Hospitality Trends
Published
1/4/2023

Hotel Revenue Management Strategies

12 Minutes

Kajal Makhija
Published
1/4/2023
Hospitality Trends

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Many companies see dramatic weekly, monthly, and annual fluctuations in customer demand. Companies like airlines, hotels, and golf courses have very high fixed costs and low supply flexibility, making this a particularly challenging situation for them. Revenue management is the art and science of anticipating and responding to changes in demand in a manner that maximises revenue. There are many hotel revenue management strategies and tips on how to improve your skills in this area.

Hoteliers can now better anticipate their guests' needs with the use of analytics and performance data, thanks to hotel  revenue management. After gathering this information, a decision is made regarding the optimal strategy for distribution and price.The end goal of hotel revenue management is to make sure that the right guest gets the right room at the right time. The highest levels of sales and profits are expected to be anticipated.

Insight into your customer’s mental processes and valuations of your offerings will help you better meet their needs. This will let you know when to hold on to a room until you can get a better price and when to lower your prices since demand has dropped. The last key to a good hotel revenue management action plan is having a good way to predict the spending habits and needs of your guests. This can include historical and up-to-date reservations, season demand, weather projections, visitor statistics, and more. You'll be better prepared to make educated modifications with this data at hand.

Over the years, this phrase has been updated by hotels and building owners to reflect new practices and technologies. A hotel's success can be measured more accurately with the help of efficient hotel revenue management, which lays out a plan for pricing and hotel revenue optimization. This means that there are a lot of things to think about in order to find the best strategy. This article will give a brief overview of revenue management and explain some of the most common ways to do it so that stakeholders can make better decisions.

What is Revenue Management?

The revenue management market is expected to grow at a CAGR of 9% from USD 14.1 billion in 2019 to USD 22.4 billion in 2024.

In order to make the most money possible from a company's supply and inventory, revenue managers use data and analytics to forecast sales and make adjustments to pricing and other terms of sale. To put it another way, "offering the right product to the right consumer at the right price" is the "art and science" of revenue management.

Managing revenue entails more than just setting prices. In revenue management, the best price for a product is usually determined less by the product's economics than by what customers want. Revenue management might not be required for businesses that are successful with cost-plus pricing. When they work in an industry with high fixed costs and low marginal costs, most businesses use revenue management. Businesses in the travel and hospitality industries, such as hotels, airlines, and car rental companies, depend significantly on revenue management to set rates and other terms of sale.

The goal of revenue management, which is a business strategy, is to make the inventory work as well as possible and make as much money as possible. Its specifics may change over time as new AI systems, procedures, automation, and other industry-standard tools become available, but the underlying concept will always be the same. It means using targeted distribution channels to get the word out about the best lodgings to the best customers at the best prices and times. This is a low-priced option that helps guarantee happy customers

Why is Revenue Management Important?

Revenue management is important in the hospitality business because it helps hotel owners plan ahead for their guests' needs and make the most money possible by setting prices and managing inventory in a smart way. What is revenue management? Why is revenue management important and why you should implement your own revenue management strategies are topics we'll cover in this post.

"Selling the right room to the right client at the right time, at the right price, through the right distribution channel, with the best cost efficiency" is the generally accepted definition of "revenue management" in the hospitality sector.

Using analytics and performance data, hotel managers may be able to better predict what guests will want and how they will act. So, they can increase sales and profits by being smarter about how they price and distribute their products. A company can't manage its income well without a way to predict what customers will want and how much they will spend in the future. Hotels can use past data, current bookings, weather forecasts, revenue management tactics and other industry data to plan their revenue management strategies.

Hotel revenue management strategies lets hotel owners make the most money possible by making the most of their hotel rooms, which are a limited and temporary resource. Instead of relying on intuition, decision-makers can use this data to inform their choices. Hotels, like any other sort of business, have fixed expenses that must be fulfilled no matter the number of rooms sold or the amount of money brought in by guests. With the help of a hotel revenue management strategies based on pricing and service optimization, hotel owners can pay their bills and keep making more money.

What is Revenue Management for Hotels?

Simply put, revenue management is the process of predicting how customers will act so that the product can be sold at the best price every day. Hotel revenue management is the process of making the most money by selling the right number of rooms to the right number of guests at the right price through the right channels and making the most of commissions. Revenue management is also known as yield management, but they are not the same.

Parts of revenue management that work together to define the field are pricing, yield management, inventory management, and segmenting customers. All of these things affect how much money a hotel makes, and hotel revenue optimization strategies can help you get the most out of it.

Make sure you are using the most effective internet distribution channels to market your hotel and destination online as part of your overall revenue management strategy. The right ways to get information about your hotel to people who might stay there can be very effective marketing tools. By 2026, 80% of all revenue in the hotel segment will come from online sales.

If a hotel wants to make the most money possible, it needs a reliable and up-to-date system for managing revenue. With the help of cutting-edge technology and huge data sets, hotels can predict market demand and respond to changes in the market by putting in place new strategies and systems.

Hotel Revenue Management Strategies

Here are some helpful examples and explanations below to help you better understand the many ways you can manage your revenue. You can improve your financial outlook with each of these strategies:

Understand the Industry

Putting in a significant market focus is a vital revenue management tactic for hotels. Who exactly are you trying to reach? Where do they call home base? What do you think they want, need, and expect from you? How fierce is the opposition, exactly? In what ways could local variables affect demand over time? How does seasonality affect demand? Acquiring market knowledge is crucial for prudent decision-making when using effective revenue management tactics.

Optimization of market segments and prices

The answer to the question "What is revenue management?" should include discussion of price optimization. One strategy for doing so is called "segmentation," in which your customer base is broken down into several "types," their preferences and booking patterns are analyzed, and the prices they pay are optimized. You might, for example, offer discounted room rates to business travelers on the assumption that they will use other hotel services to make up the difference.

Align your various departments

One of the main steps is to think about how you can get the different hotel departments to work together and coordinate. To accomplish this, you'll need to educate the department heads on the value of revenue management and win them over. Help them fine-tune their methods if they need it, and make sure their documentation is accurate.

Find the most appropriate pricing method

Choosing the best pricing strategy at any given time is the key to good hotel revenue management. Hotels can make more money by charging more during peak seasons when occupancy rates are high, while in off-seasons, a discount pricing plan can help them sell rooms that might otherwise go unsold. Make sure your strategy makes sense and that you have room to maneuver.

Offering rewards for direct reservations

Hotel revenue management can benefit greatly from direct reservations because hotels keep all the money customers pay throughout the booking process. However, while OTAs do increase a hotel's exposure to potential guests, they also require a commission from each booking made through their site. So, you should offer perks like a loyalty program, free add-ons, and so on to encourage direct bookings.

Additional methods of revenue management

If you want to enhance your revenue management approach beyond the above-mentioned methods, you have a lot of choices. There are a number of ways to do this, such as using search engine optimization to raise your profile and attract more clients and hiring a freelance revenue manager, who could give you new ideas.

Planning for the future

Forecasting is an important part of managing revenue because it helps predict demand and income in the future. This lets any changes be made in advance. In order to make reliable projections in the hotel industry, thorough tracking of data, including occupancy, room rate, and revenue, is essential. Prediction methods typically analyze past information for patterns. If you've seen a rise in sales for the past three Julys, it's reasonable to expect a similar trend going forward. To make an accurate forecast, it is also important to know what is going on in the area, in the industry, and with trends.

Optimize search engines

Search engine optimization (SEO) is an important part of any successful revenue management strategy because it is one of the best ways for hotels to get new customers. SEO can help hotel owners by making their site more visible in search engine results. So, you can make it easier for people who aren't necessarily looking for your hotel but are looking for a hotel in your area to find you. To reach this goal, you need to be good at content marketing and search engine optimization (SEO) of your website's layout.

Choosing a Revenue Management System

Even though the ideas and logic behind revenue management are the same across all industries, the specifics of each industry have a big impact on how it is used. Consider tailoring a solution and making a revenue management action plan that fits your specific needs instead of trying to fit a round peg into a square hole.

There is no shortage of tools and websites that can provide you with advice on what features your revenue management system must have, but all the bells and whistles in the world won't help if you don't have a strategy in place. Advanced analytics are fantastic, but only if you know how to put them to good use. While many users appreciate cloud technology because of its emphasis on data security and the ease with which software is updated, some businesses may choose not to deal with the constant stream of updates that come with storing and protecting data in the cloud.

Revenue Management Systems typically offer optimization algorithms and price suggestions, but if your organization operates best with a simpler strategy-which many do-it's not worth paying for premium features you'll never use. When choosing a hotel revenue management system, it's important to find the right fit.

Some of the best revenue management systems (RMS) on the market include:

  • BEONPRICE
  • Duetto Edge RMS
  • EasyRMS
  • guestrev
  • HotelPartner Yield Management
  • Hotelsdot
  • IDeaS
  • LodgIQ
  • MaxEngine
  • Rainmaker
  • RateWise
  • RevPar Guru

Conclusion

Demand can change a lot from week to week, month to month, season to season and year to year, and this is likely to get more competitive in the future. Many hoteliers find it hard to predict and adapt to changes in travellers needs and even in the types of travellers who stay with them. With revenue management software, you'll be able to sell the right product or service at the right time to the right customer.

Long-term success in the hotel industry requires careful attention to hotel revenue management since hoteliers deal with both historical and real-time data. It should also fit with the hotel's changing strategies, the needs of its guests, and what its target market is looking for.

There is no doubt that automation and artificial intelligence play an important role in this field. Because of the technology advancements, running a hotel is now easier and more profitable than ever even though during these competitive times. Stay ahead of the competition by adapting to the market demand and update your strategy to maximize the revenue.


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