Outsourcing Revenue Management is the Future

By Lily Mockerman Founder, Total Customized Revenue Management | August 20, 2017

Most hospitality leaders or general managers wouldn't blink at hiring an outside IT firm. When asked why, the common response is that they would find IT hard to manage, as they don't fully understand what needs to be done, leaving them open to hiring a less than qualified person, ending up with under-performing employees, or being unable to truly review the employee fairly. Even as the leader of an outsourcing revenue company, we recognize the value of being able to hire highly-skilled groups of providers, which is why we choose to outsource items like payroll.

Yet when asked about Revenue Management, a similarly specialized field, most general managers feel they understand the discipline. Looking at the evolving nature of the discipline, however, many leaders don't realize the way that this area has expanded. As I mentioned in my earlier article, The Future of Revenue Management, revenue managers are faced with an array of challenges that include advanced tactics like channel optimization, distribution cost management and room type optimization. As if that were not enough, Revenue Management is sometimes asked to function as a miniature IT department, with most companies looking to the revenue management department to be the experts in the PMS, CRS, GDS and RMS systems.

The detailed nature of these systems when it comes to building content and revenue structures, or finding ways to use the system to optimize when it may not particularly lend itself to advance revenue techniques, can present a daunting challenge for a leader who believes they have a firm understanding of Revenue Management. This often leads to less than thorough evaluations of a revenue manager's talent and performance.

It is, of course, not a general manager's fault that they may not be able to keep pace with innovation and expansion in revenue management duties, but it is essential that they understand that the discipline is no longer simply pricing a booking window and working with numbers. Perhaps in some cases, the job description of a revenue manager tends to be misleading in this aspect, seeming to focus only on things such as forecasting, budgeting and pricing. With the broad scope of the new revenue management role, it is unreasonable to expect someone to manage the Revenue Management department effectively without being integrated in the day-to-day activities of the position, if a hotel truly values and desires focus on this discipline.

Outsourcing, then, provides some solutions to these challenges, as it does for outsourcing IT, payroll or HR. From the talent perspective, using an outsourcing company to provide revenue management capabilities can impact talent in four major ways. First of all, as alluded to above, using an outside company for this function allows a hotel to tap into higher talent levels than they may be able to find (or afford) on their own. While the quality of such companies can vary widely a reputable company will have highly-skilled and knowledgeable staff that are chosen by other experienced revenue management professionals who understand the skill sets needed and how to properly manage performance in the department.

Secondly, outsourcing gives hotels access to a broader "think tank" of knowledge to help solve strategic problems. In the best companies, there is a strong environment of collaboration between the revenue management team members, giving the hotel access to not just one perspective, but a wealth of team members who all see a given strategic problem from multiple angles, allowing them to best select the most effective strategy. Even the most experienced on-property revenue managers often fail to look beyond their local market to make the best decisions for their property. It takes substantial time and effort to pull together a comprehensive revenue management strategy that extends beyond local reach. When outsourcing Revenue Management, a property can benefit from a broader perspective on current trends and will be able to gather data from a wider array of sources. This type of information creates a strong competitive advantage in any market.

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