The Changing Commercial Landscape
Posted on 13th May 2021 at 09:22
Nation-wide lockdowns and restrictions on domestic and international travel have wiped out base business for hotels around the world. With some restrictions easing and hotels being able to reopen, many properties are starting from scratch. Most bookings were cancelled, leaving them with little to no on-the-books business and accurate forecasting is a challenge since previously known demand patterns are now unreliable. We caught up with Graham Lewis – VP Commercial to hear his thoughts on all things Commercial and the changes to the industry from when he joined Hilton fresh out of University.
• What attracted you to a career in hospitality?
I joined Hilton post University and was lucky enough to have some fantastic mentors and be given the opportunity to experience a wide range of roles which meant I could embrace the industry.
What initially caught my attention was the fact that a hotel team is made up of a wide range of people, skills and interests - unlike many other jobs where the teams are similar because the jobs are similar. By way of example (and please excuse the lazy generalizations, these are just to illustrate a point) a team member in the Bar may be an extrovert, life & sole of the party, where the team member from one of the admin positions could be more reserved and analytical in their approach - all providing a fantastic diverse tapestry and making a hotel a great place to work.
This career has given me the amazing good fortune to learn a huge amount; from the highly technical to leadership - from coaching on a 1:1 basis to presenting to many hundreds. I have also lived in and travelled to a vast array of countries; making a great number of friends and being invited into their lives, learning about different cultures and experiences.
Each day is different and always offering opportunities to solve challenges and support others in their growth (all this while everybody's job is to create an environment where your customers have a great time) this makes this the industry for me.
• How have you seen revenue management change over the years?
The early days of Revenue Management in hotels saw the role as primarily reactive in nature and focussed almost exclusively on Rates & Inventory, with very little responsibility for offering any form of proactive long-term strategic direction, The Revenue Managers, in turn, became the hotel experts in the advanced functions of excel spreadsheet and they became the generators and custodians of "top-line" revenue reports which were presented to the hotel management team - with an aim for this data to support pricing, allotment and contract negotiation decision making. (In many organisations the RM position reported into the Sales & Marketing leader and as such RM was a support role for Sales & Marketing).
Slowly other indicators were incorporated into the Revenue leader's repertoire, such as Channel, Source and Length of Stay, then in recent years the importance, and relevance, of RM "exploded" across the hotel industry, as the opportunities when applying robust RM principles were realised by many leading hotel groups, and this spread out across the industry. The reasons for this growth stem from an increase in sophistication in the efforts from sales and marketing, coupled with improvements in technology and access to "big data".
The access to massive amounts of data and the RM leader being elevated to the custodian of all of this data has increased the RM Leader's "scope of work"; segmented guest data allows for price fragmentation and customisation, greater detail around channel statistics allows for more accurate demand forecasts, improved data from "other" revenue streams allows for a Total Revenue Management approach, a growth in transparency around operating/distribution expenses allows for profit consideration, in the RM decision making. This increase in data and opportunity inevitably has led to an increase in complexity and RM tools (in particular Revenue Management Systems and Aggregation companies) have been developed to meet this need.
The Revenue leader now needs to be the driver of these Revenue Management Systems; that provide an understanding how a hotel is performing and as such hotels now understand complex data and can act extremely quickly in their forecasts and profitable pricing decisions. Helping embed a RM culture across the hotel.
Successful hotels now understand that the business performance of the hotel relies upon the skills/principles of Revenue management as a "lynch-pin" for all things Commercial (Sales, Revenue Market, Distribution, PR) - the discipline is now evolving even further; initially from the RM working for the Sales and Marketing leader - then to the roles working together - to a multiskilled, multi-disciplined collaborative team moving away from these legacy titles and towards function / activity to meet the strategic objectives. Total Revenue Management continues to gain importance and Profit management is now a feature of all RM discussions; a great leap from the simple yielding-only discussions of years ago.
• Will the pandemic threaten the existence of revenue managers and the revenue management discipline as such, or will it offer a unique opportunity to gain the position they’ve sought for so long?
A key feature of the Revenue Leader is the ability to demonstrate adaptability and flexibility in thinking and this will be pivotal to RM during and post this pandemic period. It is the role of the RM leader to collate and understand the data and present strategic (and tactical) propositions in a clear/concise manner. A RM leader must not be constrained by historical thinking/paradigms and previously accessed data sources - "creativity" and "imagination" will see RM leaders embrace new models to help lead hotels to profitable decision making.
For some hotels the closures introduced (due to the pandemic) have seen a real strain on cash-flow - and where this was once the domain of the Financial Controller, now the pricing and product decisions of the Revenue leader must also pay greater attention to this.
The pandemic is novel as will be the recovery. Looking at the experience of many RM leaders within the industry, it is fair to say that because of promotions and career changes many existing RM leaders will not have lived/worked through a down-turn and recovery. It will be paramount for a hotel (hotel group) to call upon experienced heads to avoid following past mistakes/lessons learned. (For example: shying away from competitive price spirals on the downwards slope and panicked over commitment on the bounce back)
If a hotel re-evaluates it's "Ways of Working" and understands the visions/tasks to be done (without consideration to existing titles) the principles of Revenue Management will be vital as a starting point for all business performance decisions. In relation to the individuals who hold the title of Revenue manager +/or Revenue Director; these Revenue Leaders need to consider (and show an understanding of) the “Competitive advantage process” (that’s long been the domain of those with the title of Sales, Marketing, Commercial, business development).
1. Who are our guests ?
2. What do they want ?
3. How do they hear about what they want ?
4. Where else can they get what they want (the competition) ?
5. Why should they choose us ?
These are Tasks and not constrained to a Job Title - to share in these Tasks diminishes the risks of silos and the splits between Sales, Revenue, Marketing Distribution that can cause poor performance (these disciplines are “after all” all from the same root/family).
It really is a time to “Try, Test and Measure” - very much a skill set of the Revenue Leader.
• Will the commercial structure in the hospitality industry change after COVID-19 and if so, how?
It is a changing environment and doing the same things as before and not adapting to the new world will weaken a hotels position, it is really important that all hotel leaders, across all functions understand how the industry is changing and it is but to truly declare where it will end up is probably folly we really are on a journey and there are still a huge number of factors still in-play (many unknown) that will determine the shape/look of the industry and therefore the Commercial structure within it.
The industry will be there to provide experiences for a clientele that have missed these experiences. Many factors are different than before the pandemic which need to be considered but the end result is still creating and pricing a product and then telling our guests about it in the places they are looking (the answers to the "what", "when" and "how" have changed) and the Commercial structure of the future must be geared up to truly realise the potential. It will be paramount to understand what task need to be done without being constrained by the titles/silos of existing structures.
Realistically if one were to imagine a future Commercial environment it will consist of leader (irrespective of title) who has the vision, humility and grounding to call upon varied and evolving skills and expertise to deliver outstanding Commercial performance - a true way forward will call upon leadership with an ability to engage across the business, industry and further afield.
Engaging in loyalty activity and instilling confidence will also become much higher up the "drivers" list.
The aims will be the same, but the guests needs, and lifestyles have changed, and Commercial teams will adjust to meet these needs.
The industry has famously always risen to the challenges that face it and will do so again.
• What’s your prediction for hotel stays over the next 6 months?
Whilst COVID-19 vaccination rates continue to improve and the infection rates decline we will still be within a global pandemic in 6-months and this will continue to exert its influence on hotel stays.
There is definitely a "pent up" demand for Leisure stays with some potential guests actually seeing an increase in disposable income over the COVID-19 lock down and deep sense of wanting to travel. Of-course this is saddened (and conjoined) by the fact that some people and businesses have left the industry and the true unemployment levels are still to be realized, all this is coupled with increased job uncertainty for some, possibly dampening demand.
What I find particularly interesting is the "what" will be demanded; booking pace show leisure up, whereas many companies are still hesitant to commit to business travel (with uncertainty around changing government restrictions and policies and some lack of clarity around the implications for corporate medical insurance and liability). There is an increase in enquires surrounding "blended" meetings with some delegates in attendance and others "dialling" in. With some companies shying away from office commutes, some hotels situated on main arteries are seeing an increase in enquires for small day meeting rooms. There are a lot of Weddings that have been put on hold which have the potential to drive a spike in demand, but these are now seeing smaller attendee numbers whether this is due to restrictions or personal choice.
Travel and hotel stays will absolutely return but there is still a great deal of uncertainty around timing and the needs/expectations of the guest have been "adjusted" slightly in a post-COVID world.
What has been inspiring is how many hotel teams have used their expertise, facilities and produce to support the community in this time of crisis - I believe this will not be forgotten and continue to play its part in the hospitality industries raison d'être.
• When you're not thinking commercial – what are you doing?
In my spare time I like to go climbing with my youngest daughter, I also enjoy Muay Thai (though I have not had much opportunity during the current time) and walking our 2-dogs with my wife.
For any Commercial support or questions please email Graham - Graham@Fourcornershospitality.co.uk
Tagged as: commercial, Hotel Advice, hotel re opening, post covid hotels, re opening hotel plans, Revenue Management
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