How to Select a Revenue Manager

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A revenue manager can be a critical hire for a property management company. Choosing the right candidate is not easy and the field of qualified candidates is not big. But, good candidates are out there and it’s possible to find the right fit for your business if you use the right evaluation criteria.

There are two primary qualifications that a revenue manager should have. The first is a deep sense of curiosity. This may not seem like the most important attribute. When we think of the role of a revenue manager, it’s heavily analytical. But, a big part of the job is understanding human behavior. Curiosity is what prevents your new hire from settling for weak instruction answers. It’s so important that at quibble we have coined the term Quriosity and it’s a big part of our company values.

“Curiosity is what prevents your new hire from settling for weak answers.”

The second qualification is a deep understanding of probability. When revenue managers make decisions, they should all be based on probability. Humans, particularly property owners, are driven to make decisions that are completely irrational. Fear, greed, and pride are all emotions that will destroy a good pricing strategy. The revenue manager should communicate in terms of probability to cut through the irrational.

“Fear, greed, and pride are all emotions that will destroy a good pricing strategy.”

Other qualifications will depend on the size of your team and portfolio. There are more advanced concepts in pricing strategy that a seasoned analyst will know and a new manager will need to learn.

There has been a recent increase in revenue management consultants popping up in the STR space. They are largely targeting the smaller to mid-sized managers who want a skilled revenue manager but don’t have enough work for them to justify a full-time employee. Alternatively, larger managers who have difficulty finding a candidate with the requisite skills have also turned to consultants.

Full-time revenue managers normally work for larger management companies that can justify the expense and have plenty of work to keep them busy.

Since this should be a revenue-generating position, the decision should be based on the possible value added versus the cost of the manager.

“Since this should be a revenue-generating position, the decision should come down to the possible value added versus the cost of the manager.”

Your expectations should be extremely high whether you hire a full-time employee or a consultant. Many managers, particularly consultants, will make aggressive claims when selling themselves. A 30% revenue improvement is extremely rare and if someone claims they will get that for you it is important to hold them to that claim.

“A 30% revenue improvement is extremely rare, and if someone claims they will get that for you, it is important to hold them to that claim.”

Second, expectations should be high because revenue managers are expensive. From a purely revenue perspective, they should generate more than they cost. From a practical expectation, they should help you understand your business on a much deeper level.

Revenue managers need software to do their jobs.

Some revenue managers will have preferred pricing software that they work with. You should know all the software that they are using to set rates. If they are a direct-hire, this might be something you already know because you have a preferred software provider.

More important than the selected software is the underlying pricing model used by that software.  There are 2 models currently available to the STR market to set rates: Base Price Model and Optimization Model.  Your revenue manager should understand the differences between these models and know which one they are using.  Optimization models use more advanced pricing science and produce better revenue results, so expect your revenue manager to prefer this model over the Base Price model.

“More important than the selected software is the underlying pricing model that is being used by that software.”

If your revenue manager uses a Base Price model, they will need to run some forecasting processes outside of the software. Base Price models do not run a forecast and the manager should be running something to give you constant projections of the future. Optimization models will run a forecast and this data should be available in the application. This is another reason Optimization models are preferred by seasoned revenue managers.

One of the most critical roles of the revenue manager is to communicate the current revenue position and the expected future position to the leadership team. This should be done through weekly revenue meetings. The meeting should provide revenue guidance as well as updates to the pricing strategy due to changes in the forecast.

This should be your expectation of the consultant or direct hire and you should set this expectation during the onset of the hire.

The reason other industry experience matters is that the practice of revenue management is relatively new to short-term rentals and is more developed in adjacent industries. This is both a positive and negative attribute for hiring in this space. The positive is that the field is ripe for innovation which makes it very attractive. The negative is, that there has been very little innovation in pricing in the STR space so not a lot of pricing talent has been attracted to the space, which makes it very hard to hire.

To attract top talent in revenue management, pricing science needs to rapidly advance in this space. The pricing problem for STRs is actually much harder to solve than in other industries like airlines. This makes the problem more interesting to work on and should attract highly qualified talent. But, the technology generally in the industry has been pretty stale, which you can easily see by attending any industry conference.

Evaluating the performance of the revenue manager you hire should be pretty easy if they are providing adequate revenue updates on a weekly basis. In this regard, they should be evaluating themselves for you in these meetings. The revenue management software you are using should also make this very easy. If you look at the RevPAR trend before and after they start, there should be some change in the slope of the trend.

Evaluating the performance of the revenue manager you hire should be pretty easy if they are providing adequate revenue updates on a weekly basis. In this regard, they should be evaluating themselves for you in these meetings. The revenue management software you are using should also make this very easy. If you look at the RevPAR trend before and after they start, there should be some change in the slope of the trend.