For hotel owners looking to grow their business, a robust revenue management strategy is of the utmost importance, helping to optimize business results. However, under the broader revenue management umbrella, many smaller strategies can help to facilitate growth. In this article, find 12 revenue management strategies that hotel industry employees can employ to achieve this ultimate objective.

Table of Contents

What Is Revenue Management?

Revenue management is a popular concept within the hotel industry and is used to optimize a hotel or resort’s financial results by maximizing revenue. The accepted definition is selling the right hotel room to the right customer at the right time, for the right price via the right channel, with the best cost efficiency.

Typically, it requires businesses to effectively use performance data and analytics to predict demand, establish a dynamic pricing model, and maximize the revenue the company brings in.

Although revenue management applies to other industries, it has significance in the hospitality industry because hotels deal with a perishable inventory, fixed costs, and varied levels of demand. Revenue management is important because it takes the guesswork out of key pricing decisions. You can read more extended information about revenue management in the article “What is revenue management?”.

23 Revenue Management Strategies

Below is a list of 23 revenue management strategies you can use to grow your hotel business.

1. Analyze the Market

To implement a successful revenue management strategy, you must clearly understand your market, where demand comes from, and the local factors that might affect seasonal demand. You must also know your audience’s needs, wants, and expectations.

Moreover, you need to do competitor research to see what exists within the market and make strategic decisions regarding price, discounts, and advertising with this competition in mind. Remember, this competition may not always be obvious and may not always be in the same location as your hotel.

2. Pricing Optimization

Selling the right room to the right person at the right price requires you to segment your customer base appropriately. To do this, you need to identify different ‘types’ of customers, look at these segments, and evaluate when they book hotel rooms or hotel facilities, how they book them, and other habits. Based on this, you need to diversify your pricing strategies.

When this is carried out, it allows you to optimize prices for those different segments. One of the key advantages of this is that once prices are optimized for a particular segment, price changes can be minimized. This, in turn, can help generate customer loyalty from those who appreciate your price consistency.

For more information about pricing strategies, read “Pricing Strategies to Increase Your Hotel Revenue.”

Table: Customer Segmentation Examples

Customer Segmentation Example Description Action Examples
Business Travelers Guests who travel for work purposes, often during weekdays. Implement corporate rates and negotiated contracts.
Offer business-friendly amenities such as free Wi-Fi.
Leisure Travelers Vacationers seeking relaxation or entertainment, typically during weekends or holidays. Create attractive weekend packages and promotions.
Highlight leisure-oriented amenities like pools and spas.
Extended Stays Guests looking for long-term accommodations, such as for work projects or relocations. Offer discounted weekly or monthly rates.
Provide fully-equipped kitchens or laundry facilities.

3. Work Closely With Other Departments

Next, it is important to achieve close collaboration between the different hotel departments, such as sales and marketing, to ensure that your revenue management strategies and their departmental strategies are in alignment with one another so that you can address challenges collectively.

Identify key departmental decision-makers and bring them on board. Work with them to adjust your revenue management strategies rather than imposing your will, which might be met with resistance. Close collaboration will also help ensure you always present consistent messages to customers and clients.

Revenue Management Strategies Hotel Industry - Work Closely With Other Departments

4. Forecasting Strategies

One of the most important aspects of revenue management is forecasting demand accurately, which allows you to anticipate future demand and revenue, enabling necessary adjustments to be made. Within the hospitality industry, high-quality forecasting relies on accurate records, including occupancy, room rates, and revenue.

Most forecasting strategies rely heavily on using historical data to spot trends. For example, if you notice an upturn in business in the past three Julys, assuming the same may occur next time is sensible. However, forecasting also requires an awareness of current bookings, competitors’ performance, local events, and wider industry trends.

5. Embrace Search Engine Optimization

Search engines offer one of the single biggest opportunities for those operating in the hotel industry to attract customers, which makes search engine optimization an important part of a robust revenue management strategy. Through SEO, hotel owners can improve the visibility of their website on search engine results pages. According to the State of Inbound Marketing Trends Report by HubSpot, organic search is the top website traffic source.

Consequently, you can improve the chances of attracting business from customers who are not specifically searching for your hotel but are searching for a hotel in your location. To achieve this, it is best to operate a solid content marketing strategy, and ensure your website’s design is optimized for SEO purposes.

6. Use Dynamic Pricing

Dynamic pricing is one of the major revenue management strategies hotel industry leaders use. It involves making adjustments to room rates based on market realities, such as customer demand. The importance of dynamic pricing is linked to its ability to help hotels extract maximum value from their inventory. It can also be used strategically to increase levels of demand at key moments.

A typical example of dynamic pricing is reducing room rates during periods of low demand, providing a clear incentive to book, and increasing room rates when demand is high, maximizing the amount of revenue generated.

7. Choose the Right Pricing Strategy

There are many different pricing strategies, and no one strategy will guarantee success. Instead, those in the hospitality sector need to consider the best strategy for their particular hotel based on what they have to offer, who they are trying to attract, and what strategy their competitors are employing.

A competitive pricing strategy, where prices are set based on other hotels’ prices, puts your business in direct competition and is good when your hotel has more to offer than your rivals do. Yet, a discount strategy might be best in slow seasons because a low-paying customer is better than an empty room. Another option is the value-added approach, where rates are higher, but additional value is provided through extras and freebies.

8. Incentives For Direct Bookings

While it is certainly important to cater to all distribution channels and meet customers where they are rather than where you want them to be, maximizing the number of direct bookings made is also sensible.

The primary reason is that direct bookings do not require the commission to be paid to third parties, which means they are ideal for maximizing revenue. One option is to offer exclusive incentives, such as loyalty points or freebies, for customers who book directly through your website.

Video: Increase Direct Bookings

9. Prioritize Online Distribution Channel Management

Modern hotels use a variety of distribution channels to sell rooms, including OTAs, their own hotel website and global distribution systems. Each of these channels needs to be carefully managed to optimize revenue. It is important to take sensible steps to manage distribution channels, as this can help to ensure each channel is performing optimally. Channel management also helps to prevent issues like rooms being double booked.

In the article “The Most Important Online Distribution Channels for Hotels”, you can explore the topic of distribution channels for revenue management strategies in the hotel industry in greater depth. Along the way, you will learn about the most important channels to utilize and why those channels are valuable.

10. Focus on Mobile Optimization

Mobile has become one of the single most important revenue streams for those in the hotel industry. As a result, any hotel or resort operating without prioritizing mobile optimization is already operating at a distinct disadvantage compared to its competitors.

Make sure your website is optimized for mobile viewing, meaning it loads quickly, the pages display properly on mobile devices, and all buttons are fully functional. In addition, you need to ensure your booking process is also optimized so that customers can book rooms from their mobile devices without needing to switch to a desktop.

Revenue Management Strategies Hotel Industry - Focus on Mobile Optimisation

11. Work With a Freelance Revenue Manager

Finally, in many cases, it can be beneficial to enlist the help of a freelance revenue manager, who can bring knowledge, expertise, and experience to your organization. Freelancers are used to coming into hotels and getting to work quickly and can work as and when needed.

Appointing a full-time revenue manager internally means employing them full-time, but a freelancer will only need to be paid for their work, meaning less of their time will be wasted. Moreover, because of their established expertise, you can save money on costs associated with training them.

12. AI in Revenue Management

One of the most exciting revenue management strategies hotel industry figures are now exploring is the use of artificial intelligence technology. As a discipline, revenue management is hugely reliant on data, and AI can analyze huge amounts of data and do so at speeds that humans cannot replicate.

According to the Artificial Intelligence – Worldwide Report by Statista, the global AI market size is projected to grow at a CAGR of 15.83% until 2030. AI can be especially valuable for identifying patterns within data. This could include patterns in demand levels or guest behavior, but some of these patterns may also be less obvious and harder for a human to identify. AI can continually analyze data, freeing up more staff time while allowing you to optimize your approach.

Video: How AI is Changing Hotel Revenue Management

13. Ancillary Revenue Management Strategy

Ancillary revenue management refers to various revenue management strategies the hotel industry uses to generate income from extra products or services, away from the sale of hotel rooms. It allows your hotel to diversify its revenue streams, maximize revenue generated from each guest, and earn money from external businesses and individuals.

There are a huge number of opportunities for hotels to earn additional income, including offering food and beverages, serving as a venue for weddings and similar events, operating a gift shop or a grocery shop, offering leisure services, and more. Many of these revenue streams are also able to improve the overall guest experience.

14. Focus on Customer Retention

Customer retention involves taking steps to try to generate customer loyalty and repeat visits to your hotel. While chasing new customers is important, retaining existing ones can often be more cost-effective. A focus on customer retention is a crucial part of all effective revenue management strategies for hotel industry businesses. Retaining customers helps to minimize costs and maximize customer lifetime value.

Some of the best ways to retain customers include delivering excellent customer service, tailoring that service to individuals and training staff to have great attention to detail. You should also try to generate as many direct bookings as possible, as this gives you full access to the customer data for any future re-marketing efforts.

15. Use of Omnichannel Data for Revenue Management

The revenue management strategies hotel industry businesses use are increasingly reliant on customer data, and much of this data is gathered through interactions. Omnichannel data can be summarized as the data that is gathered from all interactions that occur with customers across all channels, including the telephone, your website, and social media.

Effective omnichannel data analysis will uncover interesting details about the typical guest journey, which you could then use to improve your revenue generation. It helps to bring together data that would have been separated in the past so that your business builds up a more complete picture of what customers think, want, expect, and need.

16. Forecast Demand for Hotel Rooms

Forecasting is the process of using available data, including historical booking data and current market trends, to anticipate future demand. It is a kind of predictive analysis, which can help you to identify patterns and opportunities. Anticipating demand is one of the most crucial revenue management strategies hotel industry figures can use. It enables you to plan your pricing strategy to maximize earnings and avoid vacancies.

Through forecasting, you can work proactively, rather than reacting after events occur. The role of AI has made forecasting more accurate, as software now analyzes vast amounts of data quickly, with minimal involvement from staff. Try to use a variety of data points, including bookings, competitor pricing and wider market trends.

17. Generate Customer Loyalty

Generating customer loyalty involves building positive relationships with guests, so they return to your hotel in future. This is usually achieved by providing excellent service standards and incentives to return. Customer loyalty can enhance revenue management strategies in the hotel industry by increasing the lifetime value of certain guests. Loyal customers may also become brand advocates and recommend your hotel to others.

It is often cheaper to reacquire a guest than to acquire a new one through marketing, so generating repeat business can boost your financial results. Attracting regular visitors can also make demand and revenue more predictable. One of the best ways to offer incentives for repeat stays is to create a customer loyalty program.

18. Build Local Partnerships

Local partnerships are mutually beneficial relationships with organizations in the local area. This may include nearby businesses, charities, tourism bodies, attractions or service providers. These relationships can be important for revenue management strategies in the hotel industry, expanding your reach. Your partners may be able to promote your hotel to their customers in exchange for you promoting them.

Beyond this, local partnerships can help to position your hotel as a pillar of the local community. This can help to create more brand advocates, who may recommend your hotel to visitors. You can also leverage partnerships to create compelling package deals, or to generate positive press coverage.

19. Create Market Segments

Segmenting the market involves grouping people together, based on shared traits and characteristics. These segments could be based on age, gender, reasons for traveling, type of customer, and more. Creating market segments is important for marketing and for the revenue management strategies hotel industry businesses rely on. It allows specific segments to be targeted with pricing and marketing that appeals to them.

Segmentation allows for a more tailored approach. You could target business travelers with different rates than you present to families, or you can market your hotel towards young people in a different way than you target seniors. This means potential guests see content and pricing that feels more relevant to them.

Video: An Introduction to Market Segmentation

20. Map Out a Demand Calendar

A demand calendar is a tool for mapping out anticipated demand levels throughout the year. It works alongside forecasting as two of the most useful revenue management strategies in the hotel industry. Creating a demand calendar is valuable for planning your revenue management strategy in advance. It allows you to clearly see when periods of high demand or low demand are expected, so you can shift your pricing strategy.

Your demand calendar can be built up using confirmed bookings, historical data and wider trends in the market. For example, if you usually experience a downturn in the winter, it’s reasonable to expect the same again. Using AI-powered software, it may also be possible to update your demand calendar automatically, in real-time.

21. Implement an Upselling Strategy

Upselling and cross selling are fundamental revenue management strategies for hotel industry businesses, encouraging customers to spend more money. This is done by encouraging upgrades or additional purchases. For hotels, upselling and cross selling are great ways to maximize the value of each guest. Encouraging room upgrades can also free up lower-priced rooms, potentially increasing overall room demand.

The best upselling and cross selling strategies will begin early in the customer journey. During the booking process, customers can be offered different room options, or pushed to add breakfast or additional services. These efforts can then continue via pre-arrival email communications and mobile app messages.

Video: TIPS TO UPSELLING HOTEL ROOMS

22. Optimize Your Use of OTAs

Optimizing your use of online travel agencies involves striking the right balance between direct bookings and bookings through OTAs. This can enable you to maximize demand without hurting your earnings potential. The use of third-party platforms like OTAs is a crucial part of the revenue management strategies hotel industry leaders use. These platforms allow you to reach people who may not otherwise encounter your brand.

You need to optimize your presence on these platforms by including high-quality images of your hotel and creating a compelling hotel description. It is also important to manage reviews, pricing and availability information. At the same time, you may be able to use your presence on OTA platforms to gently guide users towards your own website. Here, you can generate direct bookings, gain valuable customer data and avoid commission fees.

23. Make Use of Automation Tools

Automation tools make use of advanced software, data analysis and AI features to automatically perform predictable, basic or repetitive tasks. As a result, employees can prioritize more intricate or nuanced matters. Automation is important for the various revenue management strategies in the hotel industry, because it allows decisions to be made at the exact right time. This can boost the entire efficiency of your approach.

For example, hotel revenue management software can automatically adjust prices, based on changes in demand and trends in the local market. This technology can adjust room rates across all channels, in real-time, creating price parity. However, you must use high-quality data and set strict rules about when adjustments are made without human oversight.

What Is Total Revenue Management?

Within hotels, revenue management is typically seen as selling the right hotel rooms to the right customers at the right price and channel to optimize financial results. Total revenue management expands on this, applying the same principles across all revenue sources, including food, drinks, and leisure.

Take a look at the article “Total Revenue Management: How Hotels Can Maximise Their Revenue” to learn more about what total revenue management is, what it looks like, how it can be beneficial, and when it should be used. You can also find some valuable tips that can assist you with implementing this approach in your hotel.

Revenue Management Strategies FAQs

The five main steps for revenue management are: 1) collecting and analyzing data. 2) segmenting the market. 3) forecasting demand. 4) creating and implementing pricing strategies, and 5) tracking performance.

Strategic revenue management is a long-term approach to revenue management, which uses data analytics and forecasting to assist with decisions around pricing, inventory management and distribution. It also involves setting clear objectives and outlining how they will be achieved.

A revenue strategy can be described as a plan of action for generating and increasing revenue. It may include establishing a sales strategy, identifying target audiences, market segmentation, the design and implementation of pricing strategies, managing distribution channels and finding ways to maximize direct bookings.

First, it is important to establish clear goals and KPIs. You need to then understand the current state of the market and analyze rivals. Next, you should segment the market and think about your target audience(s). From there, you can start to develop sales, pricing, and distribution strategies and measure progress.

One of the best ways to drive revenue growth is to adopt a dynamic pricing strategy, where prices are based on demand. You should consider possible new revenue streams, too. Other options include using marketing to reach new audiences and making the most of upselling and cross-selling to extract more revenue from customers.

The concept of selling the right hotel room to the right customer at the right moment for the right price via the right channel is important for maximizing revenue and facilitating growth. By following the nine revenue management strategies above, owners in the hospitality industry can improve their chances of achieving this.–

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This article is written by:

Martijn Barten

Hi, I am Martijn Barten, founder of Revfine.com. With 20 years of experience in the hospitality industry, I specialize in optimizing revenue by combining revenue management with marketing strategies. I have successfully developed, implemented, and managed revenue management and marketing strategies for individual properties and multi-property portfolios.