that piece of business, that whole segment into your hotel? And then the top piece of that burger bun is, what are they spending when they get here – their incremental spend. To recap and look at TREVPAR in any detail, you need to take the ADR of each segment, then take the average cost of bringing that piece of business to your hotel; then add the incremental spend. That will give you a much better overview of true profit.
A good example of this could be wedding business. Your wedding room rate could be quite high. But how many road shows do you need to go to get that? How much are you spending on advertising and magazines? So, if you take your rate, take away the cost that you have to spend to bring that business in and then add in that expense, you could have weddings, bringing in a nice, chunky piece of business. But are they displacing high rated business? Are your bars and restaurants empty because you have a wedding taking a lot of your bedrooms? You need to look at how much you’re actually spending on that segment and what impact that’s having on the business as a plus or a negative?
Dale: That’s a great analogy. I’m going to keep the hamburger in mind, that’ssuperb. So, Adrienne, tell me about your history, managing revenue in hotels. How did you get into this, what I would consider a quite a specialist area?
Adrienne: Well, first of all, Dale I’m very, very old and so I go back a long way. I actually started my career working in travel and I worked in the tour operating. So, it was my job to go and contract hotels for long haul holiday brochures and adventure holidays and things like that. So, I had a really lovely job, traveling the world for about 13 years.
Then, fortunately or unfortunately, children came along and suddenly, you couldn’t be in South America for two weeks. And I took some time out and it actually just coincided with Hilton coming into Northern Ireland for the first time. And so, Hilton asked me if I would come for an interview, because they knew I understood tour operators and I knew I understood that type of side of the market. And so, I went to work for Hilton in a sales role and did that for a couple of years.
And then got asked through sort of several different iterations fell into another group of hotels, a wonderful Northern Ireland company called Hastings Hotels. They were interested in something they saw as a dark magic called revenue management and they asked me if I would be interested to come along and learn this discipline and help them out understanding it. So, it was a baptism of fire. They were very aware that I didn’t know what I was doing, and they didn’t know what they were doing, but we took those steps together.
And after working with them for a couple of years, I helped put a revenue management software solution into those hotels. And really during that time I actually found my inner nerd and found that I loved revenue management, I loved all the predictive stuff, I loved forecasting, I loved analyzing. And so, I actually went to work for the software solution that we put into Hastings. And I worked for them for a couple of years.
But what I actually discovered during that time was that there was this whole level or layer of hotels, that particular revenue management solution didn’t really fit, only because you have to be a revenue manager to understand it and it was quite technology heavy. And I just felt there were a lot of hotels that were independent or small groups that perhaps needed to be coached through revenue management. And I’m going back, probably 16 years at this point. And so, I did a crazy thing of deciding that I would start my own consultancy business and that was 16 years ago.
I’ve worked with all sorts of works in Ireland and the UK, from independent, small two star properties up to beautiful five star resorts and apartments, really helping them trying to put a revenue strategy in place. And then about four years ago, I just found that I couldn’t be in all these hotels all at once and I wasn’t reacting quickly enough because I wasn’t on site or didn’t have the data. And I had this idea of ‘why don’t I look at trying to solve a problem that I saw in the industry?’ Which was building a software solution that was specifically targeted at those independent and small groups and I just tried to make the whole mystery of revenue management much simpler, much more straightforward with good data, great decisions and in a really easy to use and user friendly format. So that’s kind of why I fell into it, probably not the traditional route. But that’s why I fell into it, Dale.
Dale: So along with the consulting that you’ve done and also the creation of this software solution, what else do you see being your key USPs, therefore, at Right Revenue?
Adrienne: I suppose, really the tagline that we started out and what we feel is different about our system is, it’s built by revenue managers for revenue managers. In the business team we have probably over 30 years’ experience coming through reservations and front office, So, we have a lot of hospitality knowledge. We’re not software people, building software and putting it into hospitality. We’re hospitality people who have built software for the hospitality industry.
And our whole system is built around what we call an “also revenue manager”. And that means that you may be a revenue manager, but more likely, you’re a reservation manager, front office manager, even general manager sales or marketing. So, you have other things to do in your job. And that means that you need really good decisions, really great data and our system actually supporting the decisions that you want to make and nudging you along and saying, “here’s the day that we think you can make more money. This is why. Here’s what you need to do to do it. Click this button and it’s done for you”. And that’s as straightforward and as simple as it is.
We’ve been told by hotels that we take roughly about four hours out of someone’s day and that releases that time back to them to do other things. And we’re making quantifiable revenue growth. So, we feel we’re doing okay.
Dale: Well Adrienne, it sounds like you’ve simplified a very complicated process. So, what kind of challenges do you face going into a new client and explaining the technical side of revenue management?
Adrienne: I think there are still some hotels that are slightly nervous about revenue management. Unfortunately, there are still some general managers and owners out there who feel that revenue management is moving rates. A lot of times and this is absolutely no disrespect to anyone who came through this path, but a lot of times it is the front office person or reservations person gets revenue manager in their title with almost little or no coaching or training whatsoever and they literally go in and they look at business on the books and they decide whether they’re putting their price up or down, or they look at their competitors and they decide whether they’re going to put the price up or down. That’s not revenue management. So, I think the biggest hurdle that we face is trying to educate people.
Good revenue management is looking at your revenue in totality. It’s looking at your internal events, your external events and it’s projecting far in advance. Any revenue manager worth their salt can, forecast and set rates, two or three weeks in advance. It’s the really clever revenue managers who can set the rate strategy a year in advance. And it’s a really, really clever revenue managers who know that the quiet season is not going to make them a huge amount of money. Actually, even the high season isn’t going to make them a huge amount of money, because they already know what their rate strategy needs to be.
A really good revenue manager is able to maximize revenue on those difficult days, those shoulder days. And that’s whether that’s shoulder days or months or weeks, that’s when great revenue management comes into play. We all know that owners and managers are quite happy to spend hundreds of pounds a month to perhaps buy a new cooker or new cleaner or cups and saucers, but not everyone will actually commit to spending a little bit of money on technology to help their person making these rate decisions a lot more clever.
And, I suppose that that’s our biggest goal or sorry, our biggest challenge, Dale is ‘is it actually worth spending a little money on technology ‘ because your return could be massive.
Dale: You’ve got an amazing backstory there. You’ve got a lot of experience with coaching and training and now with your software product that you’ve launched. Where do you see revenue management going? What’s the next step for revenue managers and revenue management?
Adrienne: I think the first and intermediate step is still trying to get hotels to come out of those silos and come to work in a full team. If anyone ever reads anything that I write or hears me talking, they will know that one of my big buzz phrases, ‘revenue managers rule the world just like dinosaurs in Jurassic Park’. And so, revenue managers should really be allowed to go to all of those operational meetings. Can you imagine the power that you would have if the person deciding on your profitability was able to understand what your marketing team are doing or your operational team are doing? So, I think for me, that’s the future, the immediate future, we have to get out of working in silos. We need to change our thinking on revenue management and we need to do it fairly quickly.
I think the revenue management technology systems will get cleverer. And I’m going to be a little bit controversial here and say, I’m not a fan of the big buzzwords of AI. Anyone who understands artificial intelligence know that you it needs a million data points before it even starts to work. So, you have a long process of trying to train a model of AI. And sometimes when AI learns something, it’s very difficult to unlearn it. In fact, it’s impossible to unlearn it.
So, I see the future of revenue management more in really, really clever machine learning. And some people confuse machine learning with AI. But we’re certainly looking at how we’re running the algorithms. And we are investing really heavily on how we’re running those algorithms so that we’re only getting clever and cleverer.
So, I think technology will come on in leaps and bounds. But I think the really clever stuff is what every revenue manager calls for…and that’s relevant data all in one place and that is our goal within Right Revenue is to make sure that every single piece of internal and external data is available in a dashboard to have a look at, to help you make those revenue decisions and we hope to be on that journey with hotels.
Dale: Wow! Well, if I could summarize, it seems like in the short term, it’s important for us to change the paradigm of the revenue manager. We need to include them in meetings and make sure that we look at changing how we communicate and the communications that center around revenue management. Is that fair?
Adrienne: Absolutely. And you said that much better than I did, Dale. So yes, absolutely.
Dale: Because I guess, I’m listening to an expert. Longer term, I think it’s good that you made that distinction between AI and machine learning. You said that it might be more on the machine learning side rather than AI. But importantly, I think probably critically, we need to make sure we have all the relevant data and the data points there in place for us to access and analyze and be able to predict using your terminology, use a prediction factor as well. And if we can make it easy with dashboards and visualizations of the data, then it’ll go some way perhaps to kind of reducing that fear factor or the fear of the unknown about revenue management.
Adrienne: Absolutely. And it’s also the responsibility of the hotel to allow someone like us to come in view their business and say, look, actually, there’s perhaps a better way of doing that. And that would make sure that the data is cleaner and actually more relevant. And if you put garbage in, you get garbage out. And so, there’s a little bit of to-ing and fro-ing with revenue management on the software side.
But yes, getting good, clean data is absolutely relevant and that’s internally and externally. But we’re on that journey and it’s a really, really exciting place to be. And I genuinely mean this, I actually have the best job in the world. And, you know, hospitality, it’s my life and revenue management is just an exciting place to be.
Dale: Adrienne, you’ve got a really unique background, I think, and a very impressive proposition as well. And certainly, you’re passionate about it, I’ve got to say. I seldom hear anybody speak so passionately about revenue management. So, how would somebody get in touch with you if they’re interested in learning more about Right Revenue or about revenue management?
Adrienne: Well, our website is www.rightrevenue.co.uk. So, you can contact us on that. My personal email is Adrienne@rightrevenue.co.uk or firstname.lastname@example.org, will also get me. And you can reach us on our landline, which is +44 2890 998 866. And it would be wonderful if anyone who wanted to sign up for anything would sign up for our blog, which I write every week or so. So, there’s some industry advice going out every week.
And then just one last thing is that anyone who actually does engage with us on that is they don’t have to be a customer; they just have to tell us that they’re interested in revenue management. And we have a WhatsApp group called the hospitality forum. And we invite only hoteliers, we don’t invite any suppliers to be part of that, so that hoteliers can speak very openly and frankly and ask questions about software solutions or about technology or about problems that they’re having. We let our peer to peer hotels give each other some great advice. So, anyone who wants to join now, we would love to have you as well.
Dale: It sounds great. I’m quite jealous, I wouldn’t mind going to some of those myself. Adrienne, thank you so much for the conversation. I found it very enlightening and very, very helpful to help me understand revenue management and I’ve been in the business for much longer than I’d like to admit myself. But I really do appreciate you coming on and giving your views.
Adrienne: It’s been my absolute pleasure. Dale, thank you for giving me the opportunity. It really is a pleasure to work with you guys. And I wish you every success, because I know you’ve got some exciting times ahead with you and your business. So, I wish you every success for those as well.
Dale: Thank you so much.