People arguing for moving toward total revenue management think that the overall perspective on the topline would increase profits for the hotel. However, very little, if any, research clearly shows the actual impact of focusing on total revenue instead of room revenue. So let's reason who would gain the most by moving from room revenue management to total revenue management.
Type of hotel
Hotels with many facilities besides the rooms would benefit from moving towards total revenue management. In many hotels, the room revenue is less than half of the revenue, so hotels would benefit from giving the other revenue sources more attention. Typical hotels that would benefit from total revenue management are full-service hotels with rooms, meeting space, F&B outlets, and other facilities, and resort hotels where the guest spends several nights and use many different facilities. In hotels where room revenue is the dominating revenue source, the hotel should focus on room revenue management.
Anticipated views from stakeholders
Let's take a look at what's in it for each stakeholder.
The owner
The owner should be the stakeholder with the strongest motivation to start focusing on total revenue management if growing all revenue sources would increase profits. Higher revenue means an increased profit, provided that marginal revenue's contribution is positive. In addition, the owner has a long-term perspective, so even if the implementation of total revenue management will take some time, a long-term higher profit will lead to a higher return on investment.
The general manager
The general manager should also be strongly motivated to implement total revenue management since the general manager often has a bonus calculated on achieved EBITDA. Many general managers have a time horizon of three to five years at the same hotel, so if the implementation will take one to two years, the general manager would probably go for total revenue management if it is at the beginning of the employment contract term. Later during the contract term, the general manager would not risk a lower EBITDA because of implementation costs and thereby get a lower bonus. Potential rewards always tend to drive decisions.
The revenue manager
It takes a lot of effort from the revenue manager to drive a total revenue management project. Without the necessary tools, systems, and human resources, it will be challenging and time-consuming, with a high risk of failure. Therefore, the revenue manager should secure the necessary resources to increase the project's success rate. If the owner or general manager does not want to give revenue management enough resources, the job will become a suicide mission and not end well for anyone.
The department heads
Revenue managers are experts on maximizing room revenue and learning to maximize revenue on meeting space, but not on all other revenue sources. Most revenue managers do not have good knowledge about food & beverage, spa, golf, etc. Revenue managers have ideas they can apply to other capacity-driven revenue sources, but the missing knowledge is about how consumers purchase additional products and services. The heads of revenue-producing departments have a more profound understanding of consumer behavior. At first, implementing total revenue management will only mean more jobs for the department head.
The CFO
The CFO should be part of the team in implementing total revenue management. The knowledge and experience in accounting, budgeting, and financial forecasting are vital to the project's success. In addition, the CFO already manages all revenue sources in the accounting system and can connect the dots between all transactions, accounting, reporting, and legal requirements. This ensures that total revenue management is integrated into other processes and does not become an isolated island. The CFO will also be the extra support the revenue manager needs to cope with the additional workload of executing the total revenue management project.
Marketing and sales
Total revenue management requires marketing and sales to include all products and services in B2C and B2B offerings. Using a broader assortment of facilities, products and services will help marketing and sales to succeed in their jobs so that these roles will welcome the change. In addition, a total revenue management project will likely give marketing and sales a better structure and clarify which products and services to sell and when to sell them.
Systems and tools
There is a lack of systems and tools for implementing and applying total revenue management. Demand Calendar fills the gap with functions for total revenue management for all roles in the commercial team and the CFO. Today, hotels have siloed systems with partial functionality for total revenue management. The main challenge is setting up these systems to communicate with each other. Most hotels cannot overcome this hurdle, so they manually use Excel to collect data to get an overview of the total revenue. Total revenue management is complex, so it will be too expensive to handle manually. Without a system that can handle all aspects of total revenue management, the project risks failing or, in the best case, only going break even.
