BERLIN — The modern hotel industry had never coped with a demand shock to the level of the COVID-19 pandemic, and similarly the automated revenue-management systems increasingly deployed across the industry had no frame of reference.
That's why, according to experts speaking at the 2022 International Hospitality Investment Forum, revenue managers had to go back to basics and evolve their thinking through the course of the pandemic.
Speaking during the "Evolution of Revenue Management" session, Konstantinos Santikos, managing director for the Santikos Collection, said those automated systems became "completely irrelevant early in the pandemic."
"We had to go back to using Excel, basically, which is sad," he said.
Joe Pettigrew, chief commercial officer for hotel asset management at Starwood Capital, said revenue-management systems are "built with a steady-state environment in mind."
"The system needs to look at the past to predict the future. That's the whole purpose of their existence," he said.
When past patterns become completely decoupled from future demand, revenue managers had to relearn how to be entrepreneurial, he added.
Pettigrew said in the depths of the crisis, revenue-management systems, which are designed to forecast demand and set rates to match that demand, were relegated to being primarily a reporting tool that human revenue managers then used to parse and forecast from manually.
"We came up with some really good Excel models in the last two years," he said.
Judith Cartwright, founder and managing director of Black Coral Consulting, said much like how the systems lost their reliability in the downturn, they couldn't accurately measure and predict the upswing.
"With the last-minute demand the occurred initially when markets opened up, no revenue-management system can keep up with that," she said. "When you look at destinations like the Maldives, 70% of the total month's occupancy was booked within five days."
Adversity Spurs Innovation
Without automated pricing feedback, revenue managers have had to innovate over the past two years, panelists said.
Pettigrew noted the inability to rely on automated systems made it clear which revenue managers were in tune with their markets and which weren't. He said the crisis taught Starwood the importance of "instilling that culture of revenue leadership" across the enterprise and treating directors of revenue management as key members of a hotel's leadership team.
"Actually elevating revenue to the same level as [general managers] and [directors of sales] sets the right tone," he said.
Santikos said the crisis has spurred a shift in exactly what revenue managers evaluate, moving focus from the top line to the bottom line.
"It's about understanding what keeps the hotel actually alive, and that's profit," he said. "The goals have to change because revenue managers were pursuing occupancy, then rate, then [revenue per available room], and sometimes, occupancy might end up being a negative."
Cartwright pointed out the revenue-management discipline has grown more sophisticated, beyond just managing inventory to having highly skilled revenue experts act as "the gatekeeper of profitability" to make sure they're not just finding demand, but the right kind of demand that gets the most out of a hotel asset.
She said a good revenue manager in today's environment is the keystone of the various departments at a hotel.
"They're liaising with sales, with marketing, liaising with operations and the general manager, and they need to have that same voice at the table," she said.
Rainer Willa, CEO of HotelPartner Yield Management, said the role has evolved beyond the box of "revenue manager." He said in many circumstances that means not just working closely with other departments but overseeing them.
"The role of the revenue manager is moving in the direction of being commercial director — having revenue management, marketing and sales and bringing these together," he said. "Because they fit together, and the results are much, much better."
Cartwright noted that someone in a sales role, rather than versed in revenue strategy, often will default to prioritizing occupancy over all else.
"That's when that balance gets unhinged," she said.
This newly evolved role for revenue strategists and experts requires more skilled and analytically minded workers, panelists said, and that's been one of the most difficult things to deal with in an environment in which a hotel career is being perceived as less appealing.
"It's very hard because the whole industry was like a seasonal hotel [during the pandemic]," Santikos said. "People left, and had opportunities elsewhere while they were on furlough."
He said the pandemic spurred many workers, particularly millennials, to look for places to work where they could have a better work-life balance, which is a challenge in an industry where many roles don't offer a traditional workweek.
"As managers and owners, we had time [during the pandemic] to sit down and review things," he said. "The same thing happened with everybody else. They reviewed their lives, and that's why they left."