Relationship or revenue: Potential management conflicts between customer relationship management and hotel revenue management

Xuan Lorna Wang

International Journal of Hospitality Management

source: here


This moment had to come as I described Revenue Management (RM) pretty in detailed on my website and recently I focused on Customer Relationship Management (CRM) with Customer Lifetime Value concept. When I was writing posts about the second type of management, I intuitively felt that their might be a conflict between RM systems that nowadays uses only historical bookings and CRM that is much wider and takes variables from different dimensions. As a result (in very simplified sense) RM look at short-term gains and CRM looks at long-term relationship. It took me a while but finally I found an article that satisfy my needs and hunger for knowledge. If you were as eager to know as me, please find the analysis of this article below


 

First of all let’ stress some fundamental differences between those two concepts in a bit more structured way than in the beginning. Especially it’s important to emphasize their relationship and attitude to customers.

CRM grew directly from times when companies changed the way their perceived their customers. They are no longer just “buyers” but they became a valuable asset of company and this is what they call a ‘new marketing paradigm’. Although, trying to present one and the best definition of CRM is pointless as e.g. Zablah et al. (2004) suggest there are at least 46 of them. The important fact here from managerial use is fact that CRM creates a relationship between customer retention, customer profitability and customer lifetime value.  However, in hotel industry maximizing today’s revenue might be more tempting than retaining tomorrow’s customers, especially during times of high demands when hotel can rise the rates. From customers perspective authors pointed out that RM practices might be seen as unfair if there is lack of information (the problem of fairness I already described in previous post). The second potential problem is lack of agreement for RM strategies that are demand-oriented (dynamic pricing that always rise rates during peak seasons). The last potential problem is associated with allocation inventory restrictions (e.g. long length stay requirements). All of those actions decrease the power of buyer.

The future however might be bright for cooperation between RM and CRM. Hendler and Hendler (2004) showed that positive result of combination between RM and CRM might be achieved based on 3 conditions:

  • a supportive organizational structure,
  • the right technology,
  • human intelligence or analytical skills

Wang in her study used qualitative approach and gathered data from four different hotels. For data collection she used methods such as: documented studies, non-participant observation, semi-structured interviews (with three sources of information: head office, sales and marketing offices, hotel properties). Documented studies included examination of: company policies, standard policies, training manuals, minutes of meetings, memos, management reports, customer complaint letters and customer contracts. Non-participant observation was carried out at hotel properties and offices, where Wang took part in daily operations, meetings and by shadowing certain employees. Then she conducted 18 semi-structured interviews with head managers, revenue managers, sales account managers and other managers at similar position. To analyze the data she used template analysis technique derived by King (1998). Such an approach to the problem created a very complex analysis that should show a lot of interesting results. I am truly fascinated by this study.

 

Findings:

  1. Disparity in management attention towards revenue management and CRM -
  2. Differentiation in management interests: revenue vs. relationship -
  3. Managers’ opinions on the compatibility between CRM and Revenue Management -

 

Just a short summary of the conflicts that I copied directly from this article

Screen Shot 2014-07-11 at 01.00.04

 


 

 

References:

Main Article: Wang, X. (2012). Relationship or revenue: Potential management conflicts between customer relationship management and hotel revenue management. International Journal of Hospitality Management, 31(3), pp.864–874.

 

  1. Hendler, R., Hendler, F., 2004. Revenue management in fabulous Las Vegas: combining customer relationship management and revenue management to maximise profitability. Journal of Revenue and Pricing Management 3 (1), 73–79.
  2. King, N., 1998. Template analysis. In: Symon, G., Cassell, C. (Eds.), Qualitative Methods and Analysis in Organisational Research—A Practical Guide. Sage, London, pp. 118–134.

  3. Zablah, A.R., Bellenger, D.N., Johnston, W.J., 2004. An evaluation of divergent perspectives on customer relationship management: towards a common understanding of an emerging phenomenon. Industrial Marketing Management 33 (6), 475–489.

 


 

Author: Mateusz Konopelski

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