Compute This! - By Jean Francois Mourier

2012-10-26
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  • RevPar Guru Decisions. In all industries, the highest success goes to those who choose wisely based on the most influential and relevant data. Key to successful decision-making, however, not only lies in the gathering of such data, but in the speed in which it’s acquired.

    Speed in gathering relevant data not only gives the decision-maker quick response capabilities, but in the case of the Chief Financial Officer and the Revenue Manager speed allows him or her to spend more time deliberating and determining the best strategic outcome.  Why compare the two? Both have roles that are critical to the financial success of their respective business.  What follows is a quick comparison of some strategic decisions made by both the CFO and the RM-what’s at stake, what’s involved, and how human experts, combined with software solutions best arrive at this outcome.

    The CFO’s Decisions

    The CFO must make decisions that ultimately affect the value of the firm for the better.  In other words, while the market, through economic forces such as supply and demand, overwhelmingly affects the company’s value, the CFO makes decisions along the way that can tip the scales in the company’s favor and keep its value somewhat consistent.  Think of such strategic decisions as ways to “smoothen” dramatic market fluctuations and keep the company’s value somewhat consistent over time.  The CFO must also determine the corporation’s optimal strategic financial direction, thus positioning it for growth over the years to come.  Decisions that the CFO must make successfully include:

    Forecasting Decisions – In order to anticipate future firm financial requirements, the CFO must accurately forecast future needs in contrast with current and future cash inflows and out flows.  The traditional methods of forecasting usually involve differing methods that follow a basic formula: project the firm’s current financial variables; calculate the firm’s sustainable rate of growth; and seek ways to finance this growth without going over a selected debt ratio limit.

    Budgeting/Budget Monitoring Decisions - Budgets tell the firm “how much” and “when” in regards to the firm’s forecasted future. Budgeting depends on the gathering of relevant data (from both outside and inside the firm) in order to be accurate.  The CFO’s budget is the foundation from which the firm must move forward, he or she must monitor it and make ongoing decisions on whether to continue on its planned path, or take corrective actions.

    For both of these decisions, the CFO has at his or her disposal, a large variety of software solutions to rely upon.  While the big decision is still ultimately up to the CFO (rightly so), the use of software allows both the CFO and the supporting staff more time to make more informed, strategic decisions based on knowledge and experience.

    The RM’s Decisions

    The hotel revenue manager is in much the same situation as the CFO.  Hotels are, for the most part, subject to market forces within their primary market (or competitive set) when it comes to controlling their rates.  However, the RM also has the decision-making ability to optimize the hotel’s pricing structure for success now – and growth in the future.  This success lies on the RM’s capability to effectively manage inventory (supply) and manage sales channels (demand) by implementing a strategy that requires the utmost attention to the decision-making process.

    In order to ensure the maximum RevPAR available, the RM, in general, must expertly set competitive rates based on his or her knowledge of booking trends, forecasting, and expertise at monitoring booking channels.  Let’s look at these decisions:

    Forecasting Decisions – Based on everything from seasonal trends, to comp set variables, the RM must decide where rates need to be set for the future.  The key difference here between the CFO and the RM is in timing.  The RM must make decisions based on both the immediate future (as in seconds, minutes, and hours) as well as in the broader future.  This difference alone is a good reason why RMs have been switching to software in droves: when it comes to split-second booking rate decisions, gathering and formulating data has become too cumbersome of a process.

    Monitoring Decisions – Much like the CFO monitoring multiple items on a budget, RMs must constantly monitor multiple booking channels.  This includes everything from OTAs, to the emerging mobile booking engine channels, and from the hotel’s direct booking engine, to all other traditional channels (telephone, travel agents, group booking, etc.).  In addition, all other comp set variables such as local economy, and local competition rates must be monitored – and let’s not forget macroeconomic variables as well.  With all of this monitoring, RMs have little precious time to devote to strategic decisions without the aid of software.  Just as it is with the CFO, the RM (and the hotel as well) benefits from revenue management software solutions that free the RM to spend more time on making an expert decision.

    It’s the fundamental truth regarding software in business: computers can perform millions of tasks in seconds so that humans can spend significantly more time making successful decisions.  When it comes to making informed decisions, success depends on the speed and relevance of the data and the human involved in making the decision.  Whether it’s an RM or a CFO making them, strategic decisions based on knowledge and experience dramatically affect the future of the hotel and the corporation. Isn’t it imperative then that a person in either position spend more time making the decision, than gathering and monitoring the data necessary to make it?

    Jean Francois Mourier is CEO and Founder of REVPAR GURU, an intelligent online solution that provides hotels around the world with an alternative revenue management software system designed to deliver maximum bookings and profits, as well as the convenience of full automation and integration 24/7. As REVPAR GURU's custom-designed Yield Dynamic Price Engine is the only real-time revenue management system available on the market, it meets the rapidly changing needs of hotels looking to increase their competitive advantage in an increasingly difficult marketplace. REVPAR GURU’s system offers dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management and GDS sales distribution, to increase a hotel's RevPAR intelligently and effectively, while maintaining rate integrity and automated rate parity. Since 2004, smart hoteliers worldwide have used REVPAR GURU’s software system to increase occupancy, average daily rate (ADR) and RevPAR.

    To learn more about REVPAR GURU, please visit www.revparguru.com or call +1.786.478.3500.   Follow REVPAR GURU on TwitterFacebookLinkedIn or YouTube.


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