We’re being lied to about Performance measurement

We’ve told you that good performance measurement for RM is based on the indicators that everyone knows: Turnover, Occupancy Rate (OCC) and Average Price.

But no, you can’t build good targets with these, and they’re not good indicators for measuring RM performance.

How to measure your performance?

Firstly, because we’re mixing up GOALS, MISSIONS and OBJECTIVES. Reaching a level of turnover set by the CEO is a GOAL that the whole company has, collectively. You can be the best RM in the world, but if the sales people don’t get any contracts, if the website crashes all the time, you won’t get very far. Achieving turnover is a collective effort. Everyone contributes. And the RM, no more than anyone else, cannot be held solely responsible for whether or not a turnover budget is achieved. So we need to look elsewhere, and talk about MISSIONS and then OBJECTIVES.

First of all, the RM’s MISSION is to activate all the levers of stock management and price management to maximise Turnover. Sell at the right price, at the right time, to the right customer. It is this requirement that must be reflected in its OBJECTIVES.

And this is true for all functions: there has to be a mission and objectives in line with that mission. For example, the Call Centre’s mission is to take calls and sell. Their objectives may relate to the number of calls taken, the conversion rate, the average basket, etc. If these targets are met, the call centre will have done its job and contributed to the collective goal of achieving this level of Turnover. And this is true whether or not the goal is achieved.

The RM: an independent system

The MR must also have its own indicators and objectives. In the same way that only the Call Centre can be held responsible for a good call pick-up rate, the RM must be assessed on his ability to manage prices and stocks properly, because it is he who controls these levers, no one else. And the activation of these levers is consistent with the mission entrusted to him. The mission itself is to achieve a goal.

In concrete terms: if I close the OTA channel on a date when I’m not full, I’ve lost sales. This is known as SPOILAGE. It’s a refusal to sell when you’re not full. The objective is therefore to aim for a rate close to 0% SPOILAGE, with a target of less than 3% for example. Conversely, if I had saturated my stock too early with low prices, I would have been able to sell at a higher price and I would have lost the average price (we talk about SPILL and we build objectives around this KPI), and so on. In this way, you can set KPIs and objectives for each lever: overbooking, length of stay, etc.

And that’s where you stop getting beaten up if you don’t reach your turnover budget.

Would you like to find out more and set up these RM KPIs? Get in touch with us. We know how, we’ve done it before. And it works.

Keywords: Performance measurement, Revenue Management, Turnover, Call centre, OTA, KPI