Warren Lieberman is recognized as one of the world s leaders in non-traditional implementations

Transcription

1 GETTING THE MOST FROM REVENUE MANAGEMENT By Warren H. Lieberman Veritec Solutions 824 Miramar Terrace Belmont, CA U.S.A. Tel: About the Author Warren Lieberman is recognized as one of the world s leaders in non-traditional implementations of revenue management. He began his career in yield management in 1984 with American Airlines. Dr. Lieberman is President of Veritec Solutions. Veritec is a consulting and software development firm based in Palo Alto, CA., whose mission is to be the world s highest quality provider of revenue management and pricing solutions. Veritec s services include system design and development, educational workshops, strategic consulting, and implementation support. 1

2 GETTING THE MOST FROM REVENUE MANAGEMENT Abstract Reviewing the literature on revenue management, it becomes fairly clear that the vast majority of articles are focused on the technical aspects of the subject. Demand forecasting probably receives the bulk of this attention and after this probably comes optimization. On the nontechnical or less quantitative side, areas that have received attention include case studies describing the use of revenue management in various industries, customer reactions to revenue management, specific elements of revenue management programs (e.g., groups, performance measurement, overbooking, differentiated pricing structures), and discussions of the applicability of revenue management s concepts under different types of business conditions. What appears to be missing, at least at a detailed level, is informative discussion of the managerial and operational issues that affect the success of a revenue management program. Kimes (1989) made the observation over 10 years ago, and we believe it still holds true. For example, there is widespread recognition that commitment from senior management is critical to the success of a revenue management program. But exactly what does this mean? What actions do companies take that actually reflect whether or not senior management support is sufficiently high? Or consider training and educational efforts. While no one might doubt the need for such programs, what topics should be included? It is difficult, if not impossible, to find much in the literature that addresses such questions. Based on our experience to in working with companies in a variety of industries, it is also clear that revenue management programs are often less 2

3 effective than they might be, as companies fail to take appropriate managerial and organizational actions. This article attempts to lay some of the groundwork regarding implementation factors that affect the success of a revenue management program. Although we try to be comprehensive in our treatment of the subject, there are clearly many more managerial, organizational, and operational issues than can be discussed in a relatively short article. The items reviewed are those that we have found to be particularly important in a variety of industries and are also those that many companies are struggling to address. Keywords: revenue management, organizational and managerial issues, key success factors, implementation, performance measurement, pricing 3

4 INTRODUCTION Why do some companies have successful revenue management programs while other companies struggle with theirs? Why do some companies invest significant resources (time, manpower, and money) to install and implement a revenue management system, but then fail to get much value from it, while other companies use the same system and obtain extraordinary benefits? Drawing on our experiences over the past 20 years, this article reviews the factors that tend to separate the winners in revenue management from the also-rans. It has long been recognized that achieving success with revenue management requires far more than having the right technology. There are a variety of managerial and organizational factors that have an enormous influence on the level of benefits obtained from a revenue management program. Indeed, there have been a number of articles written and presentations made at revenue management conferences that highlight key factors to revenue management success (Bacon, 1989; Kimes, 1989: ; Lieberman, 1991; Baldanza, 1997; Cross, 1997: ; Donaghy et al., 1997: ). Yet very little has been written on the details behind these concepts. And, having worked with many companies in this area, it has become increasingly clear that many companies are struggling to address the managerial and organizational issues. Our goal in this article is to provide greater detail than is typically included in such articles and presentations. Many of the concepts discussed are relatively simple and straightforward. Yet, the reality is that these concepts are often overlooked or ignored at many companies reducing the benefit levels of their revenue management programs. Through a more detailed discussion of success factor criteria, we hope to make the points more tangible and ultimately, give 4

5 practitioners of revenue management specific ideas on how to increase the success of their revenue management programs. CRITERIA FOR SUCCESS Drawing on our experience in a variety of industries, key elements of successful revenue management programs include: 1. Measuring performance 2. Developing supporting business policies and processes 3. Ensuring decision-making authority and accountability 4. Integrating revenue management with other departments 5. Knowing the limits of your revenue management system 6. Providing for career path support and progression: Life during and after revenue management While the first four areas have been noted in the previously cited references, we are not aware of any articles or presentations that discuss the fifth and sixth elements. An issue that we recognize as important, but do not treat specifically in this article, regards how to improve the success of a revenue management program during periods of market instability. Market instabilities can result from either fundamental shifts in customer behavior and demand or from changes in the competitive environment. The current state-of-the-art of most revenue management systems, and in particular their forecasting capabilities, assume a certain level of 5

6 historical continuity. When such conditions are not present, the systems are not sufficiently selfcorrecting that they can provide satisfactory results under the level of investment and attention that companies have been accustomed to making. We intend to discuss this issue in a future article. Measuring Performance Consider the following scenario: You are responsible for managing a hotel s room inventory. It is Monday afternoon. You have one room left to sell for Tuesday night. You have many rooms available on Monday, Wednesday, and Thursday and you know you will not sell out on those nights. The daily rate for rooms is $120. You receive a call from a potential customer who wants to make a reservation to stay at the hotel on Tuesday night and is willing to pay $120. You believe that if you turn down this request, there is a 50 percent chance that you will receive a request from a customer who will want to arrive on Monday and stay four nights and will be willing to pay $480. If you do not accept this reservation request for the 1-night stay on Tuesday, you believe there is a 50 percent chance that you will have an empty room on Tuesday night. What action should you take? How do you demonstrate to the hotel s General Manager that you made the right decision? We have posed this and similar situations to Revenue Managers and Revenue Analysts in a variety of industries. Their responses tend to have two parts: 6

7 1. If this were a situation that they were facing repeatedly, they would prefer to turn down the one-night request so they could accept the four-night request. Over time, this would result in greater revenues and profits for the hotel. 2. Given the performance measurement tools they have access to, it would be difficult, if not impossible, for them to demonstrate that such a decision was resulting in greater revenues. Even worse, for a given week, if it were known that they rejected the one-night request for Tuesday and no additional demand for that night materialized, the decision they made would be criticized. Revenue management is fundamentally about making the right short-term trade-offs to increase long-term revenues and profits. A great deal of revenue management is about increasing a company s profits by estimating and responding to the short-term odds associated with accepting or rejecting different pieces of business. And yet, it appears, many Revenue Managers are unable to demonstrate the impacts of their decisions. Even worse, perhaps, when the Revenue Managers are making decisions that increase net revenues in the long-term, instances of where the odds did not play in their favor could result in criticism and lead them to make decisions that are less profitable in the long-term. The value of measuring performance is widely recognized as a key element of revenue management success, yet in practice it is often done poorly, or may even be absent. Revenue Management staff should be able to access information that estimates the financial impact of their decisions or provides them with recommendations on where their actions could provide the greatest financial benefit yet in many companies, such information is not available or credible. 7

8 And when such information is communicated, oftentimes it is not presented in a way that is actionable. The effectiveness of revenue management programs also appears to increase when the impact of revenue management decision-making takes on greater consciousness within an organization. It can be very useful for senior managers outside of Revenue Management to receive daily or weekly Revenue Management Impact Reports. For such reports to be useful, it is vital that the information they contain be easy to understand and review. When the financial impacts of pricing and inventory control are accorded a similar level of attention as operational issues, which tend to be widely communicated, this tends to drive improved revenue management performance. Although it would seem to go without saying, it is also critical that performance measurement information be accurate and credible. Unfortunately, this is not always the case. We have worked with a number of companies whose performance measures provided misleading estimates of the financial impacts of the company s revenue management program. Again, this was a contributing factor to the revenue management program being much less successful than it should have been. Conversely, consider the following example. An airline that has had what most industry experts consider to be a highly successful revenue management effort produced a daily revenue management report providing an overview of the previous day s flight operations. The report was circulated within Revenue Management as well 8

9 as to other Department Heads, including the CEO. The information was easy to review. Information on the report included revenue management operating statistics such as spoilage (the percentage of empty seats on sold out flights), denied boardings, flight numbers with excessive spoilage or denied boardings, and a variety of financial impact estimates of overbooking decisions. Anomalies were easy to find and often triggered senior level discussions. Although the information was after the fact, in that it reported on flights that had already departed, the information was actionable insofar as supporting staff training, educational efforts, and policy revisions. The daily report was an excellent vehicle for communicating and tracking revenue management performance. By helping to keep revenue management top of mind throughout the airline, it also helped to keep the Revenue Management team focused and effective. In industries such as lodging, where information regarding the financial performance of competitors is publicly available, many companies have relied on competitive benchmarking to evaluate the performance of their revenue management efforts. While competitive benchmarking can be a useful component of a performance evaluation capability, it has significant weaknesses when used as the primary evaluation measure. Such measures tend to be fairly broad by design and reflect much more than just revenue management performance. In the hotel industry, revenue per available room (REVPAR) has often been used as a benchmark measure. A hotel will deem its revenue management program to be effective if it sees improvement in its REVPAR relative to how REVPAR is changing at competitor hotels. At best, such a measure can be a useful indication of how well a hotel s revenue management 9

10 program compares to the program of competitor hotels; at worst, it can provide misleading information. Comparisons may be distorted due to group bookings, corporate negotiated business, efforts by competitor hotels to improve their revenue management decision-making, and other events that are beyond the control of revenue management. And, since REVPAR itself may be more affected by external events than by revenue management decisions, using changes in REVPAR to evaluate the effectiveness of revenue management is also risky. Nonetheless, this and similar comprehensive measures are often used. In our experience, however, the companies with the greatest success in revenue management do not rely on such comprehensive statistics to evaluate the success of their revenue management programs. Revenue management performance statistics should measure how well the revenue management program is doing its tasks, not how well the business is doing overall. There are too many factors that influence a business s overall performance that are beyond the control of revenue management. A company in a declining market may have an effective revenue management program that enables the company to extract additional revenue from limited demand. By using overly broad performance statistics, however, the firm may miss the value of revenue management s contribution. Conversely, a business in a growing market may have an ineffective revenue management program. By relying on overly broad performance statistics, revenue management may receive undue credit for revenue gains. Performance measurement tools, such as the one shown in Figure 1 can help keep staff focused on achieving incremental improvements. In this example, financial trade-offs are made between 10

11 different levels of spoilage and oversales (or unaccommodated customers). The firm s current performance is shown on an indifference curve that contains other combinations of spoilage and oversales that represent the same total cost to the company. The shaded areas below the curve represent different ranges of lower cost combinations. Different revenue management analysts may follow different strategies and tactics to move to preferred combinations a graphical tool such as this can help highlight how well different staffthe are performing and identify opportunities where additional training and support may be needed. INSERT FIGURE 1 ABOUT HERE It is worth noting that there is a strong intuitive appeal to using a single comprehensive measure to assess the impact of revenue management decision-making. Combining multiple measures is inherently more complex and is likely to underestimate the true impact. Some benefits will ultimately not be accounted for as they arise from the joint and interactive effects of the components that are being measured individually. Also, a single measure can be easier to communicate. We are currently conducting research into developing a comprehensive performance metric that reflects the impact of revenue management decisions. Business Policies and Processes In our experience, prior to September 11, 2001, the single most important reason for underperforming revenue management programs was organizational. Specific elements have included, lack of staff continuity, limited understanding and misperceptions of revenue management by managers to whom Revenue Management reports, treating revenue management analysts as lowlevel clerical staff, unnecessary separation of technical and business staff causing them to work 11

12 at cross purposes, failing to provide adequate and needed resources to maintain systems and monitor system performance, and failing to use revenue management information to better understand the financial implications of alternative product design and other policy decisions, when such information was available. Post September 11, these problems have been compounded by forecasting difficulties and systems that were not designed to respond to such large and fundamental changes in the market place as have been experienced. Further, there is a fundamental discrepancy between the way most firms set revenue and performance goals and the way in which revenue management is most effective. Typically, revenue and performance goals are based on budgets or thresholds that the firm wants to achieve. Often, these can be year-over-year improvements. On the other hand, revenue management focuses on maximizing the return from the selling opportunities that present themselves. Revenue management works towards optimality rather than achieving targets. Consequently, it is valuable to have business policies and processes that estimate how well the revenue management program is performing, relative to the available revenue enhancement opportunities, rather than evaluating the performance of revenue management simply on the revenue generated. When pricing and inventory control decisions become more systematic, it generally leads to more thoughtful and profitable decisions. To maintain this focus, we suggest that companies develop benchmarks and Best Practices Guides around their revenue management efforts. Such guides can be especially useful when a company experiences turnover in its revenue management personnel. Best Practices Guides can be established for such business processes as: 12

13 ! Daily/Bi-weekly/Weekly Revenue Management and Pricing meetings! Overriding demand forecasts! Prioritizing future events for review based on revenue opportunity! Group evaluation! How to stimulate demand! Formulating an RM strategy, including experimentation! Using competitive data! Post hoc analysis of decisions Best Practices Guides can assist individuals new to their position in developing a clear understanding of what the company expects of them. Just as Best Practices Guides for operating standards can be valuable training tools and help drive communications within the company on how to deliver a product in a consistent fashion, Best Practices Guides for Revenue Management can also help drive consistency in the way pricing and inventory control decisions are made. We have also found that companies can derive significant benefits by conducting periodic audits of their revenue management practices. Such audits enable a company to identify and correct deficiencies in their revenue management practices as well as provide ideas for new ways to carry out their business (including introducing new products) that could further enhance revenues and profits. Audits can be used to keep Best Practices Guides up-to-date and to ensure that the Revenue Management staff carries out their responsibilities effectively. 13

14 Internal policies and procedures must be designed to create sufficient incentives to encourage staff continuity within Revenue Management as well as institutional learning. Beyond just learning how to use revenue management decision support models, there is a critical need for the Revenue Management staff to learn how to integrate this understanding with the tactical and strategic possibilities made possible by using the decision support tools. For example, one major international airline recognized that its revenue management system and processes were becoming less and less effective for certain types of flights. For these flights, the revenue management system s demand forecasts were becoming less accurate under changing market conditions and the airline s customary revenue management tactics were no longer appropriate. Taking advantage of their staff s extensive experience in revenue management, the company diagnosed why their standard revenue management methods were becoming less effective for these flights. The staff designed a new revenue management approach, including a significantly different organizational structure to manage these flights. In this process, the staff s sophistication about how their system worked and how it interacted with market forces grew enormously. In the above example, the Revenue Management staff gained knowledge and experience that could prove extremely useful to help the airline better cope with changing market conditions. The airline would be well served by organizational and personnel policies that enabled it to retain and grow the knowledge of these staff. Unfortunately, the promotion and staff rotation policies used at many firms can reduce their ability to benefit from the gains made possible by institutional learning in revenue management. 14

15 Decision-Making Accountability More than any other department, Revenue Management typically has access to the most detailed information that can enable a company to identify its most profitable sales opportunities. Whether or not Revenue Management s responsibility includes setting prices, the Revenue Management staff is typically in the best position to evaluate the financial implications of alternative selling strategies and tactics. But how well is the Revenue Management staff positioned to use this information to the benefit of its company? To be most successful, Revenue Management needs to have the authority to implement its inventory control and pricing recommendations, or at least ensure that other departmental staffs are held accountable for their decisions when they overrule Revenue Management s recommendations. At one hospitality firm, Revenue Managers were held in high esteem for their ability to identify which pieces of business were most likely to maximize the profitability of a hotel. For nights when the hotel was expected to be sold out or have very high occupancies, this generally meant reducing the number of rooms that could be sold at a discounted rate to groups. Yet, when it came down to trading off specific pieces of business, the Director of Sales, who needed to meet group sales targets, was typically able to overrule the Revenue Manager s recommendations. It was openly acknowledged among the hotel s staff that short-term revenue sacrifices were being made, but the Director of Sales argued that doing so would benefit the hotel s revenues and profits in the long-term, as the groups in question, or the group s booking agency, would provide future business during low demand periods. Unfortunately for the hotel, there were no 15

16 mechanisms in place to ensure that this actually occurred an audit of the hotel s business revealed that many of the groups and their agencies did not in fact book much business during low demand periods. The authority of the Revenue Manager, while broad in theory, was actually very limited in practice. Conversely, in those companies where the Revenue Manager does have the authority to restrict and otherwise influence where sales efforts are focused, it is critical that mechanisms be in place to hold the Revenue Manager accountable for pricing and inventory control decisions. Integrating Revenue Management with Other Departments Just as a skilled orchestra conductor unifies the diverse talents and capabilities of musicians in an orchestra, Revenue Management plays a key role in coordinating the selling activities of multiple departments. To do so, especially in larger companies, establishing formal communication methods and tactical Working Groups can be beneficial. Responsibility should be assigned for developing, implementing, and monitoring the impacts of specific initiatives. Given the day-to-day focus of most staff, it is easy for inconsistencies to develop among advertising, marketing, pricing, and sales efforts. For example, to increase demand for its product, one travel company launched an advertising campaign to stimulate business through promotional and discounted offers unfortunately, in many of the target markets, business was being stimulated for high demand events that did not require such additional demand. For legal reasons, discount availability had to be opened up and the company diluted its revenues. Had efforts between Advertising and Revenue Management been coordinated, the situation could 16

17 have been easily avoided. In a larger company, one of the ways to accomplish such coordination would be to assign responsibility for interdepartmental cooperation to a staff member in the Advertising Department and a staff member in the Revenue Management Department, such as might be done in a brief weekly meeting or scheduled phone call to review current and potential advertising initiatives. For such efforts to be effective, responsibility and accountability would likely need to be assigned to departmental heads. While members of their staff might be assigned day-to-day responsibility for working on specific initiatives, the departmental heads should be held accountable to a more senior executive such as the Vice President of Marketing to ensure that departmental integration is taken seriously. In practice, this would also imply that the Vice President of Marketing must have a sufficiently deep understanding about revenue management in order to ensure that the departments are carrying out the right tasks. The use of databases that maintain historical records of customer purchases is providing new opportunities for Revenue Management and e-commerce Departments to develop and communicate non-public offers to stimulate demand for low demand products. Such offers can be made to selected individuals within a company s own database or done in cooperation with third-party databases. Done properly, such offers can be communicated in a cost-effective way, carry low risks of revenue dilution, and can increase customer loyalty. While some companies have already begun to carry out such efforts, the offers that are typically made are only loosely targeted to match specific sales opportunities with appropriate incentives for stimulating demand from desired customer segments. Demand and revenue opportunities are missed. 17

18 For example, you can drive from San Francisco to Monterey, California in just over 2 hours or take a 40-minute flight. Monterey is a popular destination for families in the San Francisco Bay area, as it has a world-class aquarium among other attractions. On a recent weekend, roundtrip airfare with only a few days notice was more than $500/person, although many seats were available. At such airfares, the airline is not likely to see much demand from families of four who would like to spend the weekend in Monterey. However, if the airline sent a special roundtrip offer to selected customers in its loyalty program who live in the San Francisco area, of say $100 or perhaps even $200 for up to four seats on specific weekend flights, it might stimulate significant demand and incremental revenue with little risk of revenue dilution. The opportunities to target creative non-dilutionary offers to specific customer segments are broad. Recognizing that some customers are motivated primarily by price, while others by service, companies can experiment with a variety of offers to determine those that different customer segments are most receptive to. We see this as an opportunity for companies to be very creative in the types of offers they make to potential customers, taking advantage of the cost-efficiencies that come with e-commerce distribution. Another technique used by companies with successful revenue management programs has been to provide the Revenue Management staff with first-hand knowledge of the roles, responsibilities, and job demands of the Operations staff and vice versa. Just as the Revenue Management staff should understand the practical implications of overbooking and other revenue management decisions, the Operations staff should understand how much revenue is at stake when sub-optimal revenue management decisions are made. The Operations staff can receive a tour of the Revenue Management Department and be introduced to the Revenue Management 18

19 analysts. Revenue Management analysts can visit field locations and meet the Operations staff that is being affected by their decisions. Such seemingly simple efforts lead to better interdepartmental communications and ultimately better revenue management decisions. Knowing the Limits of Your Revenue Management System A revenue management system is not simply a piece of software that once installed, should be left alone so it can provide the benefits that it is capable of delivering. Although each system is different, revenue management systems only operate with maximum efficiency when its users understand and capitalize on its strengths, weaknesses, and data input needs. One of the core elements of any revenue management system is its forecasting capability. It is especially important that those who use the system have an understanding of the business conditions under which the forecasts can be relied upon and of the conditions when overrides are likely to be required. This is facilitated when users have a general technical understanding of the forecasting algorithms. Although users do not need to have a detailed understanding of the forecasting algorithms, it is best when they understand the underlying structure of the forecasts and the information they are based on. System users should be able to answer such questions as:! What historical time periods are being used as the basis for the forecasts? Is there any reason to believe that such historical periods are more or less reliable than usual? 19

20 ! Under what business conditions is the forecasting model most likely to be least accurate and forecasting overrides most likely to provide value?! How does the forecasting model estimate the amount of unconstrained demand? That is, what is the basis for forecasting demand when it is known that historical transaction volume does not reflect true demand?! How do changes in product definition or product classification affect the forecasts?! When a new price is introduced, what is the basis for forecasting demand at that price?! Over time, how are fundamental changes in customer behavior reflected in the forecast? For example, how are changes in consumer price elasticity incorporated into the forecasting model?! What data inputs need to be maintained and kept up to date to ensure accurate forecasts? Being able to answer such questions allows the system to be used more effectively. Whether or not the system tracks the accuracy and impacts of its recommendations, information should be recorded and maintained to help the staff learn from past decisions. Under what conditions are the system s recommendations most accurate? Under what conditions are overrides most likely to be needed? How effective are overrides to the system? The ability to access such information enables system users to learn how to use the system to provide greater returns. Not only will experienced users benefit from this knowledge, but as personnel turn over, new Revenue Management staff will come up the learning curve more quickly as well. Career Path Progression 20

21 It is widely acknowledged that in companies with the greatest revenue management success, Revenue Management is seen as a key business strategy and receives visible support from senior management. At a day-to-day level, this should mean:! Training/Educational programs may exist to facilitate the transition of personnel into a Revenue Manager role, as well as to help more experienced Revenue Managers obtain greater proficiency! Within the organization, being a Revenue Manager is seen in a positive light and is an important element of career progression Revenue Management is not a dead-end job! Senior management receives regular and credible communications regarding the impacts of Revenue Management actions and holds Revenue Management accountable for its decisions! The Revenue Management staff should be evaluated based on its ability to generate incremental revenues for the firm. Lacking credible performance measures, many firms are not able to carry this out. The firms with the greatest success in revenue management have frequently invested significant effort and resources to achieve this. Revenue management training programs have long been elements of successful revenue management programs. But they have typically been somewhat limited in nature. Often, they focus on introductory materials rather than supporting the career progression of the Revenue Management staff. Sometimes, they concentrate on the technical aspects of revenue management rather than the business concepts. We believe there is a strong opportunity for companies to combine recurrent revenue management education and training programs with 21

22 certification programs that would enable the Revenue Management staff to increase its proficiency in revenue management decision-making. A comprehensive revenue management training program for a hotel might include such topics as:! Introduction to Revenue Management! The Company s Revenue Management Philosophy! The Revenue Management Mission! Objectives and Goals People Technology Business Processes! Relationship between Revenue Management, Sales, Marketing, and Operations Responsibilities of the Revenue Management Committee Information/criteria for making decisions Resolving conflicts! Balancing Supply and Demand Group Business Transient Food and Beverage contributions Ancillary Revenue contributions! Market Segmentation Definition of Market Segments Value and impact of each market segment Purchase Fences Value-added opportunities! Creating the Ideal Mix of Business Transient (Commercial and Leisure) Group (Associations, Corporate, Tours, Government, etc.)! Length-of-stay controls Rationale Evaluating the risks Measuring the benefits! Overbooking How much risk to take Relocation policies! Maximizing the Value Received from Different Distribution Channels! Competitive Assessments and Analysis Product Price 22

23 Service! Forecasting Short-term process Long-term process Using the Revenue Management System! Understanding what drives Revenue Management System recommendations! Pricing relationship with Revenue Management Transient Consortia Volume Accounts Leisure/Weekend Discounts Groups! Establishing Group Ceilings Process for developing ceilings Frequency and rationale for adjusting ceilings! Group block management How the Revenue Management System handles group blocks Management of group blocks from Definite status to Check-out Estimating group wash Key activities for successful management of group blocks Case studies of factors contributing to group performance! Decision Support Tools Tools that are key in supporting the decision-making process Tools that assist in measuring the effectiveness of decision-making! Decision-Making Process Accepting or rejecting potential business opportunities for: Contract Volume Accounts Group (long-term and short-term) Consortia FIT! Report Information Standard reporting Exception reporting! Daily, Weekly, Monthly, Quarterly, Annual Checklists of Key Revenue Management Activities! Revenue Management Meeting Standards Who attends How often Guidelines Format Objectives Action Steps Establishing accountability! Performance Measurement 23

24 Why it is critical Hotel Operating Statistics versus Revenue Management Operating Statistics! Case Studies (actual hotel situational experiences)! Video The Hotel Yield Meeting! Yield Meeting Simulation! Hotel, Corporate and Regional/Divisional responsibilities Decision-making Support Oversight! Why revenue management fails! Why revenue management succeeds While some of these topics would be covered in both basic and advanced training programs, the focus of the information presented would be different. To emphasize the value to the company of making the best revenue management decisions, certifications could be offered for demonstrating proficiency with making revenue management decisions, as opposed to simply completing a course. Such certifications might be associated with compensation increases or one-time bonuses. SUMMARY Revenue management is won or lost in the details. The level of revenue management success enjoyed by a firm depends on many factors, including:! The knowledge and skill set of its Revenue Management staff! The authority given to Revenue Management! The type and amount of information and systems support available! How well the staff understands its roles with respect to revenue management decisionmaking 24

25 ! The ability to measure and communicate the impact of revenue management decisions and take actions accordingly! How well revenue management is supported by business polices and organizational processes There is no right or best way of implementing revenue management. But, as illustrated in this article, successful revenue management programs do share certain characteristics. REFERENCES Bacon, S. (1989) Organizational Issues in a Yield Management Program, Proceedings of IATA and Airline Economics, Inc. 2nd International Airline Yield Management Conference, Washington, D.C. Kimes, S. E., (1989) Yield Management: A Tool for Capacity-Constrained Service Firms, Journal of Operations Management, 8, 4, Lieberman, W. H., (1991) Making Yield Management Work for You: Ten Steps to Enhanced Revenues, Travel, Tourism, and Hospitality Bulletin, Arthur D. Little. Baldanza, B. (1997) Generating Revenue Management Enthusiasm, Proceedings of IATA s 9 th International Revenue Management Conference, Miami, Florida. Cross, R.G., 1997, Revenue Management, Broadway Books, New York. 25

26 Donaghy, K., McMahon-Beattie, U., and McDowell, D. (1997) Yield Management Practices, in Yeoman, Ian and Ingold, Anthony (Editors), Yield Management Strategies for the Service Industries, London: Cassell,

27 Figure 1. Achieving Improved Performance Oversale Rate Booking Performance Indifference Curve Current Performance Good Better Best Spoilage Rate 27