Revenue management isn't just yielding prices. In fact, the difference between yield management and revenue management is precisely that revenue management doesn't stop at room revenue and captures all revenue streams.

In reality, many organizations are still in the stages of a room revenue focused yield management and haven't yet fully transitioned to actual revenue management.

This is of course impacted by the top line focused KPIs (Occupancy, ADR and RevPAR). And that focus on top line revenue is a natural consequence of how franchise and management agreements are typically structured.

A transition to actual revenue management and profit optimization requires to look beyond top line revenue.

An organization that doesn't understand it's cost will inevitably go out of business. Therefore, revenue management has to account for cost as one important factor when developing revenue strategy.

The shift towards profit leadership will require fundamental changes where leaders have to master contribution analysis, labor efficiency ratios and flow through impact.

How do we measure?

We need to reimagine our KPIs and transition from revenue focused Occupancy, ADR and RevPAR to profit focused metrics like GOPAR, Total Net RevPAR/RevPAF/RevPAM. We need to expand beyond room revenue and consider all revenue streams and we need to understand cost, from cost of acquisition/channel to cost per occupied room. We also need to look beyond the individual room night or reservation and think about total lifetime value.

Breaking down silos

For years we talked about breaking down the silos. And typically, we refer to the walls between revenue management, marketing and sales.

But breaking down silos goes beyond the commercial departments and needs to capture the entirety of the organization. Front desk, housekeeping, F&B, accounting and finance, etc. All need to work towards common goals, all with the overall profitability in mind.

I used to call this revenue management culture…

The hotel tech stack

If your PMS is older than your team using it, it's probably time to upgrade to something from this century. If your booking engine comes "for free" with your PMS, it's probably time to switch it to a profit driven conversion machine. And if you don't have a BI tool, it's time to get one!

Understanding profitability requires a deep understanding of the underlying data. Which means, not only do we need to collect data and ensure its quality and integrity, we also need to be able to easily access and process the data. Hence why the BI tool is essential.

Existing tools and reporting also needs to evolve to allow a more effective view on profitability and not simply be based on Occupancy and ADR.

Developing new capabilities

Revenue managers (or profit leaders) need to recognize the interplay between revenue, variable and fixed cost, learn how f&b profit differs from meeting spaces or the spa impacts the total property performance. Understanding each department's revenue and cost structure will allow revenue managers to optimize the whole organization.

Revenue managers will need to look at the P&L, master contribution analysis, understand operational constraints through labor efficiency ratios and grasp the impact of flow through.

This transformation will change rate setters to profitability architects who will earn their seat at the executive table and shape the future of their hotel.