Fire Your Revenue Manager

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The revenue manager may be the most dangerous person in your hotel or company. That, in so many words, is what Mike Leven told attendees at last week's Vantage Hospitality convention in Las Vegas, and I agree with him. He believes the wanton and irresponsible rate cutting that's overtaken the hotel business in response to the 15-month-and-counting downturn is a direct result of the black-and-white nature of modern revenue management.

At one time, general managers and/or owners made the daily decisions regarding rate. When business got soft, they would make judicious adjustments based on experience, education, market knowledge and good-old-fashioned gut instinct. They knew they sometimes had to lower rates to meet market conditions, but they also knew rates that fell too far or too fast hurt business once recovery began.

Today, in many cases rate setting is a function of computer calculations that merely measure and react to supply and demand: Demand goes down, and rates go down, irrespective of possible long-term implications. And let's face it, many property-level revenue managers are youngsters who've never had to manage their way out of a tight economy. They're more likely to be computer operators than they are experienced business people.

Mike believes, and I'm not as convinced of this argument, that revenue management is equally bad for the industry in good times. Again, because current principles of revenue management hinge on supply and demand, hotels may be guilty of pushing rates too far during periods of high demand. Mike argues it's better to set rates at levels equal to the true worth of the experience to the guest, not just what the traffic will bear. Do this, he reasons, and guests will be loyal to you through good times and bad. But again, these kinds of decisions need to be made by experienced hoteliers, not clerks or button pushers.

You may quibble with my credentials to make these arguments, but no one can taint Mike's standing. Among other jobs in his nearly 50-year career, he's been head of Days Inn, Holiday Inns, US Franchise Systems, HSMAI and helped co-found AAHOA. His opinion carries weight.

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