Never before has a single event affected the global economy to the extent that the ongoing COVID-19 pandemic has. Within the hotel industry, revenue managers, owners and operators have been thrown into disarray and all are facing a less predictable future. In this article, you will learn more about the role that revenue management strategies will play in the post-COVID economy and some of the key trends resulting from the pandemic.
Revenue Management and Adapting to Changing Times
Revenue management faces a unique set of challenges in the COVID-19 era, owing to uncertain demand patterns and negligible historical data. Yet, while revenue management has changed forever, it is important to remember that change is constant and revenue management is fundamentally an ever-changing methodology, which can always be improved.
For those in the hotel industry who are striving to increase market share, the pandemic has forced a change of approach and there is now a requirement to think differently and come up with creative solutions to your problems.
7 Revenue Management Trends Due to the Pandemic
As stated, the coronavirus pandemic has introduced significant challenges within the hotel industry and those in the industry have been forced to adapt quickly. Here is a list of seven of the main revenue management trends that have emerged in response to the crisis, and which are likely to influence strategies in the months and years to come.
1. The Role of Revenue Manager is More Important Than Ever
Hotels operating at lower-than-normal occupancy levels should by no means undermine the requirement of a revenue manager/team. The pandemic has given rise to conversations about well-rounded commercial leaders taking charge of the recovery process. This transformation will result in revenue managers moving away from the role of managing systems and data, towards taking a more important position in commercial decision-making across departments.
2. Shorter Lead Times, But Longer Lengths of Stay
Impulse travel, revenge travel, digital nomads – these are the buzzwords that have arisen. Such trends have also given rise to many hotel chains witnessing more last-minute bookings, with guests staying for longer than usual.
Travellers are now booking holiday homes and hotel rooms for weeks on end; even combining work with a vacation. This provides opportunities for hotels to capitalise on, but it does require adaptation too.
3. Providing Greater Flexibility to Increase Customer Demand
Offering flexibility in cancellations and re-booking options is one of the most effective ways to win back guests in the post-COVID period. During the crisis, confidence in travel hit an all-time low and there is no denying that uncertainty about new variants means there is the potential for the same to happen in the future.
Adopting a flexible approach will help to ensure guests choose your hotel when they do eventually feel safe to travel again. Of course, in the longer term, once the demand for travel returns to normal levels (and it will, with a vengeance) hoteliers can once again return to more restrictive, non-amendable policies.
4. “Love Thy Neighbour” By Focusing on Local Customers
In a post-COVID world, domestic and leisure markets are more critical than ever. During the crisis, international border closures meant hotels in many destinations had to turn their attention to local customers and this should not be entirely reversed. If borders close again, residents will look for safer, domestic travel destinations.
Reliance on domestic travel should serve as something of a contingency plan for any future demand decline scenarios. With this in mind, you should engage with your local area, make effective use of social media and target offers towards this demographic, with a good example being ‘staycation‘ type package deals, allowing for quick getaways.
5. See the Big Picture By Adopting a Macro View of Hotel Demand
In addition to aspects like competitor rates and behaviours, it is important to analyse the macro view of demand peaks and dips within your location. Flight searches, hotel booking searches, and trends in hotel cluster search analytics are all significant elements that need to be tracked continuously, so that you can see the big picture.
You must also keep abreast of any changes to travel restrictions in various countries and stay up-to-date with the estimated timelines for their release via government travel advisory sites and similar sources.
Prior to the pandemic, revenue management technologies were largely reliant on algorithms that prioritised historical data points. However, with COVID-19 having changed the game, a shift in this approach may be necessary as well.
6. Greater Reliance on Technology and Tech Investment
Owing to the plethora of data points that have needed to be analysed, the use of technology in assisting in strategy development has increased dramatically. The advancements made in the last 12-14 months with regard to hospitality technology solutions have not been seen in the past decade or more.
High-quality revenue management systems will now adjust rates and alter demand forecasts based on market behaviours, rather than just competitors’ price changes. Technology will help hoteliers in forecasting accurately, pricing competitively and analysing with confidence, and will help to make decisions rather than simply offering suggestions.
7. The Growing Importance of Ancillary Revenue Streams
Leveraging all options to generate additional incomes will result in a holistic growth phase, rather than pressurising only rooms or food and beverage outlets to make up for lost time and money. One of the easiest ways of increasing guest spend is by up-selling and cross-selling, where you attempt to encourage upgrades and additional purchases.
This focus on ancillary revenue requires a total revenue management approach, where hotels survey different avenues to generate income, even in times where occupancy rates are low. Therefore, hotels are adjusting their revenue management approaches accordingly, devising pricing strategies that optimise their hotel’s total revenue performance.
In order to get the most from a revenue management plan in the post-pandemic era, robust, adaptive methodologies must be implemented, with an awareness that historical demand patterns cannot predict what lies ahead. A framework for implementing this is provided by the continuous monitoring of pre-departure KPIs.