Total Hotel Revenue Management: What's Taking So Long??
While Total Hotel Revenue Management (THRM) is much discussed (in fact, I'm getting sick of hearing people just talk about it!), it seems that few hotel chains have been able to implement it successfully. For example, in a study I did on the future of hotel RM conducted in 2017 (you can find it on the website!), THRM was again identified as something that would be a major trend in the future of hotel RM. Yet, when I asked respondents how far along with their implementation initiatives in non-rooms departments, not much had really happened.
Why is it Taking So Long?
Why has it been so difficult for hotels to implement such a seemingly logical idea? I've wondered about this for a long time.
In many of the THRM discussion I’ve had with revenue managers from a variety of companies from throughout the world, the biggest obstacles that are almost always mentioned are the varying Key Performance Indicators (KPIs) of the different departments and departmental silos. Typically, each department has its own KPIs and strives to meet their budget. For example, RM may be trying to meet their budget and achieve a strong RevPAR index, while F&B might be trying to minimize their food and labor cost while meeting budget. In addition, inter-departmental discussion and cooperation are sometimes lacking.
These by themselves are formidable barriers, but the added factors of (differences in departmental culture, (2) the dominance of Rooms profit over that from F&B, Spa and other revenue streams, and the traditional view of looking at F&B, Spa and other revenue streams of as amenities, rather than profit centers makes it even harder. In addition, (3) data issues as well as (4) possible resistance to change add to the complexity of successful implementation. Take a look at an article that I co-authored with Dave Roberts (former SVP of RM for Marriott) to learn more of our thoughts on this.
Tips for Success
Obviously, there are some formidable challenges facing the implementation of THRM initiatives. Based on my consulting experience and on conversations with multiple hotel leaders, I’ve come up with a few tips for success. I’ve seen all of these in action and all have been successful (as in the hotel was successful in implementing THRM).
Clarify and Communicate Your Objectives: If you don’t know what you’re trying to achieve, it will be impossible to determine if you’re successful. For example, with F&B, the objective may be to maximize profits, or drive brand engagement or drive Long-Term customer value. Whatever starting point you land on, you will need to clearly define success upfront.
Importance of GM and Owner Alignment and Support: The importance of GM and owner alignment and support cannot be overemphasized. Ultimately, they are the ones who control the actions of their team and also the pocketbook. In the case of more traditionally trained GMs, further exposure to RM principles might be in order. If you don’t have clear objectives (step 1), it will be very difficult to get the GM and owner to support your THRM effort. In addition, you should make sure that your Director of Finance is on board and supports your initiative. Without this, you may run into problems with acceptance and implementation.
Importance of Training: THRM principles may be unfamiliar to some of your F&B and Spa colleagues. Consider having hands-on training sessions on THRM at both the chain or region (for chain hotels) and at the property level. These training sessions should not only include RM, but also Sales and Marketing, F&B, Spa and Finance.
Don’t Try to Do Everything at Once: Choose one department or outlet and focus on that. In my experience, if you try to implement THRM in multiple departments at the same time, you are very unlikely to succeed since it will be nearly impossible for you to maintain focus. In addition, once you’ve had success in one department or outlet, it will be much easier for you to be able to get buy-in for further THRM initiatives.
Build Rapport: Once you’ve chosen the department with which to start, get to know the department head on a more personal level. Get together for coffee or have lunch together and get to know each other (one of my seminar participants jokingly referred to this as her 'BAR strategy'. Once you’ve established rapport, it will be easier to broach the topic of THRM as a possibility. Ask if you might be able to attend one of the departmental meetings. When you’re at their meeting, listen to what people have to say and take note of their concerns. In order to be successful with your THRM initiative, you will need to have a good understanding of their operations and concerns.
Choose One or Two Simple Things: Work with your counterpart to help choose one or two simple things that you’re pretty sure will be successful. It doesn't have to be anything complicated, but probably should be something that you're pretty sure is going to work. At this stage, it’s important that the ideas stem from your counterpart, not from you. Remember that your role is to provide analytical support for the THRM initiatives. Stay away from using RM jargon. You may know what they mean, but everyone else might not. I still remember being at a restaurant RM seminar in which half of the participants were from RM and the other half from F&B. One of the RM leaders got up and started talking about the 'granularity of the F&B forecasts.' Sigh.....to say that the eyes of most of the F&B people glazed over is an understatement!
Clean Data Matters: Remember that GIGO (garbage-in-is-garbage-out). Work with your counterpart to help clean up the data. If the data is not accurate, it will be very difficult to measure the success of your THRM initiative. In addition, you might want to consider developing a simple dashboard that shows the progress on your agreed upon success metrics.
Implementation Matters: It’s one thing to come up with ideas, but it’s much more challenging to actually implement these ideas. Be sure to provide your counterpart with any assistance that he/she may need. This ties in with having a clear notion of how you’re going to define and measure success. Without this, you won’t know if the initiative has been successful.
Celebrate Success: Celebrate success and be sure to give your counterpart and his/her team credit for it. In my consulting experience, I’ve seen the success of this strategy. One of the hotels I worked with had a great director of F&B who was initially very skeptical of THRM. The idea that he and the Director of RM came up with was implemented successfully and the Director of RM made sure to publicly give him credit for this. After that, he became one of the biggest proponents of THRM and helped lead his team in developing and implementing further THRM initiatives.
Incentives Matter: Just because you and your counterpart come up with good ideas, the line level staff (and sometimes the managers or assistant managers) might not buy into them. For example, let’s say that you decide to increase retail sales in the spa and ask the spa therapists to make sure to sell more retail items. Essentially, you’ve asking them to do more work for the same pay. But, if they get an incentive for pursuing these sales, they are more likely to buy-in to the initiative.
Importance of Sharing: Be sure to celebrate success of any THRM initiatives throughout the chain or hotel. One of the chains I’ve worked with used internal social media to celebrate successful THRM initiatives in different outlets and of course gave the respective teams credit. This serves a dual purpose. It highlights the great work of the team, but also serves as a repository of ideas for others.
So, what to do next? It's time to just stop talking about TRHM and do something about it! I hope that these ideas help you move forward. In future blog posts, I'll talk some more about tips for success, give an example of a very successful RRM initiative at Fairmont Raffles (FRHI) that I worked on with Jeannette Ho, former VP of FRHI and talk about ways in which you can learn more about how to do this. Stay tuned!!!