Posted: September 25, 2012

By Kent Duncan, CRME, Vice President, Sales & Revenue Strategy, Marcus Hotels & Resorts, and member of HSMAI’s Revenue Management Advisory Board

As revenue management continues to weave into the fabric of hotel and resort day-to-day operations, its overall purpose, of course, is to increase profitable revenue. The question often arises about who is best positioned to manage and lead this important function for a property – a centralized entity such as the brand “revenue management for hire” program, or an on-property revenue manager? There are certainly advantages and disadvantages of both approaches. Depending on the objectives you’re seeking to accomplish for your property or organization, consider this guidance as you weigh the options.

The discipline of hotel revenue management has grown significantly over the last 20+ years and now is a widely accepted practice for managing the sale of hotel rooms, function space, spa offerings, and more. In its beginnings, hotel revenue management primarily took shape within the reservations departments with directors or managers of reservations learning and implementing early yield control methods and pricing strategies. Since then, hotel revenue management responsibilities have grown and become more refined, requiring the revenue manager to be well trained in various systems, know how to use the data from many different reports, understand numerous distribution networks, and have a broader knowledge and understanding of hotel operations, finance and profitability.

Over the last few years, many hotels have coped with this evolving landscape by having a director or manager of revenue management based at the property. However, technology improvements and, frankly, trust in the discipline, are enabling hoteliers to find real benefits by having their revenue management needs managed by a person or team of people outside of the property team, based in a location away from the hotel.

Table 1 illustrates many of the benefits and challenges of having a dedicated, on-property revenue management leader.  Table 2 looks at the other side of the coin, examining the benefits and challenges of an outsourced, or centralized approach.  While it’s not possible to address every scenario, these illustrations will offer general guidance that can apply to other situations.

Table 1 – On Property Benefits and Challenges

Table 2 – Centralized Benefits and Challenges

Obviously there are many benefits and challenges to either approach, and neither is a sure fire solution. For a company with multiple hotels, in some cases you may deploy a mix of strategies depending on your portfolio (Table 3).

Table 3 – Portfolio Organizational Deployment (Source: The Evolving Dynamics of Revenue Management)

Determining the appropriate revenue management deployment for your organization begins with knowing the objectives you’re seeking to accomplish, and the level of services you desire from this deployment. For example, a select or limited service hotel may have a basic objective simply to have someone forecast, manage and price the day-to-day demand of the property and set the appropriate yield within a 90-day window. On the other hand, a more complex, full service hotel or resort may require more of a strategic and leadership role including full year forecasting, budgeting and total hotel strategies (which may include function space yield management).

Total Hotel Revenue Management, or THRM, has become the big buzz word in hotel revenue management, so also of consideration is the available technology.  Improvements in revenue management systems have enabled revenue managers on property to be more available to do other tasks, such as yielding function space, pricing and forecasting catering, etc., all components of a solid THRM foundation.  If you have an on-property revenue leader, be sure this person has good functional technology in order to optimize his or her time and your revenue management strategies.  From a centralized perspective, technology is what is enables the effective management of multiple properties.  If the technology in use for your revenue management team – whether on property or in a centralized cluster – is not up to par and keeping pace with advancements in the field, your functionality is less than optimal. 

At my company we use multiple methods for deploying revenue management – cluster deployment in cities with multiple hotels better distributing our talent pool, executive committee directors at mid-size upper-upscale hotels, and brand centralized services in markets where the talent is shallow or the hotel is limited or select service. I believe it is important not to limit your options by having a one-size-fits-all approach to revenue management deployment. Instead, have flexibility, and carefully consider what options may best fit your hotel’s or company’s needs. With improving technology, available training, and the growing talent pool in revenue management, your options for managing your revenue management are wider than they have ever been before. 
 
About the Author
Kent Duncan is Vice President of Sales and Revenue Strategy for Marcus Hotels and Resorts where he is responsible for optimizing sales, revenue management and event management for the company’s portfolio of hotels. He brings 23 years of hospitality experience managing various areas of hotel disciplines including, catering/events, sales and revenue management. Prior to joining Marcus Hotels & Resorts, Kent held a variety of leadership positions in his 19 years with Marriott International, most recently as Director of Market Strategy overseeing the revenue management strategy for several hotels in the Atlanta area. In addition to his leadership experience, Kent has gained valuable knowledge through his time spent in a variety of property types including major convention, luxury, resort, downtown, and suburban hotels. He is a member of HSMAI’s Revenue Management Advisory Board.

About the HSMAI Revenue Management Advisory Board
The Revenue Management Advisory Board leverages insights, emerging trends, and industry innovations to guide the development of products and programs that optimize revenue for hotels. www.revmanagement.org

Members include: 

• Co-Chair: Jon Eliot, CRME, CHA, Vice President of Revenue Management, Premier Hospitality Management
• Co-Chair: Sloan Dean, CRME, Vice President of Sales & Marketing, Interstate Hotels & Resorts
• Immediate Past Chair: Scott Roby, CRME, Vice President, Revenue Management, Evolution Hospitality
• Chris K. Anderson, Ph.D., Professor, Cornell University
• Bonnie Buckhiester, President & CEO, Buckhiester Management USA Inc.
• Sheila Cosgrove, Director, Revenue Management Ops & Planning, Intercontinental Hotels Group
• Kathleen Cullen, CRME, Vice President Revenue Strategies, Heritage Hotels and Resorts
• Kent Duncan, CRME, Vice President, Sales & Revenue Strategy, Marcus Hotels & Resorts
• Tammy Farley, Principal, The Rainmaker Group
• Neal Fegan, CRME, Executive Director of Revenue Management, Fairmont Raffles Hotels International
• Rhett Hirko, CRME, Director of Revenue Analytics, Hyatt Hotels & Resorts International Operations
• Jay Hubbs, Vice President, Regional Sales, ReviewPro
• Burl Hutchison, CRME, Director of Revenue & System Optimization, Sabre Hospitality
• Klaus Kohlmayr, Senior Director, Consulting, IDeaS - A SAS Company
• Mark Molinari, CRME, Corporate Vice President of Revenue Management and Distribution, Las Vegas Sands
• Orly Ripmaster, CRME, Senior Associate, KSL Capital Partners
• Mark Robertson, Central Director Revenue Management, Wyndham Hotel Group
• Susan Spencer, Market Director - N. America, ChannelRUSH
• Trevor Stuart-Hill, CRME, President, Revenue Matters
• Paul Wood, CRME, CHBA, Vice President of Revenue Management, Greenwood Hospitality Group

Want to Learn More?
Each month, the 2012 Revenue Management Webinar Series, produced by the HSMAI University in partnership with HotelNewsNow and STR, covers one aspect of cutting edge revenue management in today's economy in conjunction with articles written by members of the HSMAI Revenue Management Advisory Board. If you’re not able to attend a live program, archives are available.