Outsource Revenue Management

Outsource revenue management refers to the practice of hiring external experts to oversee and optimize a company’s revenue strategies. It’s important as it leverages specialized skills and technologies to enhance financial performance, allowing businesses to focus on core activities while benefiting from advanced revenue optimization techniques.

Key Takeaways

  • Achieve Better Financial Results: Outsourcing revenue management to specialized companies can enhance financial success through expert knowledge, technology, and industry insights.
  • Focus on Core Activities: By outsourcing, resort staff can concentrate on sales, operations, and customer experience, improving service quality and guest satisfaction.
  • Gain Competitive Advantage: External revenue management expertise helps resorts become more competitive, offering efficiency advantages and financial performance that outperforms rivals.
  • Access to Advanced Technology and Analytics: Outsourcing provides resorts with access to state-of-the-art revenue management software and analytics, which can be costly and complex to manage in-house.
  • Adaptability to Market Changes: External revenue management services offer flexibility and adaptability in responding to market fluctuations, ensuring pricing and strategies are continuously optimized.

Introduction

For resorts, hotels, and other hospitality companies, revenue management is vital, allowing financial results to be optimized. However, many outsource revenue management to a third party rather than handling it internally, because it requires specialist knowledge and tools. In this article, you will learn more about revenue management strategies and some of the key reasons why they are often outsourced.

Defining Revenue Management

Revenue management is a strategy that maximizes financial results through data and analytics. To achieve this, information is used to predict or anticipate demand levels, then to inform pricing and distribution strategies. The standard definition for those within hospitality is as follows:

Revenue management: “Selling the right room or cottage, to the right person, at the right time, for the right price, through the right distribution channel, with the best cost efficiency.”

Understanding Revenue Management

Revenue management is an especially important concept for resorts and hotels, because cottages or rooms do not all sell for the same price. Indeed, depending on when a booking is made, the date of the reservation, and the channel used to make the booking, prices can vary significantly, even when people are paying for the same room type.

Additionally, resorts and hotels have a certain number of cottages and rooms to allocate, and they cannot simply create more to meet demand. Therefore, for financial results to be optimized, they need to sell the limited number of cottages/ rooms they have for the best possible price, while getting the balance right to ensure as many cottages/ rooms as possible are sold.

This means hospitality owners can gain a major advantage by accurately anticipating demand. After all, Resorts can charge higher prices when demand is high but may need to reduce prices to achieve full occupancy when demand is lower. Getting this right requires detailed data analysis.

Why Resorts Outsource Revenue Management

Hotel and resort owners operate in an extremely competitive industry, and revenue management has become an essential ingredient for success because it has a proven ability to improve financial results. Nevertheless, it requires a knowledge of the industry, and an understanding of quite complex techniques.

Some resorts and hotels opt to hire a full-time revenue manager who works exclusively for them. This can be a successful approach, but paying a full-time salary can be expensive, and it generally needs to be supported through investment in technology too. The alternative is outsourcing revenue management to a third party that works on demand.

The outsourcing option is especially beneficial for smaller resorts or hotels and those with a stricter budget. It allows revenue management to be carried out by experts with access to the latest technology and are equipped with up-to-date skill sets, data, and other market insights.

Moreover, resorts and hotels that outsource revenue management do not need to worry about hiring a replacement if the revenue manager leaves, or providing their revenue manager with regular training and coaching.

4 Reasons to Outsource Revenue Management

1. Achieve the Best Financial Results

One of the main reasons why an increasing number of resorts and hotels are outsourcing their revenue management strategies is because it allows them to achieve better financial success. This is helped when the responsibility is outsourced to a company with industry experience and the right knowledge, expertise, and technology.

Indeed, when an experienced third party is provided with valuable data, like past sales figures, and can combine that with their industry insights, they can help resorts and hotels to adopt the right pricing strategy, and to target the right customers, through the right channels, to optimize revenue generation.

2. Focus on Sales and Customer Experience

Outsourcing revenue management offers an additional benefit: it frees owners and other resort staff to focus on other activities. This is extremely advantageous because hotel and resort owners must manage sales, marketing, housekeeping, restaurant, bar staff, and everything else.

In particular, delegating revenue management to a third party can allow for an increased focus on activities related to sales, operations, and the customer experience. This, in turn, enables resorts to enhance the quality of their products and services, improving satisfaction levels and generating loyalty.

3. Gain a Competitive Advantage

Another reason why revenue management is increasingly outsourced to third parties is that their expertise can allow resorts to become more competitive. On the most basic level, it can allow resorts to financially outperform rivals that do not have a coherent revenue management strategy.

However, the potential advantages go beyond this. For instance, it will offer efficiency advantages over resorts where the management team attempts to handle revenue management themselves.

4. Avoid the Need to Hire a Revenue Manager

Finally, in many cases, the decision to outsource revenue management can be preferable to the alternative: hiring an internal revenue manager. This is especially true for smaller, independent resorts and hotels, where the money might not be available to pay someone a full-time salary and invest in the latest tools.

Hiring a permanent revenue manager can be a time-consuming process and provides challenges if and when a revenue manager decides to leave. Training an existing staff member to become fully competent is time-consuming and expensive. Outsourcing the responsibility, on the other hand, avoids these issues completely.

Revenue management is vital for modern resort owners because they sell a limited number of cottages or rooms for variable prices and need to maximize their financial results. However, it is becoming increasingly common for revenue management to be outsourced to third parties who specialize in the discipline, have access to the most up-to-date tools, can work on demand, and do not require the resort to provide training or coaching.

More Tips to Grow Your Business

Revfine.com is a knowledge platform for the hospitality & travel industry. Professionals use our insights, strategies and actionable tips to get inspired, optimise revenue, innovate processes and improve customer experience. You can find all hotel & hospitality tips in the categories Revenue Management, Marketing & Distribution, Hotel Operations, Staffing & Career, Technology and Software.

This article is written by:

Hi, I am Martijn Barten, founder of Revfine.com. I am specialized in optimizing revenue by combining revenue management with marketing strategies. I have over 15 years of experience developing, implementing, and managing revenue management and marketing strategies and processes for individual properties and multi-properties.