Hotel Profit Discovery

Hotel Revenue Managers have taken the Five Ps away from Marketers

For years, we’ve all been reading about the need to coordinate the activities of Revenue Management and Marketing into one synergistic Revenue Generation process. In practice what is really happening in many hotel companies is that the activities of both departments are not merging, but they are instead becoming the domain of Revenue Management. That RM is “taking” away many of Marketing’s traditional roles makes sense. As marketing has become more digital, it has inevitably become more data driven, and in most properties around the world RM is more prepared to access, manipulate, analyze and make decisions from data than Marketing. With RM around, Hotel Marketing responsibilities are being relegated to Public Relations, the brand “look” and “feel”, social and web content, and ad execution. In fact, in many hotel properties, the traditional Five Ps of Marketing are completely in the hands of RM. Here’s why.

1. Price.  Today, pricing in hospitality and in most of travel belongs to the RM department.  That was not always the case.  When the practice of Yield Management began at American Airlines and British Airways, marketing made rate decisions and fed those prices to the math guys in the yield team that would decide on the protection levels for each rate class.  In fact, many of the RMS systems today run on algorithms designed around this same process of marketing leading the pricing decisions.  Today, non-room pricing is still largely the domain of each department head (i.e. F&B, Spa), but as the Total Revenue Management movement expands, all pricing will eventually belong to RM.  I’ve personally heard several GMs say, “If I can get more Revenue with better pricing, why do I need Marketing?” That’s silly of course, but it goes to the heart of a common sentiment.

2. Place.  Where to sell is distribution and that is definitely the domain of RM.  Whether we are talking about how many rooms to sell to each channel or which channel to sell to, RM has complete control of the places where rooms are offered.  What’s more, in hotels that practice Mathematical Revenue Management, RM has control over how many rooms Group Sales can offer on any day.

3. Promotion.  When and where you offer a promotion is now just as important as what you offer.  To make an informed decision on how to execute a promo you need to have information on booking windows, occupancy forecasts, comp set pricing, and that data is usually completely controlled by RM.  Whereas before, Marketing would blast out dozens of promos to see what would stick, most RMs now have enough PMS data to direct marketing as to the ideas that work and those that don’t.

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4. People.  Proper guest segmentation is a strategic weapon that allows you to align marketing, offers and pricing. It has always been the domain of Marketing, but since one of the purposes of segmentation is to provide more accurate pricing, it is now RM’s responsibility.  In fact, most of the time I speak to Hotel Marketers about micro-segmentation, they bring in their RM colleague. That’s a shame because I find that, for the most part, Hotel Marketers are still better at understanding the nuances of  the qualitative aspects of guest behavior than their RM counterparts.

5. Product.  While most product decisions are made by department heads (i.e. menus), in some properties RM is guiding the process of product decision by providing insight into what sells at what time to what guest.  In the past, marketing would be more likely to lead these discussions as it would know the “pulse” of the market.  However, with PMS and POS data, that marketing “hunch” has lost a lot of its “punch”.

RM taking over Marketing’s domain may be the most efficient way to get things done at many properties, but it is by no means the most effective.  A true marriage between these two departments, built around the unselfish sharing of data and the alignment of common goals is the preferred order of things.  Under one common vision, there is no doubt that both departments can accomplish more together than apart.

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Robert Hernandez, Statistical Analysis and Data Mining for Revenue Growth Robert is an expert in the field of mathematical Hotel Optimization and Analytics. He has spent the last 17 years building data-driven forecasting and optimization models for companies in over 20 different industries, from tech to tourism. Robert possesses a very unique skill set including cross-disciplinary experience, advanced mathematical and analytics skills, data transformation, industry-specific knowledge and business-process improvement expertise. Robert began his career at the Walt Disney Company in Revenue Planning. Read More+


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