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Date
16 January 2014

Revenue Management: do revenue managers recognise its impact on wider financial performance?

Established by the airline industry during the 1980s, revenue management has since become a strategic tool for the hospitality sector. Through the implementation of various practices, including demand-based pricing, inventory control and market segmentation, the benefits to a company’s generation of revenue and profit is evident. However, despite revenue management practices having this direct impact on a company’s financial performance and bottom line, many revenue managers have a limited understanding of the finance function.

Being defined as the maximisation of revenue when variable conditions are in play, revenue management is essentially selling the right product or service, to the right customer, at the right time, for the right price and through the right channel. Having these multiple considerations, the practice of revenue management becomes challenging and highly analytical, often requiring the interpretation of considerable quantities of data.

Involving complex processes, such as forecasting demand, managing inventory and setting prices in accordance with the conditions of the marketplace, revenue management devises and implements forward-looking strategies in order to maximise revenue in times of both high and low demand. However, with strategies tending to focus on the relationship between pricing and consumer demand, the important relationship between pricing and profitability is often overlooked.

With profitability affecting the financial position of a company, including its cash balance and also liquidity, the impact of revenue management strategies extends well beyond the generation of total revenue. For this reason, it is important that the relationship between revenue management and the whole of the finance function is understood. Revenue managers must consider not only the short-term effect on revenue generation, but also the long-term impact on wider financial results.

Designed for individuals working in revenue management, arena4finance’s course 'Finance for Revenue Managers' addresses this interrelationship and aims to improve understanding of financial accounting in the hospitality industry. Covering the profit and loss account, pricing strategies and key performance indicators, individuals learn of the impact that revenue management strategies have on a company’s bottom line and the wider effect that they have on financial performance.

For further information on the Finance for Revenue Managers course, please visit the course page or contact us at hello@arena4finance.co.uk.