What are the main problems currently in revenue management and why aren’t we working on them?
Recently I listened to a podcast where a group of scientists sat in the room and presented their current projects. They worked in different fields. Person organizing the meeting asked each one what are the main problems in their field and how is their project going to impact these problems. The conclusion was that all projects scientists were working on didn’t actually have anything to do with the main issues in their industry and were not solving any big questions. I couldn’t help but to question- What are the biggest problems in my field and what am I doing to help solve them?
Revenue management has evolved enormously. We have better systems, more data, faster reporting and increasingly sophisticated pricing tools. And yet, many of the most fundamental problems in revenue management remain unresolved.
Not because we don’t see them, but because we keep working around them instead of through them.
Below are what I see as the biggest unresolved problems in revenue management today, illustrated with real-world examples and some thoughts on how we could start addressing them.
1. We still optimise the wrong success metrics
RevPAR, Occ. and ADR remain the dominant measures of success. A month with record occupancy is often celebrated even when profit quietly declines.
Example:
A city hotel drives occupancy through discounted OTA campaigns during shoulder season. RevPAR increases, but higher housekeeping costs, OTA commission and overtime staffing mean GOP drops compared to the same period last year. The result is framed as “commercial success” despite lower profitability.
Why it persists:
Topline metrics are visible, comparable and embedded in incentives.
Potential solution:
Introduce net revenue calculation, contribution margin and CPOR into regular revenue discussions. Pricing decisions should explicitly consider cost and margin impact, not only pickup. Change all revenue to be calculated in net values in your RMS (yes it is a big project but it really creates a clear picture unlike Gross calculations).
2. Distribution costs are treated as inevitable instead of strategic
OTAs and intermediaries are essential, but margin leakage is often accepted as unavoidable.
Example:
A hotel pushes aggressive OTA promotions during low demand while direct bookings sit idle. Direct traffic exists, but no targeted offer or behavioural incentive is deployed. The hotel fills rooms, but pays significantly more for demand it could have partially captured directly.
Why it persists:
Volume feels safer than control, especially under pressure.
Potential solution:
Manage distribution as a portfolio. Measure true acquisition cost by channel and segment. Use OTAs intentionally, not as a default.
3. Revenue, marketing, sales, finance and operations still operate in silos
Forecasts, promotions and staffing plans are often developed independently.
Example:
Revenue forecasts strong weekend demand. Marketing launches a last-minute promotion to “boost visibility.” Operations respond by increasing staffing and purchasing. The weekend fills, but incremental revenue does not cover the additional cost triggered by uncoordinated actions.
Why it persists:
Organisations reward functional optimisation, not shared outcomes. Commercial Team still often doesn’t have same KPIs for the whole commercial Team. I even witnessed situations where the Revenue Team had OTA Revenue volume as KPI, while marketing/E-commerce team has direct business as their KPI. You get the issue here.
Potential solution:
Position revenue management as a coordinating function. Forecasts should inform staffing and purchasing. Promotions should be cost before launch, not only analysed after (yes, don’t skip the retro, but calculate ahead). Revenue, marketing, sales, e-commerce teams KPIs and projects should compliment common Commercial Team KPIs.
4. Pricing ignores how guests actually make decisions
Guests are not rational calculators, yet pricing often assumes they are.
Example:
A hotel offers eight room types with minimal differentiation in description or value framing. Guests hesitate, compare endlessly, or default to OTAs for “clarity.” Conversion suffers, despite competitive pricing.
Why it persists:
Behavioural effects are harder to quantify than rate elasticity.
Potential solution:
Apply behavioural pricing principles. Simplify room displays, design clear value tiers, use anchoring and framing intentionally. Test what converts (can use AB testing method for example) rather than assuming logic equals behaviour.
5. Short-term pressure overrides long-term value creation
Weekly pickup dominates decision-making, while long-term guest value remains secondary.
Example:
A loyal repeat guest receives the same discount email as price-driven one-time bookers. No recognition, no tailored offer, no incentive to return directly. The booking happens, but loyalty does not deepen.
Why it persists:
Short-term results are visible. Lifetime value is harder to track.
Potential solution:
Integrate CLV thinking into campaign design. Segment offers by behaviour and value. Reward decisions that strengthen future demand, not just immediate pickup.
Why aren’t we fixing these problems?
Because fixing them requires changing how success is measured, how teams collaborate and how decisions are rewarded. It requires stepping back from constant urgency to redesign how revenue actually works.
That is uncomfortable work.
An open invitation
This is my perspective, shaped by experience and observation. It is not fully comprehensive.
What do you see as the biggest unresolved problems in revenue management today?
What are we still not addressing, even though we know better?
I’d genuinely like to hear what I’ve missed.