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Top Floor Podcast Featuring Dax Cross: The Man Behind the Curtain

Dax Cross, CEO of Revenue Analytics, sat down with Susan Barry on the Top Floor Podcast to discuss all things hospitality, revenue management, and N2Pricing™ RMS. Check out the episode here or read the full transcript below.

 

Susan Barry: This is Top Floor episode 52. You can find the show notes at topfloorpodcast.com/episode/52.

Narrator 1: Welcome to Top floor with Susan Barry. This weekly podcast ride up to the top floor features tangible tips and excellent stories from the experts and characters who elevate hospitality. And now, your host, and elevator operator, Susan Berry.

Susan Barry: Welcome to the show! When Dax Cross realized his history degree might not yield the kind of career he was hoping for, he headed to law school at the University of Georgia. Dax, like me, was not a super serious undergrad. But unlike me, he made up for it and then some by graduating at the top of his law school class. That dedication to Legal Studies turned into four years of toiling away at corporate law before going into business with his father and brother in 2005. A self-described renaissance man with a fondness for classics like The Beatles on vinyl, Dax is CEO of Revenue Analytics. Today, we are going to talk about what it's like to be a 17-year-old startup. But before we jump in, we need to answer the call button. The emergency call button is our hotline for burning questions from hospitality professionals. If you would like to submit a question you can call or text me at 850-404-9630. Today's question was submitted by Samir, who asks: are hospitality technology and services companies having the same staffing and labor issues as hotels and restaurants? If not, why not? This is a good question for both of us, Dax. What do you think? Have you had labor challenges?

Dax Cross: I would say some labor challenges, but not to the extent that we have seen in the hospitality industry, particularly with frontline workers at the hotel level. Certainly, it's very challenging. From a labor perspective, when you look at software engineers are in very high demand, scientists are in very high demand business experts... So it's certainly a challenge, but I can't claim that it's nearly as bad as what the hotels themselves are facing.

Susan Barry: I agree, I think it's always hard for me to find people that I really want to work with. I have a tendency to lean toward hiring less experienced folks and wanting to grow them versus hiring somebody that's at the top of their game. Is that how it works in your company as well?

Dax Cross: We love to do that at Revenue Analytics. And we talk about how the company's growth goes in parallel with the individual's growth. And you know, we love the idea of a meritocracy where if someone is growing and developing, there's no set career path or no set, you know, rule that you have to be in a role for two years before you can advance. If you're crushing it, and you're ready for something bigger than that's what we want you to do.

Susan Barry: That's the beauty of owning our own companies, we can make up the rules. Your father, Robert "Bob" Cross has been called the guru of revenue management, and wrote the definitive book, which I actually read around the year 2000. He worked for Delta, and then all of the big hotel and travel brands in his own company. And this is a little convoluted, but I know your brother Zach went to work for a revenue management software company. So I have to assume that this was a, you know, family conversation over dinner that this came up over time. So I have to find out what made you decide to go to law school?

Dax Cross: Oh, yes. So basically, I mean, I grew up with revenue management and really with my dad's old company, so I always had a bit of a entrepreneurial bug. And then, you know, we always would talk about revenue management as a family. So we would go to the movies, the movie we want to see is sold out, all the kids would say, "Ah, come on, can't they get the prices up, they would make more money, we get to see our movie..." - everybody wins.

Susan Barry: Trying to go buy people out of their seats, like I paid $25 for that, $10, like...

Dax Cross: That's right. These guys don't get it.

Susan Barry: That is awesome.

Dax Cross: But then when, as you as you mentioned, I wasn't the most studious college student. And so I found myself in my senior year. You know, I had a 3.0 GPA. I was a history major. And I just couldn't envision that any business would want to hire me. And so my thought was, I can go, I can do well on the LSAT, I can go to law school, and I can come out of law school with a much more marketable skill set. And then in law school, I took business courses. So the whole idea was, I'll be a corporate lawyer, and then I'll shift over to the business side.

Susan Barry: You started Revenue Analytics with your brother and father in 2005. What made that more appealing than practicing law? I mean, you went to all the trouble of graduating first in your class. So then why chuck that and start the company with your your brother and your dad?

Dax Cross: Well, so you know, for me, personally, corporate law was a grind. And someone else that I worked with once said, "I like this enough to be good at it, but I'm not passionate enough about it to be great at it." And I said, that's a great line of BS, and I am absolutely, but it's also true. And it was true for me. So I started using that line as well. And so basically, my brother Zach had the idea that, hey, there's a lot left to be done, and revenue management, you know, advancing the state of the art in industries like hospitality, that practice the discipline, taking it to new industries. And it just seemed like it would be a lot more fun and something that I could be a lot more passionate about than kind of the grind of doing deals in the M&A world.

Susan Barry: Understood. It's funny to me, because for someone who has never been a hotel Director of Revenue, or I don't even think you've worked at a hotel at all, have you?

Dax Cross: No, that's correct.

Susan Barry: You, you really have a thorough and deep understanding of how it's done and kind of what the issues are that come up for your end-user stakeholders, sort of what their pain points are. Can you talk a little bit about how you learned about that, how you were, the process maybe that you used to gather those customer insights, to really plug into the problems that you're solving?

Dax Cross: Sure. First off, I appreciate that, that sentiment. So yeah, I would say that's something that we really tried to hone over, you know, 17 years, is to really understand the problem, how people are approaching that problem, and then try to design analytics around how someone who's actually doing revenue management is thinking about the problem. So we, as a company, and I personally, have spent, you know, hundreds of hours in kind of side-by-side sessions with people on how they do their jobs, focus groups, global focus groups... Some of the most fun that I've had, in hospitality is, you know, flying around the world and doing focus groups and learning from all kinds of different people - both, you know, hotel revenue managers at the hotel level, central revenue managers who are managing portfolios, people, you know, overseeing an area or region. So that has been a lot of fun. And also, we've had a lot of great people who have shared their knowledge and experience with me.

Susan Barry: Do you think those folks are ever afraid to really keep it real? And say, like, this doesn't work, here's why? Or we don't trust this system, here's why? Or do you feel like you're able to get a pretty straightforward answer?

Dax Cross: I think that once you really sit down with someone and show that you're genuinely interested in understanding their challenges, and what they see as opportunities, and you want to help them, that they'll open up to you pretty quickly.

Susan Barry: That's good advice, I think, for any business, not just for Revenue Analytics, right? Listen to your customers.

Dax Cross: Oh, absolutely.

Susan Barry: When you first when you first started Revenue Analytics, the company was really focused on custom software for the big hotel brands, among other, you know, vertical segments that you worked with. You did that for several years before making a pivot that we're going to get to in a couple of minutes. What I the way I envisioned it is that you were sort of The Wizard of Oz, the people behind the curtain, making these systems like Prio and One Yield. And in my case, what I'm most familiar with are TLPE and ROS, which were the Starwood systems that you all built. This question might be controversial, but what I remember about the Marriott acquisition of Starwood is that everyone loved ROS, and ROS got thrown in the trash. Did that feel like one of your babies going off to war? Or tell me what you, tell me what your thoughts are about that.

Dax Cross: Well, first off, I would say I love your analogy of kind of the man behind the curtain behind the scenes. That's very true because you know, all these proprietary revenue management systems, you know, they're, they have their own brands and names that you've been talking about. And we built either, you know, all of the analytics for those systems or large parts of them. So it was funny for me, it was almost like a sibling rivalry with Marriott deciding to take One Yield over RAS, because we had built RPO, which is Retail Pricing Optimizer within One Yield. So we partnered with Marriott on that and had a big hand in that. But we had done a lot more with ROS. And that had been a huge multi-year project. And we just loved the people that we worked with it at Starwood. And I have consistently heard for years since then, from people who use the system that ROS was one of their favorite systems. So that to me is the sad part is that, you know, ROS got better feedback from the field than any other proprietary revenue management system that we've seen. So it was, it was sad to see it sunset.

Susan Barry: It's such a heartbreaker! It was so sad. And it's really sad when people feel this strongly about a piece of technology. Like that will tell you the level of A) nerdiness and B) how great the piece of tech was, if, you know, people have strong emotions around it. In 2018, or 2019, you decided to take all of this experience and learnings from building the custom solutions for hotel brands - and I know you've worked with companies in other industries - and turn Revenue Analytics into a SaaS company. That resulted in a venture capital raise. What were the things you were seeing in the industry that drove you to make that change? Or was it more of an internal pressure or internal drive?

Dax Cross: That's a great question. I would say that there were internal and external reasons. From an internal standpoint, we really felt like, while the analytics that we had done in these different custom proprietary systems were different and unique to our customers, they weren't that different. And we saw that there was a real opportunity to package all of our deep experience and perspective in hospitality revenue management into products. And then we thought that would be a more scalable business model for our company than just custom developing systems. But then, from an external perspective, we had an epiphany that all of the revenue management systems out there, including ones that we had played a large role in designing and building, were kind of built for that on-property Director of Revenue Management. And they were really designed more as decision support systems. So you know, show that person a recommendation, and then give them all the data that they can handle. And that's what they asked for, you know, in focus groups or side, that's what they wanted. And so those systems were great for that purpose. But our epiphany was that the world was changing rapidly. And there was a huge shift away from on-property revenue management to above property revenue management. So central teams of people, either at the brand level, at a management company, you know, in an ownership level, who were managing portfolios of hotels. And it struck us that this kind of hotel-by-hotel, day-by-day, rate-by-rate approach to revenue management was just not sustainable in a world where you're managing 10, or 20, or maybe even more properties. And so we wanted to re-envision revenue management, reimagine it for those central teams and say: okay, our system is going to be all about multi-property workflow, managing by exception, and then, you know, being very intuitive to use so that you can quickly see a recommendation and then at a glance evaluate it, and decide to take it and just, you know, make that work a lot more scalable.

Susan Barry: I am going to make t-shirts with the phrase "Decision Support System" on there. I think that's so good. Were you able to, or even allowed to, incorporate the work that you had done on all of those custom systems before? Or did you have to start from scratch or did you want to start from scratch?

Dax Cross: Also a great question. From the standpoint of writing code, we started from scratch, but from the standpoint of all of our methodologies and experience, we were able to leverage all of that work. So you know, people talk about standing on the shoulders of giants. I would say we had a real head start. And we knew that our analytics would work and work really well, because they were proven based on what we had done in the past. And then we could also layer in new ideas and advancements that we had that weren't in any of those systems. So, for example, special events auto detection is a cool little engine that we have. Because we've seen that, you know, most revenue management systems have special event mapping. So you can go back and say, I've got this upcoming event and I think it's going to be like something that happened a year and a half ago. And you map all the dates and over the stay patterns... It makes sense, but it's incredibly cumbersome and manual. And the fact is that not a lot of people use that functionality. So we said it would be a lot better just to have an algorithm that is hunting for booking spikes that would indicate a special event, and automatically accelerate the forecast based on that.

Susan Barry: Oh, that's so cool. And that's the exact kind of thing that owners say they feel like is missing. So as a result of becoming sort of a teenage startup, I know you consolidated the verticals that your company was working with, and sort of narrowed down your focus and hospitality is one of them and obviously the one that I'm the most excited about. But I think it's really interesting, the other verticals that you work in, and how they are natural extensions of your hospitality experience. Can you talk a little bit about that?

Dax Cross: Sure. I think that's one of the coolest aspects of our business. And then we're able to take ideas from one vertical and bring them over to the other and leverage them there. Actually I had a friend years ago, who called it "the wheels on the suitcase theory." He said that, you know, pilots used to roll around their bags on planes for years and years. And but it took decades for someone to say - hey, why are we all carrying ours? Why don't we roll them around like pilots? And so then everybody, then boom, you know, now everybody rolls around suitcases. And then one day, somebody said - hey, why are we still carrying around coolers? You know, we should be rolling coolers as well. And so that's what we try to do in our our different verticals. And so our other big two verticals are - one is media. So we're optimizing the pricing, the ad pricing for radio, television, and digital ads. And so it has a lot of common elements to hospitality. You're forecasting, what's the demand for this particular spot? You know, morning drive time - what's the demand? How likely is it to sell out? Things of that nature.

Susan Barry: And the inventory is perishable, just like a hotel room, like, once the time passes, it's dead.

Dax Cross: You got it. That's exactly right. So it has a lot of similarities. There are some differences that you don't have the readily available competitive data. But there are a lot of similarities and things that you can leverage back and forth. And actually, some of the analytics are quite similar. And we can leverage kind of common components there.

Susan Barry: Interesting.

Dax Cross: And then the third one is manufacturing and distribution, which does not have the perishable inventory element to it. But it is a B2B, negotiated sale. And so it actually has a lot of common elements with group business in hospitality and how we look at group pricing optimization in our group module with N2Pricing.

Susan Barry: So sort of applying, like, volume discounts - for lack of a more sophisticated phrase - to different sales based on how much somebody is buying, stuff like that?

Dax Cross: Yes. And how much discount should someone get based on, you know, what do we think their willingness to pay is? What's their overall business worth, right? Obviously, a group coming into a hotel that's going to do a lot of function space and catering is worth more than another one that's not. And then delivering, very quickly delivering a recommended price or maybe a price band, right to a seller in an automated way, to just let them go do business and not have kind of a back and forth with - in the hotel's case, the revenue management team - in the manufacturing and distribution case, their pricing team - you know, those are all common elements of those two pricing problems.

Susan Barry: This just reminded me of TLDO - the group optimizer part of TLPE. I'm going to have to edit this out - people are gonna be like, what is she talking about? I know that there are some industries that no longer fit into your niche, but I cannot resist asking you about one project because I think it's so interesting. This was an algorithm that you created for Coca-Cola to blend, to perfectly blend Simply(R) Orange Juice. Can you just satisfy my curiosity and talk about that a little bit?

Dax Cross: Sure! That was, again, it was probably as far afield from pure revenue management as we ever went. But we did this work maybe 10 years ago. But it was really cool. So people that we knew at Coca-Cola had a vision to combine their food science, so they could measure the elements of the taste in orange juice that that made people like it. So for example, sweetness, you can measure the sweetness of an orange with, it's called Brix. So you know, the higher the Brix, the sweeter it is.

Susan Barry: That's like in wine, same thing.

Dax Cross: Yes! And you can measure bitterness, based on a chemical called laminin. So their food scientist did remarkable work to say, here's the optimal taste profile for orange juice. And this is this will be the best. But the problem is that oranges are different. So you know, there are different varieties of orange; there's, you know, Florida, there's Brazilian, and then they're different during the season. So, an orange that's harvested in the early part of the season generally isn't as sweet as an orange that's harvested in the peak of the season. And so they have all of these different juices that have varying attributes, and some are better than others. And so they brought us in to combine our science with theirs. And basically, we built a big optimization equation to say: what is the optimal blend to get as close as possible to that optimal tastes spec all year round?

Susan Barry: That is so cool! And I'm gonna tell you that as you were describing it, I feel like you could take it back to the hotel business with the optimal room type mix. So you could make an algorithm that, based on whatever the demand conditions are in a marketplace, this is how many double doubles you need; this is how many rooms with a view; blah, blah, blah. Is that too - am I trying too hard?

Dax Cross: Maybe so! Or maybe something around, you know, maybe something around channel mix as well?

Susan Barry: Oh, yes! Yes, of course.

Dax Cross: That's a more strategic - hey, what, what demand should I take at what parts of the year from different channels or segments?

Susan Barry: Its codename: Project Brix. And we're doing it.

Dax Cross: I like it!

Susan Barry: We like to make sure that our listeners come away from each episode of Top Floor with a couple of very practical, tangible tips to try in their businesses or in their lives. So speaking of beverages, what do you think about the push to incorporate food and beverage and other revenue streams into the hotel revenue strategy discipline?

Dax Cross: I think it's great. I think that it makes a lot of sense. Those revenue streams drive a lot of profit. And so that's very critical to hotels right now, particularly as we continue recovering from the pandemic. So I think that's a, it's a fantastic opportunity. But what's interesting is people have been talking about doing this for 20-plus years and have not really made much progress. And my personal opinion is that it's because people are still too in the weeds with these day-to-day pricing and inventory decisions. And so there's a tremendous opportunity to have a little more automation with those decisions, to free up the revenue manager's time to think more strategically about some of these other opportunities.

Susan Barry: That's a really good point. The hotel business is evolving into a commercial strategy model versus the sort of separate disciplines of sales, marketing, revenue management. What do you think are some of the ways that revenue strategists can, or should, broaden their skills, or maybe make better use of the tools they have to meet this change, and the way our industry is approaching it?

Dax Cross: Yeah, I think, again, that's a really large opportunity in the space. And then they can look at a couple of these things we've already brought up - they can look at, you know, what's their mix of demand? They can look at how are they utilizing certain channels? What are the opportunities to create demand, maybe leverage a channel that they haven't been using before? You know, those things are things that a system can't do. A revenue management system needs that historical data, to then predict the future, but it does doesn't know what would happen if you've never done something before. Right? So you bring that human ingenuity and creativity into that. And then as you develop that channel, and you start creating demand from it, or increasing demand from it - okay, now you can leverage the RMS to, you know, figure out when and where you want to take that demand.

Susan Barry: So why do you think hotel teams still, to this day, are tempted to - and honestly just do - override their RMS?

Dax Cross: I think a little bit of it - not to blame my dad...

Susan Barry: Ha! This is your dad's fault. The end.

Dax Cross: But you know, the original revenue management systems were very... they were kind of built from the inside out. So scientists designed the algorithms that were going to optimize revenue, and that was at the heart of the system. And then, you know, they gave them to business users. And so then, I mean, I've seen revenue management systems where the system asks the user - if they were going to override the demand forecast - they don't say: "Oh, I don't think we're going to get 92% occupancy on Tuesday night. I think it's going to be, you know, 82." They would say, if you want to override that system forecast, you need to say, "what's my demand going to be by arrival night and length of stay across all days that that touch that Tuesday night stay?" Because that's the way the science works.

Susan Barry: I see. Okay.

Dax Cross: And it needs to know that to figure out what's the optimal stay pattern. But a user - that's crazy! I couldn't do that, you know? And so then - it just didn't, they just didn't work well with the way people think about the business. And then people got used to using it as decision support. I'm going to look at the data in the system, but I'm really going to make my own decisions. Whereas our experience has been: if you can design the analytics more around how a person thinks about the problem, how a revenue manager thinks about it - what are they thinking about when they make that decision? And then how do you make it easy for them to interact with the system on their own terms? You know, like, by overriding the forecasted occupancy for Tuesday night - just let them do that really quickly. Then you get a lot more trust and transparency. That drives adoption. And then that's what enables that automation. And then people stop, you know, once they've reviewed 4, 5, 10 price recommendations that they agreed with, they'll say: "You don't need to show me every little price recommendation. Why don't you just show me things that are going to be more than 10% or 15%."

Susan Barry: It sounds like one of your big, maybe, jobs is fighting this, like, distrust hangover from the early days of revenue management systems.

So, we've reached the point in our show where we're going to tell the future maybe cast some magic spells... And then we'll come back later and see if we were right. Why are hotels backward in technology?

Dax Cross: I mean, I really think that it goes back to, you know, an owner's perspective of wanting to spend money on things that are guest-facing. And that that is just common sense that that is going to drive revenue. And then you know, you think about what a back office in a hotel looks like, right? They don't put any money at all into that back office. You cram people in.

Susan Barry: Formica's like shipped in from the 40's...

Dax Cross: Yes, exactly! And then you could go out into this beautiful, grand lobby from there, right? So I think that that has been the view of technology. But I really do think that that's going to change, and it's already starting to change, you know, just in our daily lives. I mean, we carry around supercomputers in our pockets, right? We use apps. So we use software for everything. And so I think people are starting to realize that there is a tremendous opportunity to drive efficiency and to drive revenue growth, in hotels with technology. And then probably most importantly, there's a generational thing where I think the generation of people who are working now in hotels and starting their careers, are early in their careers - they grew up with technology and they can't imagine doing their job without it.

Susan Barry: These digital natives, like their eyes are rolling in the back of their head when they see those green DOS screens or whatever.

Dax Cross: That' right!

Susan Barry: So, what is next for you and what's next for your company?

Dax Cross: So, you know, we're just, we're really excited about where our N2Pricing product is. We've, you know, only launched it basically two years ago, and that was in the heart of the pandemic. So, as we're seeing recovery happen, we're bringing a lot of great new customers onto our platform. We're getting a lot of their feedback. So really, the big thing that we're hearing from people right now is that they need help with the whole financial forecasting element of their job. And so that's taking a lot of time. And so one of the big things that we want to look at over the next year is how can we bring some automation to that job to make it a lot less tedious. And again, to the same theme, focus revenue managers on thinking more strategically, rather than constantly re-forecasting and re-budgeting.

Susan Barry: Excellent. So normally, right now, I would invite you to head down to the Loading Dock and I would hit you up for a crazy story from your life. But you told me a crazy story only 5 or 6 episodes ago, so you convinced ME to tell YOU one of my crazy stories instead.

Dax Cross: Yes! That's fantastic. How many have you told on these?

Susan Barry: I don't know, gosh, I feel like 3 or 4, but I have 3 or 4 thousand, so this will be a good time to get one out. So we are going to head on down to the Loading Dock and I am going to spill the beans! Alright, Dax, so here's the story. I went to FSU for undergrad, and I worked at restaurants for most of the time I was in college. I worked at this mom-and-pop seafood restaurant. The owner's son was one of the managers. It was pretty downscale, like fried seafood platter kind of thing, but they also had a lobster tank. And, you now, I was a pretty experienced server at this point, I could handle a lot of tables. And I had been there long enough at this point that I had a bunch of regulars, so, you know, people would come in and ask for me. And that was one of the rules - that you could skip the rotation if somebody asked for you specifically. So, Friday and Saturday were our busiest nights. We were in the middle of a dinner rush. I had a full section, but one of my regulars came in with, like, I think 8 or 10 people. And they came in for their lobster feast. So, I feel like these people owned like maybe a construction company or something like that, and then every Friday they would have a big family dinner/celebration and get lobsters for everyone. They always asked for me. So that was a high-dollar table for me, I was very excited. Started like pulling the setups, like I had a bowl, plastic bib - I'm teling you, it was a little down-scale - discard bowls, all that stuff. Alright. So I brought all that out, got their drink orders. Everybody ordered sweet tea. So I went back to the kitchen, and you know we had those giant, red, plastic Coca-Cola cups, do you remember those? That were like - you could taste them. Do you know what I'm saying? They had a weird taste.

Dax Cross: Oh yeah.

Susan Barry : So, I went back to the kitchen, I was filling those up and then I was going to carry those out. There were double doors - one door that was for in, and one door that was for out. So I'm approaching these double doors, carrying out the drinks, and another server came flying in with a pitcher of sweet tea. Now keep in mind, I know that you are from the South so you are familiar with a half a pitcher of sugar and a half a pitcher of hot water makes the simple syrup to become the sweet tea. Like it is SWEET. Like sticky.

Dax Cross : Yup.

Susan Barry: Okay, so, I'm heading out, he's heading in. He looked upset. I was sort of trying to ignore him and dodge him, like I thought maybe he had a rude table or he was in the weeds... no, no, no, he was not upset. Or at least he was not upset at any customers. He was mad at ME. So, he starts screaming in my face that I was stealing tips from him, stealing all the good tables, that I had all the best tables in the restaurant. It wasn't fair and I was doing something wrong, and I was a thief, and some other choice words... And then, he took his full pitcher of sweet tea and threw it directly into my face and all over my shirt.

Dax Cross: No way!

Susan Barry: Yes! Yes! So, that is outrageous, right? That feels outrageous?

Dax Cross: YES.

Susan Barry: So I push through the doors, I'm like - outraged, looking for help, like where is the manager? Where is the boss? Somebody needs to punish him. And they were just all standing there, laughing at me. So, did he get fired or get in trouble? No, he did not. Did I walk out and never return? Yes, yes I did.

Dax Cross: Oh really? Wow!

Susan Barry: Yes! It made me so mad. And it was so indicative of the attitude, which was like - you know, you take your life in your hands working here, basically. So, that is my story of how I left the glamorous world of fried seafood and moved on with my hospitality career.

Dax Cross: Well, good for you for refusing to be disrespected. I like that.

Susan Barry: I, you know, I was probably - I acted a little rashly, but I was 21 at the time, so hopefully I've learned to calm my temper down since then.

Dax Cross, thank you so much for being here. I know our listeners got great tips and great insight into the discipline of revenue strategy, and I really appreciate you riding up to the Top Floor!

Dax Cross: Excellent. Thanks so much Susan, it's been a lot of fun!

 

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