Revenue optimization is nothing new for most hotel owners, brands and managers, but there is now a notable shift to revenue maximization.
Definitions of what it is may differ, but for Joe Pettigrew, chief commercial officer for hotel asset management at investment company Starwood Capital Group, revenue maximization is “making the most out of what you could have” not what you have.
He spoke at the IDeaS Converge 2023 event in London this week and said the properties where value had been improved “all had this one thing which was more of an attitude than a technical core competency of the team that were managing it.”
“To me revenue optimization is about making the most out of what you have. You gave me this hotel in this location in this macro environment, and I’m going to make the best out of what you have me to manage.
“There are some of these very rare talents out there who will take the same asset and say, for the asset you have given me in this location and in this environment, if you give me this one extra thing, then I can do much more with this asset.”
Pettigrew went on to describe some of the characteristics of revenue maximizers, saying they had often worked in other departments within a hotel.
“They have very diverse hotel experience rather than just coming through a traditional path to become a director of revenue or sales … but because of their broad understanding of how a hotel works they’re able to sometimes put together a strategy that goes beyond trying to optimize the revenue of the asset.”
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And, they have three main traits, according to Pettigrew. Revenue maximizers are “naturally curious people. They can’t stand the status quo.”
They’re not people who wait around, he added. They like to experiment and get some results, good or bad.
“If you have any inkling on what the data is showing, you try it out, you test it and ask for forgiveness later. I don’t know if you have ever pondered the true value of the [online travel agencies] and the billboard effect. The best way to find out is to take your rooms offline and see what happens. It’s a daring thing to do, but you want to know the answer because otherwise you’re constantly having this conversation between ownership, brand and management about the value of the OTAs and how to best leverage that channel. You can see for some hotels the traffic to the website just drops, but for some it doesn’t make that much difference.”
The final trait is that these are very persistent and resourceful individuals, according to Pettigrew: “They’ll use whatever means necessary to realize what it is they want to try.”
He added that hotel revenue directors and commercial leaders are evolving into strategists with less focus on day-to-day rates and more attention on the bigger picture of the “best and highest use of this particular asset and what is the best value that I can squeeze out of this asset by thinking creatively and also being more daring and bold with gathering the data, testing stuff out and presenting results.”
His parting advice was for hotels to instill a culture of experimentation and daring in commercial teams.
“We’re all very familiar with our e-commerce and digital team running A/B testing all the time, but that same concept doesn’t filter through to other departments as much.”