The three-legged stool metaphor has been applied widely to many industries and concepts since its earliest documentation in 1949, introduced by Reinhard A. Hohaus, an actuary for an insurance company. Outside of the insurance world, I’ve heard people use the illustration to explain the three branches of US Government, models for retirement planning, pillars of sustainable development, and yes, even facets of revenue management. When you Google, “three-legged stool metaphor,” you hit 1.8M results. I always blindly accepted it as a solid metaphor for those and likely the 1,799,996 other things, and upon entering the vacation rental space in 2015, I quickly correlated the balanced relationship between guests, property owners, and property managers to how my discipline of revenue management contributed to ensuring balance. And while there is perhaps some legitimacy to that metaphor, it's more an illustration of the connectedness between those three stakeholders, and less a statement about revenue management. I had to acknowledge a growing gap that seemed to be challenging my previous assertion that revenue management was some sort of proverbial “stool” - and I grew to realize that the metaphor was indeed an oversimplification of an anything-but simple practice. This realization led to further reflection and opened my eyes to the importance of revenue management having a full seat at the table of organizational structure - and developing the role I believe it should assume at that table.
So back to the gap: Even if revenue management perfectly priced and set restrictions for every property (which, to those keeping track, has never been my reality), none of it would matter if no one saw the perfection. And I’m not talking about not getting the revenue strategies to the “right” people as the traditional revenue management definition goes, but to people in general. What I’ve come to learn is that implementing revenue management strategies is a really good idea and can be very effective, but the strategies only work if they align with the overall business strategy of the company and if all stakeholders buy into the process.
We often hear about the importance of “breaking down silos” in revenue management, but aside from idealistic mumbo jumbo that touts collaboration among departments and leadership as the solution, there hasn’t been much focus on what that means. The Zen principle of nondualism emphasizes the interconnectedness of all things. I like this concept in that it doesn’t focus on collaboration so much as the actual nature of things being connected already. Every business is different with varying strengths, weaknesses, and ideas from the (also different) stakeholders. I firmly believe that in order for revenue management to be effective, it’s necessary to lean into the connections and interdependencies that already exist and uncover efficiencies and the collective strengths that are unique to the organization. What this means is that “collaboration” will look very different from one organization to another.
I’ve often been hesitant to share revenue management “best practices” on a stage or a podcast or in passing conversation, and in a nutshell, this is why: best practices at their core should be highly individualized to each organization. An academic understanding of revenue management theory is relatively easy to attain via a few Google searches, or for the exceptionally dedicated, at the cost of a few textbooks from a slew of hospitality-centric universities. But those things will only get you so far in the silo; and for what it’s worth, silos aren’t all bad. For example, a revenue manager should consider relevant operations variables and should work with operations to make sure they understand the implications of them in setting revenue strategy, but no revenue manager needs the head of operations dictating yield tactics. "Breaking down silos" doesn’t mean you need to burn them down altogether.
I won’t go so far as to say that I’ve completely abandoned the three-legged stool metaphor as it pertains to revenue management concepts; there are some valid, if not pretty illuminating illustrations that are worth emphasizing, but as a discipline, I see revenue management as more of a leg on a stool than anything else – or as I alluded to earlier, as a seat in and of itself at a banquet table, perhaps. The takeaway for me is that I don’t have to fit everything into someone else’s metaphor – and that’s probably a fairly decent lesson across multiple situations, revenue management notwithstanding.
-Sarah
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