Revenue Management differences between independent properties and hotel chains
One year later…is it all so different?
One year ago, I was leaving the world of hotel chains to dive into the unknown world of the independent properties. I got recently asked an opinion regarding the differences that I can find between the two, in the way that revenue management is executed.
I am having the chance to meet a lot of people (way more), talk to different hotels and learn a lot from sharing opinions and revenue management practices from a world that is far from the one I grew up in; but from which I always get valuable points of view and ideas that differ from my usual mindset.
It is undeniable to admit that there are huge differences from chains to independent properties. It is a privilege to grow and learn within a multinational environment that represents, nonetheless, a small protected and exclusive “shell” compared to the big “real word” of independents that exists outside, with its complexity and challenges.
To resume the differences between the two, would take much more than an article; I will therefore try to resume my personal top 5 differences in revenue management between hotel chains and independent hotels as follows:
- ORGANISATIONAL CHART: The revenue management function in hotel chains is strictly functional and hierarchic, teams and roles are clearly defined by job descriptions that do not leave any space to misunderstandings on the requested tasks and goals. In independent hotels, the revenue management role is hybrid and tasks and activities frequently overlap with marketing, sales and operations to name a few. Revenue management in hotel chains is transversal to, while in the independent properties it is mixed with the other functions.
- TASKS AND ACTIVITIES: In hotel chains the role of the revenue manager is more strategic and the time spent in analysis, strategy and execution is priority, this is naturally supported by a higher investment in training and technology that simplifies and reduces the time spent on daily activities. In independent hotels, the role is more operational and daily tasks and system maintenance take a great portion of the working day, leaving (unfortunately) limited space and time to the analysis and strategy.
- EMPOWERMENT: In hotel chains the strategic activities are usually coordinated among hotels at the divisional level that provides guidelines to streamline the processes and activate promotions at all hotels by chain or brand level. There is freedom but between a frame. In independent hotels, there is obviously total freedom in the decision-making process with the advantage of more flexibility. Choices are made based on the specific property needs (for chain properties these needs that might not necessarily be, at times, the same of the chain or the brand) but with also more risks and lower visibility involved.
- NEGOTIATING POWER: the economies of scale of the chains give a strong negotiating power in the margins when it comes to OTA, Wholesale or Bedbanks. The independent hotel has little space to negotiate on the margin or commission. However, if the revenue manager knows how distribution mechanisms work, he/she can still work on increasing conversion and visibility for the property, by leveraging other ways to get a favorable return (eg. release time, override targets or similar).
- LEADERSHIP: In Hotel chains, the role of the Revenue Manager has a direct reporting line to the GM and is peer to the other functional managers (like Finance, Sales, Marketing). There is still, unfortunately, no clear understanding and acknowledgment in the world of independent hotels when it comes to the Revenue Manager function and role within the team. Besides the hybrid role and mixing in other functions’ tasks, the role is many times still reporting to Sales or Marketing and/or has limited decision power due to the property or management prevalence and their low recognition or understanding of its value.
Leadership is my last point, but not the least. Sometimes people ask me how much I believe in the leadership skill to be fundamental in the role, my answer is that it is the most important skill. I also bring the unfortunate but real example of many job searches we can still see on the internet in 2018 – “analyst”, “excel guru”, “system expert” …if you are still recruiting by those skills, you are probably looking for somebody else than a revenue manager.
Leadership it is not a real difference between chains and independent hotels in the end, or should not be at least. What makes successful revenue management is the ability to forecast, adapt and change; communicate, influence and align and guide the whole team towards the same objective – the generation of the best possible revenue and profit for the Hotel.
This is universally true; regardless of Hotel size, organization, management or ownership.