For resorts, hotels and other hospitality companies, revenue management plays a vitally important role, allowing financial results to be optimised. However, many opt to outsource revenue management to a third-party, rather than handling it internally, because it requires specialist knowledge and tools. In this article, you will learn more about revenue management strategies, as well as some of the key reasons why they are often outsourced.

Defining Revenue Management

Revenue management is a strategy based around maximising financial results through data and analytics. To achieve this, information is used to predict or anticipate levels of demand, and this is then used to inform pricing and distribution strategies. The standard definition for those within hospitality is as follows:

Revenue management: “Selling the right room or cottage, to the right person, at the right time, for the right price, through the right distribution channel, with the best cost efficiency.”

Understanding Revenue Management

Revenue management is an especially important concept for resorts and hotels, because cottages or rooms do not all sell for the same price. Indeed, depending on when a booking is made, the date of the reservation itself and the channel used to make the booking, prices can vary significantly, even when people are paying for the same room type.

Additionally, resorts and hotels have a certain number of cottages and rooms to allocate and they cannot simply create more to meet demand. Therefore, for financial results to be optimised, they need to sell the limited number of cottages/ rooms they have for the best possible price, while getting the balance right to ensure as many cottages/ rooms as possible are sold.

This means that hospitality owners can gain a major advantage if they are able to accurately anticipate demand. After all, Resorts are able to charge higher prices at times when demand is high, but may need to reduce prices to achieve full occupancy at times when demand is lower. Getting this right requires detailed data analysis.

Why Resorts Outsource Revenue Management

Hotel and resort owners operate in an extremely competitive industry and revenue management has become an essential ingredient for success, because it has a proven ability to improve financial results. Nevertheless, it requires both a knowledge of the industry, and an understanding of quite complex techniques.

Some resorts and hotels opt to hire a full-time revenue manager, who works exclusively for them. This can be a successful approach, but paying a full-time salary can be expensive and it generally needs to be supported through investment in technology too. The alternative is to outsource revenue management to a third-party that works on demand.

The outsourcing option is especially beneficial for smaller resorts or hotels, as well as those that have a stricter budget. It allows revenue management to be carried out by experts, who already have access to the latest technology, and who are equipped with up-to-date skill sets, data and other market insights.

Moreover, resorts and hotels that outsource revenue management do not need to worry about hiring a replacement if the revenue manager leaves, or providing their revenue manager with regular training and coaching.

4 Reasons to Outsource Revenue Management

1. Achieve the Best Financial Results

One of the main reasons why an increasing number of resorts and hotels are outsourcing their revenue management strategies is because it allows them to achieve better financial success. This is helped when the responsibility is outsourced to a company with industry experience and the right knowledge, expertise and technology.

Indeed, when an experienced third-party is provided with valuable data, like past sales figures, and is able to combine that with their own industry insights, they can help resorts and hotels to adopt the right pricing strategy, and to target the right customers, through the right channels, in order to optimise revenue generation.

2. Focus on Sales and Customer Experience

Outsourcing revenue management offers an additional benefit, in that it frees up owners and other resort staff to focus on other activities. This is extremely advantageous, because hotel and resort owners need to manage sales, marketing, housekeeping, restaurant, bar staff and everything else in between.

In particular, delegating revenue management to a third-party can allow for an increased focus on activities related to sales, operations and the customer experience. This, in turn, enables resorts to enhance the quality of the products and services they are actually selling, improving satisfaction levels and generating loyalty.

3. Gain a Competitive Advantage

Another reason why revenue management is increasingly outsourced to third-parties is because their expertise can allow resorts to become more competitive. On the most basic level, it can allow resorts to financially outperform rivals that do not have a coherent revenue management strategy in place.

However, the potential advantages go beyond this. For instance, it will offer efficiency advantages over resorts where the management team attempt to handle revenue management themselves.

4. Avoid Need to Hire a Revenue Manager

Finally, in many cases, the decision to outsource revenue management can be preferable to the alternative, which is to hire an internal revenue manager. This is especially true for smaller, independent resorts and hotels, where the money might not be available to pay someone a full-time salary and also invest in the latest tools.

Hiring a permanent revenue manager can be a time-consuming process and also provides challenges if and when a revenue manager decides to leave. Training an existing member of staff to become fully competent is similarly time-consuming and expensive. Outsourcing the responsibility, on the other hand, avoids these issues completely.

Revenue management is vital for modern resort owners, because they are selling a limited number of cottages or rooms for variable prices and need to maximise their financial results. However, it is becoming increasingly common for revenue management to be outsourced to third-parties who specialise in the discipline, have access to the most up-to-date tools, are able to work on demand, and do not require the resort to provide training or coaching.

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