Revenue Management: Centralize or Localize?

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As a hospitality business grows, it is often difficult to decide which revenue strategies should be headquartered or centralized, or which should remain in the hands of local management teams.

Dimitris Hiotis, Partner and Global Head of Leisure, Travel & Tourism at Simon-Kucher & Partners, has over 20 years of experience in pricing and dynamic pricing across various industry and advisory roles. From his early days at TUI to now leading the Tourism, Transport and Leisure practice at Simon-Kucher & Partners, he has observed, consulted and assisted industry leaders in undertaking this transition. And with all his years of experience, he believes a hybrid approach is often the best answer.

“Every hotel has local competition and challenges and so you need to have that local input. However, from an efficiency perspective, it is better to have revenue management specialists centrally with a team focused on revenue strategy and pricing,” he said.

“The ideal situation is to have a central team using data and sophistication to set up the revenue strategy and a process to engage local teams for exceptional prizes, like when an event comes to town. But for this To do this, you need to provide hoteliers with simple information and involve them in the process. They are in the best position to tell you what is happening in the local market. But it needs to be a hybrid; science and data need to be in a position central, with the local team having a role to play in the process.”

How to centralize?

As a hospitality business grows, how does its management team take the business from local to potentially global? Hiotis has plenty of advice for teams growing their hotel business, but he warns there could be some growing pains.

“When you grow as a chain, you move away from a world where you are identified by location. You build brand identity,” he explained.

For Hiotis, companies should ask themselves four questions:

  • What are we as a brand?
  • What do we represent?
  • Where are we in the market?
  • What is our proposal?

“You have to form that identity first. Are you a thrill-less or a premium five-star, do you want to be dynamic or stay static in your pricing structure? And from there, you can start deciding how complex your pricing should be. But it is essential to state these principles early, otherwise everyone will do what they want. You need consensus,” Hiotis said.

Manage change

To execute a centralized strategy, Hiotis recommends gathering a team of people already aligned with the process and building a pilot from there.

“Start with a pilot project with GMs who are more supportive of it, then extrapolate it once you start seeing success,” he said.

“Start internally, identify people who are interested in this, then seek out external talent, such as a consultant, to advise you on how you should set up,” he added.

But how do you overcome the challenges of change-resistant team members? Those whose mantra seems to be, “We’ve always done it this way.

“The pilot has to prove the story to these people. People are more convinced when they see it working. Carefully find the most willing and work with them. Make sure you protect against any income risk. Then this success story team becomes your ambassadors and convinces others. It’s about creating that revenue culture and empowering team members,” Hiotis advised.

Golocal

Once a centralized strategy is defined, leadership can then empower local teams to work within the strategy to maximize benefits based on local opportunities.

“In a world where things are more central and you need to empower local teams, it comes down to communication and collaboration. It takes a lot of work. You need a system and reporting that is accessible to all parties , the central team being the guardian”, explains Hiotis.

The goal is to achieve a single source of truth, with reports that encompass the entire performance of the hotel.

“Incorporate that into something a hotel management team needs to review every day, including review scores, local market RevPAR, etc. Then, when it comes to pricing decisions, most d “These can be automated, but if the local teams want to query the price changes they can, and it’s easy to see why the price is up or down. You have to make it an ecosystem with input from both sides.”

Build the ecosystem

An integrated technology stack, which combines a PMS, RMS, CRS, and other elements, can help scale this centralized strategy.

“The benefit of an integrated tech stack is that it allows you to find proxies quickly. You can see hotels that work the same way. Then you can start with that structure and refine it over time Pandemic or not, there is always a need for historical reservations to start something. A machine learning method that learns from this configuration and adjusts it quickly is very effective,” said Hiotis.

However, Hiotis again favors a hybrid approach.

“You need a process that involves people and machines,” he said. “Tech companies that have been able to demonstrate system agility and have worked with customers to make systems less based on historical data have weathered the pandemic well.”

“For Hiotis, such systems must be able to create dynamic and rhythmic forecasts, capture increases in demand and adjust prices accordingly. For him, this is now more important than ever.”

“We are in a strange time right now. The request is back. Hotel teams don’t think about revenue management if their system is efficient. They think about staffing challenges and airport chaos, they are more operations oriented. However, a recession could be imminent and the good times will not last. »

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About Duetto

Duetto offers a suite of SaaS cloud applications for hospitality businesses to optimize every booking opportunity for the greatest overall revenue impact. The solution dramatically increases organizational efficiency, revenue and profitability by simplifying hotel revenue decisions and enabling properties to work smarter. The unique combination of hospitality experience and technology leadership drives Duetto to seek innovative solutions to industry challenges. The software-as-a-service platform enables hotels, casinos and resorts to leverage real-time, dynamic data sources and actionable price and demand insights across the enterprise. More than 4,000 hotels and casinos in over 60 countries have partnered to use Duetto’s apps, including GameChanger for pricing, ScoreBoard for smart reporting, and BlockBuster for contract business optimization. Duetto is backed by investors Warburg Pincus, Icon Ventures, Accel Partners, Battery Ventures and Spectrum 28.

In January 2022, Duetto was named the #1 Revenue Management System in the world in the HotelTechAwards out of 52 reviewed RMS products and in-depth end-user reviews. The awards rank and rate over 200 of the world’s top hotel technology products to provide the ultimate list of best-in-class software products, based on customer feedback from over 10,000 customer reviews, integration compatibility , organizational health, the strength of the partner network, and the quality of customer support.

For more information, visit https://www.duettocloud.com/.

Sarah McCay Tams
Content Director, EMEA
Duetto

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