Revenue Management

What is revenue management?

Revenue management can be defined as selling “the right product to the right customer at the right time to the right price” (Robert Cross, 1997). The concept began in the airline and hospitality industries, which pioneered the use of analytics to help predict the behaviour of customers. Leveraging analytics, they were able to respond to fluctuations in demand by optimising product availability and price to generate the maximum amount of revenue possible.

The two main types of revenue managers we work with at CORE are in either hospitality or FMCG.

• The revenue manager within a hotel is a very important role since they guide the management of room rates, establish agreements about commissions through distribution channels, and use technology to keep track of data. Through this process, they can make data-driven decisions that will directly impact a hotel’s bottom line.
• Revenue management within consumer goods businesses is more varied than in hospitality and can be more complex. Due to the often-fixed cost of consumer-packaged goods, focusing solely on revenue is rarely effective. Instead, FMCG companies really need to focus on “profit management” – employing the use of top-line growth to drive revenue.

Since 2017, over 60% of revenue growth in the world’s top 50 FMCGs has come from pricing and mix management rather than volume increases. This just goes to show how critical it is for consumer goods businesses to have a good grasp of their pricing, promotions, and mix strategies.

Recent Trends

Last year, MRK Associates predicted that Revenue Management trends in 2022 would fixate on service recovery, big data, cross-departmental alignment and flexibility of offer, in-depth customer analysis and post-COVID pent-up demand being finally unleashed. Indeed, most venues did see an expected bounce-back, with high occupancy rates across the board and a sense of the domestic fightback against COVID being won.

Here are the top 6 revenue management trends of 2023:

1) Storm clouds are on the horizon, but demand is still high

Even with talk of recessions, hotels are forecasting increased occupancy and increased ADRs (average daily rates) in 2023. The good news is that despite the economic gloom, most of the UK population still wants to travel and there is still some pent-up demand from COVID. However, the occupancy positivity will be strained, and more than likely will drop from the heady double-digit increases we saw in 2022.

2) Big data and forecasting 2.0

Last year MRK highlighted Big Data and real-time forecasting as two of the most effective and important competitive advantages a revenue manager could deploy. Nothing has changed and if anything, optimisation of digital services and continued investment in data-led service adjustments are more important than ever. 2023 will be defined by understanding more long-term customer trends and predicting buying trends via the use of real-time data to help maximise revenue. The age of the fully connected hotel is here, and its imperative data leads the way.

3) ESG and sustainable services

Environment, social and governance issues are more than ethical guidelines - they are critical to business operations. Customer buying behaviours are now influenced by how venues communicate their “green” and sustainable agenda, and this impacts the entire value chain, from the provenance of the food they want to eat to the amount of plastic they use, and even the reviews of how staff and guests are treated and how venues represent and work within their community.

4) Inventory control - 2023 Edition

To have a thorough understanding of inventory data is one thing, but to be able to adjust to demand in real-time to optimise ROI and stabilise pricing will be how venues make inroads into battling inefficiency during a disrupted year. Through the collation of this data, revenue managers will be able to better predict long-term financial commitments and venue ROI, plus reduce overspending.

Different roles and average salaries:

We have analysed recent data in the market, primarily across retail, FMCG and hospitality and suggest the below salaries reflect the current market in the UK:

• Revenue Manager: £40,000 to £60,000 per year
• Senior / Group Revenue Manager: £55,000 to £80,000 per year
• Director of Revenue Management: £75,000 to £110,000+ per year