Michael Heyward, Founder, Heyward Hospitality Solutions, saw the birth of hotel revenue management. Having worked in the hotel industry for more than 30 years, with experience in operations, franchising and revenue management with both independent and chain hotels in Europe and Asia Pacific, he has seen it all.
Now, he juggles his time between running Heyward Hospitality Solutions and educating the next generation of revenue managers as a lecturer at the Glion Institute of Higher Education, where he works with students from all over the world.
We caught up with him to get his thoughts on market mix, forecasting and putting the customer first in your revenue strategy.
How did you first get into revenue management?
Heyward: I’ve been in revenue management for a long time; since it first started in the early days when only the airlines were doing it. I worked in Accor in the Pacific region when we were starting up revenue management. I moved to the UK with Accor. Spent a couple of years growing the revenue management team here. I managed to time that perfectly for the global financial crisis, a rather tough time to be a revenue manager! We had really good success there in our performance against the market. Then I moved to IHG, worked there for a few years. And now I’m a consultant, have been for four years with my own independent consulting on revenue management and developing high performing teams.
How do you decide on an optimal market mix for a hotel?
Heyward: Typically, the first thing I’ll do is throw out whatever segmentation exists within the chain because it’s either too high level and not very helpful, or too detailed and not very helpful. Start with a point of making sure you understand where your key elements of business come from. Don’t try and nail down every last little room night. Make sure you know what drives 80% of your business, and then who is responsible for that. Is that marketing, is that sales, is that someone else that you’re looking to, to deliver that? And then focus on those relationships in those areas. So, concentrate on the most important areas, understand them very well, and then optimize them with the relationships that are involved in that.
How important is it to benchmark with your comp set when it comes to pricing?
Heyward: There are different ways of responding to what your competitors are doing. They may leave an opportunity open for you by doing things that actually aren’t going to drive the better long-term results. And it’s not just pricing but also stay length restrictions and those sorts of things. To an extent, I would say be tactical. Identify where your strengths are. Identify the weaknesses in their strategies and take advantage of those. But I would even take a couple of steps further back: understand the value of the product you’ve got. Understand the point below which you should not go. And understand the point above which becomes a bit ridiculous, and really make sure you value the product that you’ve got.
It’s about respecting yourself and your customers, correct?
Heyward: Absolutely it is. If you want to sell an economy hotel, or a mid-scale hotel, at a price that’s lower than a Travelodge, then your customers will expect the product is even more limited than the most limited, well-known brand in the UK. That’s not doing the right thing for your product if you’re a mid-scale or a higher standard of product than they’re offering. So, you can make a real mess of pricing if you go outside certain boundaries with competitors.
What’s your advice to revenue managers building their first budget?
Heyward: The first thing a revenue manger needs to do is to understand what type of budget the hotel is looking for. The same hotel in a different situation, say if it’s being set up for a sale, will be looking for different things from a budget than if a sale has just been completed, or if there’s a refinancing process going on. So, understand the context, and then make sure you’re building your forecasts, your mix models, your pricing, and your whole budget, once you understand exactly what it is you’re trying to achieve. So, understand the context, would be the critical thing I would say.
What’s the difference between a revenue forecast and a financial forecast?
Heyward: The budgeting processes is always a point of contention for revenue managers, financial controllers, operators and owners. It’s always very challenging. One key starting point for a Revenue Manager is to understand that a revenue management forecast is different to a financial forecast. With a revenue management forecast, you’re looking at the opportunity, the potential and you’re trying to maximize your delivery against potential. Finance, you’re interested in what can I take to the bank? What can I be confident in?
How can revenue teams help break down interdepartmental silos?
Heyward: Still today, we get quite a bit of criticism in revenue management for being so rooms focused. One of the best ways to change that is to invite people in and have a broader conversation. The critical points are to make sure you’ve got the senior executives involved. And, of course, reservations, operations, and if the F&B team wants to be involved, fantastic!
All the algorithms in the world, all the smartest spreadsheets you could ever create, really aren’t worth a great deal unless you have the support of the other functions that you’re working with.
What other advice would you offer to revenue managers today?
Heyward: Good revenue managers start from the customer and work into the business, rather than starting from your systems and algorithms and working out. Focus on the customer and the customer experience and how you engage with customers.
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