Question for Our Revenue Management Expert Panel:

 What are the advantages and disadvantages to outsourcing revenue management? Is there a difference depending on hotel / property type?

Industry Expert Panel

Our Industry Expert Panel exists out of professionals within the hospitality & travel Industry. They have comprehensive and detailed knowledge, experience in practice or management and are forward-thinking. They are answering questions about the state of the industry. They share their insights on topics like revenue management, marketing, operations, technology and discuss the latest trends.



Diego Fernández Pérez De Ponga
Diego Fernández Pérez De PongaDirector of Revenue Management, Palladium Hotel Group

“This is a complicated question because it depends on your hotel, your business mix and your type of accommodation, but let me summarize the pros and cons from my point of view.

Pros

  • There is almost no onboarding process; outsourcing companies are used to controlling different PMS and RMS so they are able to start working on a property almost right away
  • They are a variable cost and you lower your labour cost
  • If they used their own technology, you save that money

Cons

  • In a world dominated by media gurus, it is becoming complicated to find the right outsourcing company
  • Cost: the best one-in-class is normally more expensive than having your own resources
  • Lack of control: you easily lose control of your pricing strategy”


Dermot Herlihy
Dermot HerlihyOwner, Dynamic Hospitality Consulting

“The opportunity to give real focus on the strategy and market opportunities are the greatest advantages I see. For big hotels, chain hotels or even small properties, boutique hotels and bed and breakfasts, for example, every property can benefit from the insights of a specialist revenue management staff. Also, outsourcing doesn’t have a bias that most hotels do when you have your own staff. Of course, for different hotel types, you may need different support. Big chains must have support for their long-term vision and positioning of different hotel brands (which do not apply to small hotels). The networking and ideas generated by an outsourced company are also a must, and the hotel can benefit from them.

In my opinion, it is a great way to professionalise (or boost) the RM structure. For sure, one of the main disadvantages is that outsourcing companies are not looking 100% only for your hotel/business. They have other clients and may not be at your disposal 24/7. Of course, even a dedicated RM is not available 24/7, but it is easier to keep in touch and make strategy adjustments and revisions.

And, also, we have a risk for those hotels that leave the strategy for the outsourcing company. Hotels should have people (or one person, depending on the hotel type) to understand and keep in touch, following up and checking if the outsourced RM company is fitting their interests and if the long-term strategies are well set.”



Ricardo Sereno
Ricardo SerenoRevenue Manager, Altis Hotels

“In any kind of property and structure, if you can’t afford to hire one (or a team) of Senior Revenue Managers and be able to train them regularly, you should hire outsourced RM. This goes for both independent hotels and smaller chains.

Constant training and teamwork analysis are the keys to the most effective pricing strategies, and they reflect effectively on your results. So you must have highly skilled professionals doing it instead of taking it into your own hand or hiring someone that will be average forever or good for a while (and then will resign for a better paying job or to go to a big chain).

There is also a halfway solution. Some RM consulting firms offer guidance in the form of the CRO/DORM position, and for a smaller cost, you will have someone that will help your Junior Revenue Manager with Market insights, high-level decision making and, last but not least, training and constant support.
I believe that the impact of a great Revenue Manager will be felt both in city and resort hotels, as well as in the 7 Apartment lodging and in the 500-room hotel with a convention centre. The cost of a good revenue manager would be the same (and too much for most of the smaller hotels) but the outsourcing cost adapts to each property size and business model.

If you have a hotel chain that can afford at least a Director or Cluster RM with a team behind them, I believe that outsourcing should not be a solution, as internal teams are quite strong and will be more efficient than outsourcing.”



Dr. Betsy Stringam-Bender
Dr. Betsy Stringam-BenderProfessor of Hotels & Resorts, New Mexico State University

“As in most cases for the hotel industry, there is not a one size fits all answer to outsourcing revenue management. There are many factors that contribute to a decision to outsource. The primary question for outsourcing any service or skill is: “do I have the skills and resources needed to do the job?” Similarly, a universal question when evaluating outsourcing is: “does the company understand my property, product and market?” Outsourcing revenue management is usually not a yes or no question. I never recommend outsourcing complete decision-making for any part of a hotel operation.

It is common for a remote revenue manager with advanced analytical skills and expertise to support a property. This remote person can be part of a franchise company, ownership company, or management company. The key word is support. The remote expertise provides insight and recommendations to the property, who in turn makes the revenue management decisions. This support however is not a one-way conversation. Properties discuss the intricacies of their product and market with the remote revenue specialist and together develop potential revenue strategies. For an independent hotel, the same expertise is available on a fee basis through outsourcing. But again what should be outsourced is expertise and support, not the final revenue decisions.

Revenue specialists can provide expertise and analytics beyond the immediate market but are likewise not experts in the local market characteristics. A revenue specialist can have access and expertise in using several systems and databases that may be beyond the time requirement and expertise available to a hotel. There are many revenue tools or systems that can be deployed at the local level by a hotel. These tools have greatly improved in recent years. They have increased capabilities and are easier to use, putting revenue management analytics in the hands of more hotel managers.”



Daniel Feitosa
Daniel FeitosaRevenue Management Specialist

“The opportunity to give real focus on the strategy and market opportunities are the greatest advantages I see. For big hotels, chain hotels or even small properties, boutique hotels and bed and breakfasts, for example, every property can benefit from the insights of a specialist revenue management staff. Also, outsourcing doesn’t have a bias that most hotels do when you have your own staff. Of course, for different hotel types, you may need different support. Big chains must have support for their long-term vision and positioning of different hotel brands (which do not apply to small hotels). The networking and ideas generated by an outsourced company are also a must, and the hotel can benefit from them.

In my opinion, it is a great way to professionalise (or boost) the RM structure. For sure, one of the main disadvantages is that outsourcing companies are not looking 100% only for your hotel/business. They have other clients and may not be at your disposal 24/7. Of course, even a dedicated RM is not available 24/7, but it is easier to keep in touch and make strategy adjustments and revisions.

And, also, we have a risk for those hotels that leave the strategy for the outsourcing company. Hotels should have people (or one person, depending on the hotel type) to understand and keep in touch, following up and checking if the outsourced RM company is fitting their interests and if the long-term strategies are well set.”



Pablo Torres
Pablo TorresDirector of Sales and Marketing, Alannia Resorts

“The main advantage seems clear: to have expert support without having to commit to hiring someone full-time. As with any consulting service, if that service is consistently used, it might eventually become more expensive than having an in-house professional. However, the pandemic showed a great number of top professionals starting their own private practices as external consultants and that has driven fees down. All in all, an option well worth considering for many independent hotels that don´t yet have the luxury of an onsite revenue manager.”



Nikolas Hall
Nikolas HallOwner, N. Hall Consulting

“In light of the current labour challenges the hospitality industry faces, outsourcing a variety of functions – amongst them Revenue Management – seems to be a feasible solution. As a hotel owner/manager, it’s easy to focus on the benefits of outsourcing, all without considering the impact it can have on your hotel and it is, therefore, imperative to compare the pros and cons of outsourcing.

On the plus side – You do not have the hiring commitments & costs associated with signing a revenue expert. By searching a global talent pool, it’s easier to find the right talent at the right price to resolve your need for specialised help. You get expertise for a fraction of the cost you would otherwise have to pay. There also tends to be an increased focus on strategy/core competencies & you get to have a fresh set of eyes to evaluate your current set-up and strategies.

Many express concerns about risks involving confidentiality and security when handing over direct control of a function or process to a third party. On the downside – there is the possibility of communication & quality issues. In addition, there can be a lack of control & possible inconsistencies in accordance with your preferences. You also need to take steps to ensure that it doesn’t have a negative effect on company culture.

Outsourcing is a great way to put a spin on your business, but for success, it really does require that there are clear and concise expectations for strategy, performance, quality & outcome between the parties involved.”



Krunal Shah