1848 was a tough year. The United States and Mexico were at war, a cholera epidemic in New York killed 5,000 people, and there was no indoor plumbing. Yet, against this backdrop, James W. Marshall found a golden nugget at Sutter’s Mill in California, setting off a massive gold rush that moved people West and kickstarted America’s entrepreneurial ethos.
2020 has been a challenging year. Covid-19 has destroyed lives and livelihoods. In hospitality, the immediate and dramatic drop in occupancy across most markets highlighted a critical flaw in our assumptions about the way revenue optimization works. What do you do when demand dries up overnight?
In speaking with leading industry executives, it’s clear that the current crisis has exposed fundamental gaps in our commercial strategy approach. Yet, in an era of doubt, many hoteliers feel that opportunity in the hospitality industry is as strong as it’s ever been.
These “New Prospectors of Revenue Management” believe that while success will require hard work and a massive paradigm shift, innumerable riches are waiting to be found for those that can pull their way through.
Here’s how these innovators, including Shawn Jereb of Montage Hotels & Resorts and Cesar Rocha of Performance Hospitality Management, are using the current crisis as an opportunity to discover new riches.
- Adopting new tools.
Many leaders are realizing they can improve performance by leveraging technology. Computers have gotten really good at many of the mundane revenue management tasks, including data discovery and report compilation. By automating these tasks, revenue executives can focus on identifying trends and implementing more strategic sales, marketing and pricing campaigns.
The great thing about this approach? Computers often work for less than minimum wage.
- Rebuilding their expedition teams in a thoughtful way.
So, we should just turn revenue management over to the machines and get rid of our people, right? Not so fast. There are a lot of things computers are really bad at. Take building a strong revenue optimization culture, for example. Or adjusting course when prior results don’t mirror future expectations.
Rather than establishing a false dichotomy of people OR technology, savvy revenue leaders are using technology to multiply the impact of their people. Shawn Jereb of Montage Hotels & Resorts stresses the importance of pairing the right people with the right tools. Expecting revenue teams to optimize results without the proper tools is a bit like “sending a chef into a closet with a knife and expecting him to make tiramisu,” Jereb says.
Many leaders are prioritizing analytical acumen and soft skills over VBA or systems expertise during the hiring process. It’s more important that revenue leaders have the capacity to adapt to new technology quickly, and to work closely with their sales and marketing team to find and target new customer sources.
In addition, many savvy leaders are rethinking their deployment model. Jereb says Montage was already moving towards a clustered model for their revenue management team, and the pandemic has accelerated this shift. Offering increased responsibility and the option to work from home long-term has allowed them to attract and select from a larger pool of revenue management talent.
- Tapping new veins.
No matter how hard you work, you won’t find gold unless you’re drilling in the right location. Many established business segments have temporarily disappeared.
The group and corporate business travel segments aren’t dead as many prognosticators will have you believe. However, they won’t bounce back overnight, and they will likely look different moving forward.
Striking it rich will require that hotels leverage the current crisis as an opportunity to pursue new customers rather than attempting to simply ride out the current travel restrictions and a down economy.
- Learning from their mistakes.
Nobody has all the answers, particularly during a time in which prior performance is not indicative of future results. When trying a new approach, it’s important for leaders to help their teams understand that failure is often a necessary stepping-stone to success.
Cesar Rocha of Performance Hospitality feels it’s important that we don’t kill creativity by telling people they are wrong. “If mistakes are made,” he says, “what did we learn that we can benefit from the next time around?”
Rocha has worked tirelessly to establish a transparent, trust-based relationship with his owners. This allows him to test new theories to improve revenue outcomes without fearing that the occasional misstep will reflect poorly on his team. While not every strategy is a homerun, Performance Hospitality Management has discovered new techniques that are helping to keep several of their properties on track to hit their annual GOP target.
- Mapping and relentlessly pursuing their success.
With the freedom to make mistakes comes the responsibility to achieve results. Rocha and Performance Hospitality have adopted the OKR process used by Google, Spotify, LinkedIn and other leading innovators.
The OKR process helps their organization to align their goals and monitor progress using the following formula:
Objectives are memorable qualitative descriptions of what you want to achieve, and should be short, inspirational, and engaging enough to motivate the team. Key results are a set of metrics that measure your progress against the objective. For each objective, you should have a set of 2-5 key results that are quantitative and measurable.
Here’s an example relevant to hospitality:
Objective: Create an awesome customer experience.
Improve Google Review score from X to Y.
Increase repeat customer rate from X to Y.
Keep the House Promo/Comp cost under Y.
“This approach,” Rocha says, “places indirect pressure on leaders to hit results.” If they are failing to achieve tangible results, questions will arise organically.
As they forge a new path forward, Jereb and Rocha are well positioned to enjoy the spoils of the recovery. Over the course of the next couple years, the performance gap between the hotels adopting a new approach and those continuing to do business as usual will widen.
Similar to the prospectors that struck it rich during the gold rush, those that work hard to find the new customer vein and tap into it will drive more value for their hotels, bring their teammates back more quickly, and cement their career legacies.
About the Author
Mike is the President and Co-Founder of Focal Revenue Solutions, which provides hospitality business intelligence systems and strategy for hotels, resorts and hospitality management organizations. Prior to founding Focal, Mike served as Director of Revenue Systems Architecture for Two Roads Hospitality.