Five Biggest Revenue Management Myths Debunked!
According to @IBISWorld, the global hotels and resorts industry is expected to grow to $580 billion in 2012. Good news? Organizations could see a 1-3 percent increase in revenue if they have a sophisticated pricing and revenue management tools and practices in place. Bad news? Ignoring it could see the industry forego up to $17 billion a year in potential revenue. So it would seem like a no-brainer for hoteliers to make the paradigm shift but shockingly, one third of hotel properties do not have automated revenue management systems in place.
I recently published an eBook titled, “The Truth About Pricing and Revenue Management: Debunking the Five Biggest Revenue Management Myths.” The eBook addresses five mistaken beliefs that many companies use as an excuse not to invest in pricing and revenue management tools and techniques even though these systems have proven to generate 1 to 3 percent (or more) additional top-line revenue. It’s time to bust some of these myths so that organizations can realize their reasons for not investing in software that directly improves profits margins might actually be based on misconceptions.
How much is 1 to 3 percent? Well, the math is easy – if you’re running a $100 million company that’s as much as $3 million dollars every year, money that falls straight to bottom line profit. If your company typically has 10 percent profit margins – that additional $3 million equates to a 30 percent improvement in annual profit. Top-line revenue is a powerful lever that drives profit margin—which drives up the total value of an enterprise.
For a $1 billion company the numbers are more dramatic: $10 to $30 million dollars every year of additional revenue. If you’re the CFO of a $1 billion company, look in your file cabinet to see how many $30 million ideas are tucked into those folders. Not very many!
Let’s review the top myths of pricing and revenue management and separate fact from fiction. Click to share your favorite via Twitter and download the eBook here to dig into the details:
- Myth #1: Revenue management systems are hard to implement and use.
- Truth #1: Powerful tools like revenue management systems are built to make users’ lives easier.
- Myth #2: Revenue management systems cost too much and won’t deliver ROI.
- Truth #2: Organizations typically achieve revenue gains of 1-3 percent when investing in pricing and revenue management.
- Myth #3: Revenue management systems won’t work in my business.
- Truth #3: Any company that cares about maximizing profit cares about managing prices.
- Myth #4: Smart people and good reports do as good of a job.
- Truth #4: Relying on gut reactions is riskier than automating pricing and revenue management.
- Myth #5: Pricing variance from these systems makes customers mad.
- Truth #5: Customers accept and appreciate a company’s pricing and revenue management efforts.
The Great Recession brought intense focus on cost-cutting measures for many businesses. Throughout the past decade or so, companies across multiple industries have gone through mergers, acquisitions, consolidations and outsourcing, mostly in the name of efficiency and cost-savings. Of course efficiency and cost-saving are worthy goals, but ultimately costs can only be cut so far.
Growth – particularly growth in unit-revenue – is a much better way to position a business for long-term success than cost-cutting and shrinking. For businesses that have used these excuses not to invest in state-of-the-art pricing and revenue management solutions, it’s time to take another look.
Tell us what you think and what you are doing differently to break barriers and drive revenue growth.