What Revenue Manager has never had an average price target set for them by their superiors?
An objective just as inane as wanting to be as tall as possible in order to be in good health. So how do you know if everything is going well? What indicators should you be looking at? We explain it all in this article.
The revenue manager hopes, and the customer decides
Would you ask a child to control its size, so that it can grow? In the same way, the Revenue Manager has no control over the average price. He sets the sale price, but the customer sets the purchase price. And for the sale to go through, the customer has to buy. So, at his price… The Revenue Manager may have a CP target of €400, but if nobody wants to pay that price, the target will never be reached.
Secondly – and this is obvious to everyone – just because you’re 2m tall doesn’t mean you’re in good health. That has nothing to do with it. It’s exactly the same thing for the average price. A high average price is absolutely no guarantee of the Revenue Manager’s good performance. It has to be analysed in conjunction with other indicators. Two examples to convince you:
- With COVID, campsites were closed from April to June in 2020. The average annual price rose mechanically because only the high season weeks were open – prices are 4 to 5 times higher than in the low season – but the campsites lost 10 to 15% of their turnover. Not great…
- Thanks to more aggressive group pricing on weekends, one of our customers generated 3 times more group sales on weekends that were previously empty. He increased his turnover but saw his average annual price fall. Good!
So what should we be looking at?
A slightly more relevant indicator of good health might be weight.
It could be related to turnover or sales figures. For an adult male, a weight of less than 50 kg or more than 130 kg could be a warning sign. But there is no certainty. The same goes for the RM: in principle, if turnover increase, it’s quite positive, except that the stock to be sold or the programme may have been multiplied, and this increase in turnover will not be significant enough. Turnover may have fallen because we have less stock to sell. Turnover may have increased because we decided to communicate massively, and RM has nothing to do with this.
BMI, which is a ratio of weight to height, is beginning to be more indicative of health.
This could be the equivalent of RevPar or the occupancy rate. An increase in RevPar is positive in principle, but it does not necessarily mean that the Revenue Manager is managing demand well. You can increase turnover and be full 6 months before; the RevPar will increase but the Revenue Manager will not have made the most of demand. In terms of health, BMI is not a panacea either: to read my scales in the morning, my BMI puts me in the « slightly overweight » category, yet I could very well be very muscular and have a massively heavy bone structure… At this stage, with just this BMI, I can still convince myself of that…
If you really want to get an idea of your health, you’re going to have to look at your cholesterol, blood sugar and body fat levels,
These are the indicators that really reflect our health. But also those we can have an impact on. In a way, the Revenue Manager’s Cholesterol is his Spill* rate, his Blood Sugar is his Spoil** rate. The Revenue Manager, whatever his height, weight or BMI, can control and steer his Spill, his Spoil and his pricing jump intensity***.
If I’m a Revenue Manager and my Spill and Spoil rates are close to 0, if my pricing jump intensity is between 1.1 and 1.2, then I’m maximising the turnover I get from the sales I make. And a certain PM follows… Which one? A strong one? A weak one? Nobody knows, but it doesn’t matter, I’ve got the quintessence of my demand.
*Spill: selling your entire offer well before the date. You could have sold more and earned more.
**Spoil: this is when, after having been very ambitious in your starting price, you have to lower your prices (usually at the last minute) because you didn’t sell enough. These dates generally do not sell out.
***Pricing jump intensity: this is the price differential per pricing change. An intensity of 1.1 means that on average pricing changes are of the order of 10%.
Keywords: Average price, Revenue Manager, Spill, Spoil, price jump
