I am delighted to share with you the interview I conducted with Estelle Izard for Jannoncecomplet on the theme of revenue management in the hotel industry.
Estelle has been responsible for revenue management for the company Clear Channel (outdoor billboards) for 3 years and has worked in revenue management for 10 years. She spent most of her career in luxury hotels for the Marriott . Finally, Estelle is also president of the Revenue Management Club, which brings together Revenue Management professionals in France every quarter.
In this interview, Estelle shares:
- his vision of revenue management
- the interest of revenue management for an independent hotelier or a real estate investor
- two actions to implement immediately in your activity
- three common mistakes to avoid
+ his unstoppable tip so as not to make a mistake when you select your competitors
Can you tell us about your journey in a few words.
I am a pure product of Revenue Management. I discovered Revenue in my business school and opted for the specialized master's degree in “Services Marketing & Revenue Management” offered by the school. (editor’s note: ESSCA – Higher School of Commercial Sciences of Angers)
It was a revelation! I immediately liked the quantified and rational aspect of the profession on the one hand, and also the fact that this expertise is at the crossroads of several professions. Indeed, Revenue Management is at the heart of commercial, marketing and financial issues. In our business, we don't just look at results. We also have a real and immediate impact on performance.
I then began my career in the United States where I worked for a few years as Revenue Manager for Marriott franchise hotels, then Senior Revenue Manager in Paris. Recently, I left the hotel field to focus on professional-to-professional ( B2B ) Revenue Management within the company Clear Channel, for which I am responsible for Revenue Management for France.
How would you describe revenue management in the hotel industry for those who don’t know it?
In its basic definition, revenue management's role is to maximize revenue from a service activity. In my opinion, you must first know how to predict demand . Based on these forecasts, modify both the pricing strategy and the inventory management strategy.
Revenue management is often criticized because it is accused of increasing sales prices during periods of high demand, to the point of making the price of the services it optimizes sometimes inaccessible. But we must not forget that the major advantage of revenue management is above all that it has made these same services accessible to the general public (which was not the case in the past), and this in particular thanks to lower prices. low prices and promotions, during periods of low demand.
So, the entire job of the revenue manager is to know how to play with this range of prices to capture maximum demand.
Why should a real estate investor (short-term rental) or an independent hotelier embark on a revenue management strategy?
For the same reasons that motivate large companies to invest in these strategies. In my opinion, this is the most effective – and quickest – lever for maximizing your income. Indeed, the decisions taken have an almost immediate impact on the activity, and the method acts in the short term, the medium term and the long term.
Another motivation lies in the fact that revenue management helps to better manage its visibility and its relationship with online sales sites (booking, Airbnb, Expedia, etc.). This point is vital because as an independent hotelier or real estate investor, you are obliged to use these platforms, but they cost you a lot of money. Optimization allows you not to abandon your inventory to these sites and to get the most out of it.
For someone who has never done revenue management in their business: what do you recommend starting with?
In my opinion, the most important thing to get started is to create a history of your data. The basis of the business is forecasting demand, and we cannot predict it without having reservation data. The data is essential as well as its quality (correct data), because this is where the entire strategy comes from.
Another important point is customer segmentation. In reality, it is initially useless to change your prices every day, and to try to create a very specific revenue management strategy, without having a solid segmentation as a basis. We must already understand who our customers are, where they come from, segment them, to decide whether or not to give them access to the service, depending on the level of demand.
For you, what are the errors observable among the various players in French tourism, which cause them to lose money?
The first mistake is the way you look at competitive analysis.
First of all, we tend to look at it too much. I think the competition should be studied after looking at its own trends and remaining capacity (if the competitor has lowered their prices, but we only have one room left to sell, no reason to change their own prices! ). And if we only look at the competition, we reduce ourselves to being a follower in the market, which sometimes makes no sense.
On the other hand, too many hoteliers are looking at the wrong competitors. It is true that we may naturally tend to look at the hotels that are geographically closest or those which are our “model” (because the service there is qualitative, for example). But you should always compare like with like, especially in terms of service.
My unstoppable tip on this subject is to look on online sales sites (notably Booking & Expedia) to see which establishments our customers have also consulted (before or after consulting ours). It can sometimes be a disappointment to be compared with a counterpart that you consider much less good than you, but you have to accept the reality on the ground: if you lose sales to another establishment, then it is your competitor!
Finally, the pet peeve of revenue management is making the mistake of lowering your prices at the last minute. This method has negative consequences: getting the customer used to waiting until the last minute to make their reservation. If your customers wait until the last minute to book, your forecasts will be of lower quality, and your actions related to pricing or inventory will consequently also be of lower quality. It is therefore necessary to limit situations of decline. It is sometimes possible to lower prices at the last minute, in the event of an unforeseen problem: for example a very late cancellation (cancellation of a group for a hotel).
What do you say to people who think you have to be good at math to do revenue management?
You have to have a certain affinity with numbers, it's true, but there's no need to be a mathematician. All the formulas used often remain basic. On the other hand, we use Excel a lot. It is therefore better to follow training in Excel than training in math. In our profession, no calculations are done by hand, everything is calculated by Excel, so you must be able to understand the formulas, but not have very advanced statistical knowledge.
Moreover, most Revenue Managers come from the field (reception, reservations), or from business schools or hotel schools. Not often engineering schools!
What do you wish you knew when you started your career in revenue management that you know today?
I would have liked to understand more fully the difficulty of balancing:
- on the one hand the maximization of income in the short and medium term
- with on the other hand the need to maintain and increase customer loyalty and satisfaction
Customers tend to demand lower prices or free rooms at the slightest hassle. You have to know how to say no when it's necessary, but also know how to be flexible at other times. Because by sacrificing a little short-term income, we sometimes ensure long-term income.
Furthermore, there is also a very commercial aspect linked to price: as soon as we change a price, we must ensure that it is the same on all distribution channels. And also ensure that we have not set the public price at a level lower than certain negotiated prices (company price for example). In Revenue Management, you have to know how to highlight your product and your company through the prices and promotions you offer, and therefore also be a marketer.
Finally, if you had to share your ultimate tip, your favorite revenue management tip for maximizing turnover, what would it be?
I particularly like to use the overbooking lever. This is a very powerful lever in Revenue Management that you must know how to use precisely to avoid degrading customer satisfaction. You have to know the limit, and it is experience that guides you.
For a hotelier just starting out, before doing so, make sure you have potential 'partner' competitors, to relocate customers who could find themselves without a room with you. You must obviously start with a low number of overbooked rooms (overbooking). Finally, without historical data on the level of cancellations you experience, or the number of customers who do not show up that evening, you cannot use this leverage, so you must track this data to create a history.
I warmly thank Estelle for the time given and the interesting insights she provides.
If you want to ask him any questions, don't hesitate to write them in the comments. I will ask them and transcribe his answers.