Resolving the Conflict between Revenue Management and Digital Marketing

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As the revenue management industry continues to evolve, it’s vital for hoteliers to embrace processes that enhance and magnify business analytics in order to maximize revenue. By opening up dialogue between the revenue management and marketing departments, hoteliers can compound the value of each department and more proactively take their revenue opportunities to the next level.

In addition, revenue managers and marketers will discover that through regular communication, not only can they significantly impact their hotels’ bottom lines, but also their careers – experiencing more job satisfaction and growth as a result. In the end, blending these two valuable disciplines together is a win-win situation for everyone involved, including the hotel.

Although many hotels are aware of the benefit of marketing and revenue management working hand-in-hand, but the bigger challenge is overcoming the traditional mindset of marketing and revenue managers viewing themselves as distinct from each other. Hotel management questions how they can change this so that working together moves beyond an idea to a tangible and profitable business strategy. As such, this can prove even more pressing a priority than technology or process changes in achieving an eventual financial return from convergence.

Nowadays the hotel distribution become more complex than ever, where Revenue management tends to look at rate and inventory by channel, with separate strategies and objectives based on achieving the optimal mix of hotel guests. While this approach is proven and sound, revenue managers often overlook the opportunity to influence consumer behavior within the demand channels they are managing.

As a discipline, revenue management typically values predictability within each channel over targeted strategies and offers that can increase conversions and gain share of online demand.

On the other hand, marketing tends to look at guest history, leveraging the hotel’s CRM, email databases, source markets and target customer types in various marketing channels.

Crossing the bridge 
In hotel industry the Revenue management and digital marketing are independent business processes that leverage advanced analytic techniques to drive significant revenues thus so revenue management tends to look at rate and inventory by channel, with separate strategies and objectives based on achieving the optimal business mix of hotel guests (market segment).

While this approach is proven and sound, revenue managers often overlook the opportunity to influence consumer behavior within the demand channels they are managing.

As a discipline, revenue management typically values predictability within each channel over targeted strategies and offers that can increase conversions and gain share of online demand.

On the other hand, marketing tends to look at guest history, leveraging the hotel’s CRM, email databases, source markets and target customer types in various marketing channels.

Most marketing decisions are based on past performance including historical booking patterns, previous campaign performance, last season’s guest profile and even research or intercept surveys that are a year or more old.

Traditionally, revenue management looks forward because it’s placing future inventory at a future rate.

But most factors taken into consideration are in the past – using historic PMS data to best predict the future such as last year’s rate, last season’s inventory, last month’s competitive rates, and projected booking pace based on pace of previous years.

The conflict, and potential synergy, between digital marketing and revenue management arises because they control two different components of the marketing funnel. Digital marketing generates demand by creating awareness in a prospect distribution channels , arguing for consideration and delivering the customer with an effective call-to-action. The customer experience of revenue management comes after all that. Revenue management stimulates or restricts demand at the point of conversion by moving price and availability. It creates optimal pricing strategies that target conversion rates to available inventory.

The key is understanding what the consumers look like who are actively shopping for a hotel room and their preferred dates. It’s the equalizer that brings both groups together, enabling revenue management to deliver the right product at the right price and marketing to target the most-likely-to-book consumer at the right time. Knowing the consumer is the foundation of success across the guest acquisition chain.

Conclusion 
Hotel distribution is more complex today than ever and there are so many companies between the hotel product and the guest.

Along the way, two key functions – revenue management and marketing – have evolved into very specific and sometimes dissonant entities that don’t always connect. But they should.

At many large businesses, marketing and revenue management can work at cross-purposes. Both are focused on generating greater profits at a strategic level, but at a tactical level the definitions of success can be very different. I have seen marketers celebrate successfully selling out a loss leader while revenue managers watched their Revpar slip out of reach. Alternatively, revenue managers can react to the demand surge due to a marketing campaign by making it impossible for anyone targeted by that campaign to buy at a competitive price.

The conflict, and potential synergy, between digital marketing and revenue management arises because they control two different components of the marketing funnel. Digital marketing generates demand by creating awareness in a prospect population, arguing for consideration and delivering the customer with an effective call-to-action. The customer experience of revenue management comes after all that. Revenue management stimulates or restricts demand at the point of conversion by moving price and availability. It creates optimal pricing strategies that target conversion rates to available inventory.

With the right approach, revenue managers and marketers can work together seamlessly to help achieve their mutually shared goal of driving revenue at the hotel. By regularly communicating, sharing information and brainstorming strategies, each department will likely see their achievements enhanced, along with their hotels’ occupancy and Average Daily Rate (ADR).

Although the changes will not occur overnight, by working together, both parties and the hotel will realize tremendous long-term improvements.

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