Revenue management within the hospitality industry involves predicting consumer demand, in order to optimise the sales process, allowing businesses to sell at the right price, to the right customer, at the right time. In a hotel, this may mean turning away business now, in order to do more profitable business tomorrow. When carried out correctly, revenue management can be extremely effective, helping companies to significantly boost their profit margins. Here, we provide 10 revenue management tips for hotels.
- 1. Create a Revenue Management Culture
- 2. Keep Consistent, Relevant Records
- 3. Offer Incentives for Direct Booking
- 4. Be Aware of Changing Customer Habits
- 5. Place a Focus on Selling Value
- 6. Forecast and Map Demand
- 7. Only Use Automation in the Right Places
- 8. Prioritise Mobile Optimisation
- 9. Implement Open Pricing
- 10. Embrace Technology
- What is Revenue Management?
- What is Total Revenue Management?
The first of our revenue management tips involves creating a revenue management culture within your organisation, but what does this really mean? Essentially, it means that revenue management is not something that should be left entirely to the major decision-makers; it is something everyone should be aware of.
By creating an awareness of what revenue management is and why it is important to your hotel, you can encourage positive behaviours from all staff members. If they realise why it is necessary, they are more likely to take care when recording data and more likely to utilise that data in order to make good, knowledge-based decisions.
Data collection is at the very heart of the revenue management process and the data your hotel gathers will form the basis for almost all of your decision-making. Yet, some hotels collect too much data, which serves only to confuse matters. It is, therefore, vital that records are relevant and consistent.
You need to identify exactly what information needs to be gathered, and how that data should be recorded. Then, in order to make life easier for the people who have to use it, a set of standard practices should be introduced, ensuring that everyone involved in the collection of that data uses consistent methods.
Although distribution partners can be a great help, generally speaking, it is far preferable to attract direct bookings. This method is the most likely to produce customer loyalty, giving guests a lifetime value to your business, rather than a one-off value. As most direct bookings are made online, your website should be well-maintained.
In an age where prices can be compared on third-party websites in an instant, the trick to attracting direct bookings is to offer value incentives. For example, loyalty programmes offer the chance to get a lower price in exchange for repeat business, while other ideas include offering food discounts or free wi-fi to direct bookers.
A huge part of hotel revenue management involves using historical data to make decisions in the present and for the future. However, historical data can sometimes be relied upon too heavily and hotel owners or hotel management can miss important changes that have occurred more recently.
Over the years, you are likely to see changes to your customer base. These changes may be things like the average age of a guest, but they may be more subtle. For instance, you may notice a shift in the way the average customer books a room. Try to keep your finger on the pulse as much as possible and be aware of changing habits.
One of the best hotel revenue management tips is to think in terms of offering value as much as possible. Part of price optimisation is understanding when you do not necessarily have to compromise on your prices. Indeed, delivering greater value for the same price is one way to achieve this.
By offering value-added extras, such as discounts on additional nights and even, when demand is low enough, a free additional night, you can afford to be braver with your prices, potentially resulting in greater revenue.
Clearly, anticipating demand is one of the most essential parts of any revenue management strategy and this requires forecasting. It is also important to forecast things like the availability of rooms and market share. However, you should also take steps to try and map where demand comes from.
Hotels typically have access to excellent information about their guests, especially in terms of where they are from. By comparing this information to historic data, it should be possible to identify areas where demand is growing and other associated trends, potentially leading to increased business from those regions in the future.
Many hotels rely heavily on automation and it can seem like a godsend. However, at times, automation can also be the enemy of effective revenue management, which requires complicated decisions to be made, based on factors like supply, demand, the cost of making a sale, and so forth.
To be clear, there is still a role for automation within a revenue management strategy. After all, modern software is able to cope with fairly complicated decision-trees and you do not want staff to be bogged down by data entry. Yet, great revenue management also requires human decisions, thinking outside of the box and the occasional risk.
8. Prioritise Mobile Optimisation
The last of our revenue management tips revolve around mobile optimisation of hotel websites. If you have not already done so, it is absolutely essential that you make the necessary changes to your website, so that the user experience on mobile is every bit as simple as it is on a desktop or laptop.
Mobile is now one of the single most important revenue streams. Indeed, Google recently revealed that mobile web searches are now outnumbering searches originating from desktop, while research from Net Affinity shows that mobile transactions on hotel websites increased by 32 percent in a 12 month period from 2015 to 2016.
Experts offering revenue management tips for hotels often emphasise the value of embracing an open pricing model. In essence, this is a pricing strategy that moves away from the fixed modifiers associated with many other approaches to pricing, allowing rates to be tailored based on the target audience, the channel, and your own needs.
Open pricing allows hotels to utilise a wider range of different price points and to target specific market segments. It can also help hotels to avoid situations where rooms are unsold, because pricing does not meet the needs of the audience. Hotels can maximise earnings, while customers have the opportunity to benefit from more tailored rates.
For more information about open pricing, read “Open Pricing: Why Is It the Next Hotel Revenue Management Strategy”.
Many revenue management tips for hotels are focused on pricing and distribution, but it is important to understand the role that technology can play in making a hotel more desirable as well. Modern hotel guests expect to be able to use wi-fi and connect multiple devices, with no friction and with excellent performance.
Going further, guests are increasingly seeking hotels that make use of the Internet of Things (IoT) to provide greater control of rooms, more automation, and a seamless experience. Then, of course, hotels can attract more guests and charge more for rooms if they can use technology to innovate and provide added excitement.
Hotels looking to optimise their financial performance need to focus on selling the right rooms, to the right customers, at the right time, through the right channel. Doing so requires an anticipation of future demand and other customer behaviours and this is where the concept of revenue management comes in.
Read the “What is Revenue Management?” article to find out much more about what revenue management is, how it can be deployed and why it benefits hotels. You will also be able to find information on some of the main revenue management strategies and the main tools that can be used to enhance your approach.
What is Total Revenue Management?
The basic idea behind total revenue management is to manage each revenue source to the maximum profitability. This is achieved by using revenue management techniques, such as data analytics, in order to anticipate demand, predict consumer behaviour and optimise availability and pricing accordingly.
Check out “Total Revenue Management: How Hotels Can Maximise Their Revenue” for much more on total revenue management as a concept, the various ways it can benefit hotel owners, some top tips on implementing a total revenue management strategy, and some of the main key performance indicators to track.
By following the above tips, it should be possible to put an effective revenue management strategy in place, allowing you to match supply and demand, and generate the maximum possible revenue.