I’ve worked in Corporate Finance and in Revenue Management for the Hospitality and other industries and I can confirm that, when done correctly, there is no more analytically intense profession than that of a Hotel Revenue Manager. Like I have said on this blog dozens of times, the Hotel Revenue Management profession sits at the crossroads of every department in a hotel company. As an example, over the last few years, hotel RMs have been taking over the responsibility for setting the pricing and promotional strategy for Sales, Marketing, and even F&B. Furthermore, RM now has as much fiduciary responsibility for hotel profits as Accounting and Finance. So why is it that Hotel RMs are underpaid compared to their colleagues in other departments, specifically Finance?
According to glassdoor.com, the average US salary for a Hotel Revenue Manager is around $65K, while the average US salary for a Hotel Finance Manager is $85K. Think about that. RMs have to deal with more systems, more data, more calculations, more tasks, more changes, and more pressure, but get paid and average of 25% less than their Finance counterparts. This is not equal pay for equal work.
In an effort to try to add some perspective to this income inequality problem (and hopefully begin to fight for a solution), I gathered public LinkedIn profile data for 9,000 Hotel Revenue Management professionals. I then looked for the most clear trends that would suggest an explanation for the above. I was able to identify 15 data points that shed some light on the drivers of the problem. The causes of the RM income disparity center around Career Path, Qualification, and Skill Set. Here are the first 5 insights.
- Revenue Managers have a Service and not a Technical Background. Back in 2003, in the rush to load rates into the new OTA websites, hotel management took the people closest to the reservations process and turned them into RMs. Today, most RMs still come from one of the Service areas of the Rooms Division. Unlike Finance Managers, that typically work with numbers and data straight out of college, many RMs are switched from a service role to a quantitative role almost overnight. This leaves a lot of holes in their background and immediately puts them behind their Finance colleagues.
- Half of all RMs have not been in their job long enough. Almost half of all RMs are just reaching the famous 10,000 hours of learning. Only about 1/10th of RMs have reached the requisite 15 year experience mark which is the unspoken expert level in Finance. The lack of respect for the profession is therefore also a function of the age of the profession. There IS a Science to Revenue ManagementLearn the Data Science of Hotel Pricing and command the highest salaries.
- Titles are being traded for salary. Revenue Managers move quickly from one title to another, but the salary does not necessarily follow. More than half of all RMs will change titles within 2 years of their last title change. The benefit for the hotel company is that they give stakeholders the impression that they have a robust RM function. The drawback for the RM is that without a gradual increase in responsibility within multiple title changes (i.e. Financial Analyst I, II, III) and with the accompanying salary increases, what you get is more work immediately with less opportunity for multiple jumps in pay.
- The profession is top heavy. In order for RM salaries to be equal to Finance, there needs to be many layers of progression to the top titles. Currently, almost 40% of RMs(about 4,000 people) are at a Director Level or above. That means that their next big salary jump would have to be to VP, of which there are currently less than 300 slots in the industry. This means that most DORMs will probably only see a cost-of-living increase for years to come. The other option is to move laterally to another company where the salary is likely to be similar. Meanwhile, there are as many RM analysts as there are VPs of RM which means that there is no pressure coming from the bottom to increase salaries up the ladder. One interesting note is that most VPs of RM are US based while most RM analysts are non-US based.
- Rise to the top is too fast to allow for salary jumps. If you entered an RM department in 2010 you would likely be a Director by now. That accelerated career path does not exist in any other department in the hotel industry. However, the unintended consequences is that within 5 years, even if you do get the title, no hotel company would be able to justify the same increase in salary as say an F&B controller would experience over the 10-15 years it would take them to make it to the DOFA role.
This post continues when I will show you the Education and Certification data points that suggest why RMs are perceived differently than their Finance counterparts.
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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+