strategic revenue management meeting

Strategic vs. Tactical Revenue Management – Making the Most of Both

Alexandra Fjällman

‘How do you report RevPAR?’

 
Or, ‘Are you using any revenue management software to help you achieve your target RevPAR?’
 
Hoteliers often debate questions like this, discussing minutiae but not the bigger picture. During these conversations, the words ‘strategy’ and ‘tactic’, are often used interchangeably. The reason is many people don’t know the difference, or how they complement each other (Do you?)
 
For instance, how much time do you spend on strategic and tactical revenue management? And how often do daily tasks keep you from working on your strategy to achieve your long-term goals?
 
In order to help you answer those questions and take your approach to revenue management to the next level, we’ve put together this article. It sheds light on how to make the best of both strategies and tactics.
 

Strategic and tactical revenue management: what’s what?

 
Let’s look at what the terms ‘strategic’ and ‘tactical’ mean.
 
A strategy is a plan you have to come up with to reach a specific goal.
This could be shifting segmentation, increasing direct bookings, winning new markets or driving ancillary revenue. In other departments, it might include improving the sales team’s conversion rates or cutting food costs.
 
Tactics are concrete action steps you take to achieve a goal.
This could mean exploring alternative booking channels, revamping the website’s booking engine. It also implies doing more targeted sales calls or implementing steps to reduce food waste.
 
To conclude, once you’ve set a clear goal and developed a solid strategy, you can decide which tactics to use.
 
As Sun Tzu already said in The Art of War:
“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”
 

Strategic revenue management

When setting a strategy for your hotel, you’ll want to start with a few basic steps.
First, understand your market.
 
  • Is it a seasonal market? If so, when is the high, mid and low season?
  • Which events happen throughout the year? How could your hotel benefit from them?
  • How does the distribution landscape look for your hotel? What are common and uncommon ways to sell your rooms? Which ones could work for your property?

At the same time, know who your guests will be. Questions to ask yourself include:

  • Is your hotel geared towards corporate or leisure guests?
  • Do you work with groups or individuals?
  • Which amenities or services could help you generate extra revenue and add value for your guests?
Drilling down on these questions will help you set overarching goals. For example, target revenue, occupancy, RevPAR (revenue per available room) or ADR (average daily rate).
 
Once you know where you’re going, you can decide how to get there. Start outlining the approach you’ll take to achieve your goals (i.e. choose which tactics to use)!
 

This is when you:

  • Set revenue management standards and procedures
  • Research and implement revenue management tools including a revenue management system (RMS), rate shoppers and pricing tools
  • Set reporting guidelines and plan regular meetings to discuss progress, performance and areas for growth and improvement

 

Nevertheless, the goal of setting a revenue management strategy is to create a framework. Hence, revenue managers know which goals they are working towards, which approaches and guidelines to follow. It also helps them make decisions quickly and efficiently in day-to-day operations.
 
The same applies to setting and implementing strategies in other departments. When you’re deciding on tactics to use, always remember General George S. Patton’s words:
 
‘Good tactics can save even the worst strategy. Bad tactics will destroy even the best strategy.’
 
 

Tactical revenue management

Now it’s time to get busy!
 
Getting tactical means putting your strategy to work in day-to-day operations and tapping into your toolkit.
 
This starts with collecting and analyzing data, a job which becomes more efficient and revealing when data integration is used to bring together information from various sources to create a complete picture.
 
Making situational decisions about which tactics to apply depending on the market shapes a hotel’s daily performance. This includes updating pricing, opening and closing channels, allowing or avoiding overbooking, offering special deals and discounts or setting rate fences.
 
Using a revenue management software makes these tasks more efficient and can even automate many of them, thus giving revenue managers more time to refine their strategies.
In the words of Atomize CEO Alexander Edström:
 
“In dialogues with hoteliers we regularly hear that Revenue Managers often spend a lot of time on the tactics and daily operations such as setting prices. However, setting prices automatically by using Atomize enables them to be much more efficient, optimize revenue and free up time for working on their revenue strategy and long-term goals.”
 
Same as other departments. The marketing and PR team will use tools to track impressions, article clippings, social media and ads, or to automate postings and improve communication. They will also collect data on their campaign performance to know where to invest to gain maximum exposure.
 
As with revenue management, using tech tools is a great way to streamline processes and gain more time to improve strategies.
 

Using strategy and tactics to win

Today, countless tech tools and reporting techniques are available for every hotel department. Getting too focused on this aspect can lead to ‘living in the spreadsheet’ and spending too much time blindly collecting data and using tools without a clear goal in mind.
 
Nowadays, to make the most of current technology and the abundance of data, a clear strategy is a must. That makes it easier to focus on where you want to go and what’s important to your department and your hotel.
 
Like the Prussian general and military strategist, Carl von Clausewitz said:
 
Tactics is the art of using troops in battle; strategy is the art of using battles to win the war.’
 
As a hotelier, you can have a similar approach when choosing the tools and techniques to use towards your goals.
 
Did you recently find out about a promising new approach or tool? (Good on you for doing your research!)
 
Now, the first question to ask yourself is: does it support your strategy and help you move towards your goal faster? If yes, great! Go for it!
 
If not, would it be wise to revise the strategy, your goals and tactics to make room for this new tool or approach?
 
However, if there is no logic, stick to your original plan. If your strategy or tactics need revising, go ahead, but make sure you’re not just following the latest fad.
Always stick to your goals. Use your tactics to reach them. Don’t let it be the other way around.
 
Do you want to know more about how Atomize RMS can help you improve your revenue management tactics, contact us > 

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