3 Ways to Get Good at Revenue Management

Introduction

If you do revenue management in your business, you need to educate yourself. Otherwise you are going to leave thousands of dollars on the table. This episode is about how to get good at revenue management. It is meant for people who are doing revenue management in their own business, or for revenue management consultants who want to pick up a few ideas.

The Three Options for Filling the Revenue Management Seat

There are essentially three ways to fill the revenue management seat in your business. Revenue management is a specialty skill set that requires training. Without it, you can leave 10, 20, even up to 40 percent of revenue on the table.

Your first option is to do it yourself. A lot of founders and CEOs of smaller short-term rental companies wear many hats, and revenue management is typically one of them. If that is you, that is fine, but you have to educate yourself.

Your second option is to hire an in-house revenue manager. The challenge is that good revenue managers are expensive and hard to find. We have close to 10 revenue managers on our team and it took us two years to find them. We worked with headhunting firms, spent a lot of time interviewing, and went through a long process. Great revenue managers are rare. If you want one, expect to pay close to or at six figures. You also need to account for sick days, holidays, and coverage. For smaller companies, in-house hiring is often not feasible. If you have two, three, four, or five hundred listings, the investment makes more sense. But for smaller portfolios, it usually does not.

Your third option is to work with a third-party service company. That is what we do at Freewyld Foundry. I am obviously biased, but I also recognize it is not the right fit for everyone.

One reason you might want to keep revenue management in-house is control. If you hire someone in-house, that person works only for you. You can manage their hours and direct their decisions. When you work with a service company, you are working with a team. The team takes revenue management off your plate entirely. You tell them your minimums, your minimum night stays, and your target occupancy at different points in the booking window. Then you let them do the work. We get the best results with clients who adopt a mindset of letting the experts do what they do best, while focusing their own energy on operations and business development.

If you want to maintain a high level of control over your pricing, a third-party company is probably not the right fit. In that case, you are better off doing it yourself or hiring in-house.

What It Takes to Do It Yourself Well

If you are going to do revenue management yourself, you need to be somewhat passionate about it. If you hate doing it, you are not going to be great at it. You have to dedicate time to it and enjoy it. Otherwise it falls off the wagon. You end up focusing on everything else first, and if you have five minutes left at the end of the day, you glance at a couple of prices and hope for the best. That is not a revenue management strategy.

So what do you need to do to actually get better at it? There are three pillars.

Pillar 1: Experience

There is no substitute for experience in revenue management. It is not a hard science. You cannot calculate the optimal price. There are too many variables. Revenue management is more like a soft skill that requires an analytical mindset. It is not deterministic. You cannot learn it once and be done. You learn it over time, by doing it, by testing things, and by paying attention to the results.

The very first thing I would do if you are managing your own revenue is block time every single day. At least half an hour. An hour if possible. Dedicate that time to your pricing. Do not skip it. Look at every booking that comes in, because every booking contains information. It tells you something about how you are priced and whether you should be priced higher or lower. Pacing changes every day. One booking can shift your position in the window. You need to be watching it consistently.

Pillar 2: Resources

There is a lot of content out there, but a lot of it is marketing material dressed up as education. You might pick up ideas, but it is not necessarily going to make you better at revenue management. Choose your teachers carefully. How long have they been around? Do they have reviews and a track record? In the hotel world, there are university courses and accredited programs for revenue management. In short-term rentals, there is no official standard. That is exactly why you need to be selective.

At Freewyld Foundry, we have built out a substantial free resource library at freewyldfoundry.com. If you go to the resources section, you will find workshops where we walk through our strategy at a high level. The Pricing Power workshop in particular is a must-watch for anyone managing their own revenue. It covers pacing, which is the most important concept in revenue management. Pacing is about understanding where in the booking window you want to get booked, how to read your current position, and how to take action when you are ahead or behind. It is the hardest concept to master, especially when your booking window is long.

We have also turned many of our trainings into guides, so if you prefer reading over watching video, those are available as well. And of course, we have the podcast. We have been talking almost exclusively about revenue management for close to a year now, which means over 50 episodes of content on strategy, execution, and market analysis. If you listen to all of it, you will know our entire approach. From there it is just practice.

Outside of Freewyld Foundry, your pricing tool is one of the best places to learn. We use PriceLabs exclusively. PriceLabs has a strong resource section, a podcast, masterclasses, and regular training. Equally important: PriceLabs updates its platform constantly. New features, new reporting, new functionality. You need to stay current. Almost without exception, every time I look at a new client account, I find inefficiencies or outdated settings in their PriceLabs setup. Knowing the tool well is just as important as knowing the strategy.

As for other courses available online, be cautious. You rarely know how good they are or whether the concepts being taught will actually move revenue in your business.

Pillar 3: Community

To get really good at something, it helps to learn with other people. If you know other operators who are also managing their own revenue, reach out. Ask if they would be interested in doing a weekly Zoom call to compare notes, share what they are testing, and look at results together. Ideally connect with people in different markets so there is no competitive concern. Different market, no overlap, just shared learning.

Learning alongside others is also more motivating. Sitting by yourself going through videos and blog posts can get lonely. Having a couple of people to think through problems with makes the process faster and more enjoyable. You tend to understand things faster in a group because someone else often gets something before you do, and sometimes you are the one who gets there first and can explain it to them.

There are also masterminds in the short-term rental industry you could potentially join if you want a more structured community.

Summary and Closing

The three pillars are experience, resources, and community. There is no shortcut. Revenue management takes time to learn. I have been doing this exclusively for over three years and I am still learning something new every week.

Before you decide how to fill the revenue management seat in your business, take the time to think it through. Whatever you choose, commit to it for a while. Switching constantly between doing it yourself, hiring someone, and working with a third party is the worst thing you can do. There is always a learning curve no matter who is managing your revenue. It takes up to a full year to fully understand a portfolio and a market, because you need to experience every season before you truly know it.

Make the right choice for your situation and stick with it. If you have questions, feel free to reach out. And if you are looking for a third-party revenue management company, we have a free revenue report process at freewyldfoundry.com/get-started where we go into your pricing tool, pull the data, and show you where the opportunity is.

Thanks for listening and we will see you next time.