Revenue optimization department is of great importance in all the industries. By using revenue optimization departments, the companies find it easy to identify weaknesses and strengths. Companies with revenue optimization departments maximize profits in short run and long run. Some of the companies that use revenue optimization department include Carlson Rezidor Hotel Group, Marriott International Company, and Inter-Continental Hotels Group. Companies that wish to yield high profits should not go for any other technique of maximizing revenue but develop revenue optimization department.
Revenue optimization refers to the process of maximizing the firm’s profits in the process of selling the same goods or services. The business people consider this process as a science and an art because it involves the use of various strategies of mixing the cost of products to maximize the company’s profits. The process is also known as ‘yield management’. Revenue management is effective in industries like hotels, ceremony halls, and airplane rooms in the airline industry, because such industries have goods and services with fixed costs whether people occupy the spaces or not.
Hospitality Sales and Marketing Association International (HSMAI)
In this association, qualified people from revenue management in the industry of hospitality are issued with a certificate in revenue management, Certified of Revenue Management Executive (CRME) (Lieberman 2009, p. 101).
Importance of revenue optimization department in a company
Increases the revenue in the company
The main purpose of having revenue optimization department in the company is to maximize profits. Revenue optimization department deals with the innovation of new goods and services hence increasing revenue to the company. Moreover, revenue optimization department sets the prices of these new products allowing the company to earn maximum profits. The innovation of the goods and services in the company increases the sales volume of the industry. For this reason, revenue optimization department is the main source of revenue maximization in the company.
Creates focus in the company
All the departments in the company depend on the revenue optimization department, which determines the future of the company. The department is in charge of coming up with new appropriate methods of increasing the revenue in the company. In addition, the department advises the other departments in the organization to take the necessary precautions required in the production of goods. A company that heeds of the advice of revenue department yields high profit margin. The department uses the current technology, for example, computers to determine the best methods of yielding high revenue. Therefore, revenue optimization department determines the future of the organization.
Construction of company revenue metrics in the company
Every company measures the profit margin using revenue metrics. The measurement of revenue is done on a seasonal basis. Revenue optimization department assists the company in making appropriate revenue metrics. As a result, revenue optimization department ensures that the company uses the relevant metrics for measuring revenue (Lieberman 2009, p. 64). Companies without revenue optimization departments gamble in measuring the profits. Measuring the profit margin in a company is of great importance because the company is able to adjust according to the results from the metrics.
Main tasks of revenue optimization director
Determination of the profits in the company requires accounting knowledge. Many revenue optimization directors have the required skills in accounting to calculate the profit margin of a company. The major accounting duties of a revenue optimization director involves preparation of revenue-received accounts, comparison of the figures with losses and calculation of revenue from the projects. The duty of the director is more of invoicing and management of firms accounts from different departments in the organization. Finally, the directors harmonize the figures from the departments to determine the revenue earned by the company.
Analyzes the financial reports
Revenue optimization directors not only do accounting tasks in the business but also analyze financial reports in the company. The director collects all the receipts from different projects within the company and makes future estimations on the company performance. Equally, the directors identify the projects that require many funds and fewer funds and then advise the company on the projects that would earn the company revenue. Providing financial information to the company allows it to identify the sources of losses in the business. The company then abolishes the projects that would consume more capital and bang on the projects with high return on capital.
Maintenance of the revenue optimization system
As the controller of the revenue in the company, the revenue optimization director ensures that the technology used for revenue collection is efficient. For this reason, the directors should have the relevant skills required in the maintenance of the system. The skills will assist the directors to detect any future problem that may affect the machine used in the collection of revenues. For instance, when a director has the skills required in the control of the computer, he will be able to develop and foresee the software that would hasten the revenue collection process. Moreover, he will be able to maintain the hardware of the computer to prevent malfunctioning of the machine.
Revenue management skills
The director should have good communication skills in order to communicate the challenges facing the maximization of the revenue. In connection to this, the directors explain the financial report to the company and make necessary changes using good communication skills. If the director has poor communication skills, the analysis of data would be difficult.
Industry analysis skills
One of the functions of revenue optimizing manager is to make predictions on how the company would win the customers’ interest. The revenue optimizing manager would be required to explain various changes within the company to win the interest of the customers, obtaining such information by reading various articles and magazines to analyze the industry reports. The directors should have knowledge concerning the competitors in order to do comparison and must be ready to answer any inquiry concerning the changes of the firm.
The revenue optimization director should have knowledge of how to handle the available machines for revenue collection. They must be able to learn various computer software programs, for example, revenue management systems among others. Moreover, the innovation of information technology has made the revenue processes easy. For this reason, the directors should interact with the new technology to improve the efficiency of their operations.
Accounting and financial skills
Accounting and financial skills are important in the field of revenue optimization. Some of the organizations like hotels prefer that their revenue optimization directors should have degree in accounting to provide quality services in the department. Revenue optimization process involves many financial operations that cannot be handled by someone without efficient accounting knowledge.
Examples of companies using revenue optimization department
Revenue optimization is used in most of the companies in the world. Most of the companies have preferred the inclusion of revenue optimization departments for maximization of profits in the company. Some of these companies include Marriott International Company, Inter-Continental Hotels Group and Carlson Rezidor Hotel Group.
Marriott International Company
Marriott international company has used revenue optimization department for the last 20 years to curb the challenges in the country. For instance, the company has used this department to control perishable stocks and reduce the cost of competition and early bookings. Initially, the company could not handle the perishable products to yield profits. Eventually it managed to do it and changed the name of the system to revenue management. In addition, the company has developed “fence rate” technique that makes them provide discounts on products depending on the demand of the products. In addition, the company formed a Group Pricing Optimizer (GPO). The profits of the company reached $46 million in 2008. Currently, more than 1,500 sales representatives use GPO technique in selling not less than 200 restaurants in North America (Phillips 2005, p. 56).
Inter-Continental Hotels Group
Inter-Continental Hotel Group has used the revenue optimization department to yield revenue. This company had problem of pricing its products, which resulted in losses. Currently, the company has used revenue optimization department to determine the prices of the products. They have launched a strategy that makes them understand the best pricing methods depending on the demand of the customers without the influence of the position of the market. The mushrooming of these hotels has increased the profit margin to 2.7% in 2009 (Lieberman 2009, p. 78).
Carlson Rezidor Hotel Group
This is another hotel group that has improved its performance due to the use of revenue optimization department. The company did not have any techniques of maximizing profits. The company has developed revenue optimization tool that is used by not less than 183 hotels. In addition, the company has tremendously increased its profit margin in pilot stage by more than 3% (Phillips 2005, p. 43).
Lieberman, W 2009, Pricing and revenue optimization: Maximizing staff effectiveness. Henry Stewart Talks, London.
Phillips, R. L 2005, Pricing and revenue optimization, Stanford Business Books, Stanford, CA.