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 8 revenue management tips for hotels.
1. Create a Revenue Management Culture
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.
2. Keep Consistent, Relevant Records
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.
3. Offer Incentives for Direct Booking
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.
4. Be Aware of Changing Customer Habits
A huge part of 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 managers 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.
5. Place a Focus on Selling Value
One of the best 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.
6. Forecast and Map Demand
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.
7. Only Use Automation in the Right Places
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 revolves 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.
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.