Revenue management in the hospitality industry involves predicting customer demand with the aim of streamlining the sales process, allowing companies to sell at the correct price, to the correct customer, at the correct time. When conducted correctly, revenue management can be an extremely effective strategy, helping hotels to significantly enhance their profit margins.

Follow the 8 revenue management tips below to boost your hotel’s performance.

1. Create a revenue management culture

Our first revenue management tip is to create a revenue management culture within your organisation, but what do we mean by this exactly? Basically, this means that revenue management is not something which should be left entirely to the main decision-makers or to the management team; it’s something which everyone should be aware of.

By raising awareness of what revenue management is and why it is important for the hotel, positive behaviour can be encouraged among all employees. If employees understand why it is necessary, they will tend to be more careful when recording data and more likely to use this data to make good decisions based on knowledge.

2. Keep consistent, relevant records

Data collection is the essence of the revenue management process, and the data compiled by the hotel will form the basis of almost all of the decisions made. However, some hotels record too much data, which only serves to confuse matters. Therefore, it is vital for records to be relevant and consistent.
You must identify exactly what information must be collected and how it must be recorded. Then, to make life easier for the people who will use the data, a set of standard practices must be introduced, ensuring that all those involved in data collection employ consistent methods.

3.Offer incentives for direct reservations

Although OTAs may be of great assistance, generally speaking, it is preferable to attract direct reservations. This is the best way to build customer loyalty. As most direct reservations are made online, the hotel website must be well-maintained and updated.
At a time when prices can be compared on third-party websites in just a few seconds, the trick for attracting direct reservations is to offer worthwhile incentives. For example, loyalty programmes offer the possibility of obtaining lower prices in exchange for frequent visits, while other ideas include offering discounts in restaurants or free Wi-Fi for guests making direct reservations.

4. Pay attention to changes in guest habits

A significant part of revenue management involves the use of historical data to make decisions in the present in relation to the future. However, historical data is not always entirely reliable.
Over the years, it is likely that you will see changes in your customer database. These changes may include aspects such as average age, but they may also be more subtle. For example, you may notice a change in the way in which the average client reserves a room.

5.Focus on providing added value

One of the best revenue management tips is to think in terms of offering as much value as possible. Part of price optimization is understanding when prices shouldn’t necessarily be compromised.
By offering extra value, such as discounts for additional nights or even a free extra night when demand is sufficiently low, you can be braver with your prices, which could generate higher revenues.

6.Predict and map demand

Of course, anticipating demand is one of the most important elements of any revenue management strategy, and this requires forecasting. It’s also important to predict aspects such as availability of rooms and market share. However, you must also take measures to attempt to identify the origin of the demand.

Hotels are usually able to access excellent information on their guests, especially in terms of their origin. By comparing this information with historical data, it should be possible to identify the areas in which demand is growing and other associated trends, which could lead to a growth in business from these regions in the future.

7.Only use automation when appropriate

Many hotels largely depend on automation, and it can seem like a gift from heaven. However, automation can sometimes be an enemy of revenue management, which requires complex decisions based on factors such as supply, demand, the cost of making a sale, etc.

To be clear, automation can still play a role within a revenue management strategy. After all, modern software is capable of handling fairly complex decisions and relieves employees from time-consuming data entry tasks. However, good revenue management also requires human decisions, thinking outside the box and taking occasional risks.

8.Prioritise mobile optimisation

Our final revenue management tip relates to mobile optimisation of hotel websites. If you haven’t done this yet, it’s absolutely essential that you make the necessary changes to your hotel website so that the user experience on a mobile device is just as simple as on a desktop or laptop computer.

Mobile devices are now one of the most significant sources of revenues. In fact, Google recently revealed that mobile searches now exceed desktop searches.

By following the 8 tips listed above, you’ll be able to implement an effective revenue management strategy, allowing you to match supply to demand and maximise your property’s revenues.

Reach us to learn how Channel Manager can help you streamline your distribution and increase your revenue.

Revenue management in the hotel industry is still relatively young and has grown exponentially in the last decade, particularly in the last few years.
This article explores the changing role of revenue management in the hotel industry and the developments which we can expect to see in the near future.

1. Revenue management is moving up a notch

A growing trend of elevating the role of revenue management can be observed in the hotel industry. Many hotels are now seeking the analytical overview and strategic knowledge which only this area can provide. This information and knowledge is used to make key decisions. Revenue managers are increasingly participating in executive committees, with the same status and stature as directors of marketing and sales departments. Equally, many hotels no longer have a revenue manager but rather a director of revenue management, lending far greater weight to the role.

2. The role of revenue management will continue to expand

Revenue management is undergoing constant change, to a far greater extent than other departments. This is due to its close links with technological capability. As technology evolves, analytical methods will be far more powerful.
At the current time, a revenue manager must be able to tackle marketing and sales challenges.

3. Revenue management will expand to other sectors

Revenue management is forecast to expand to other revenue-generating areas in hotels such as hotel restaurants, venue hire, room service and leisure facilities.
You may also be interested in: 3 key aspects of a successful revenue management strategy

4. Profit management will play a central role for hotels and revenue managers

The increase in importance of revenue managers in hotels is down to one key factor: they are in a unique position to help generate profits. For this reason, the role will increasingly be perceived as profit generation rather than revenue management. As a result, revenue managers are focusing more and more on increasing profit margins instead of increasing revenues.
This focus on profit will intensify this year, as revenue management uses new methods to better understand customers and improve margins.

5. Revenue managers will focus on guest analysis

The hotel sector is more competitive today than ever. Hotels are not only competing with their rivals in the same city, but also with competitors in other cities and even their international counterparts. Online travel agencies, the increase in Airbnb apartments and high demand from guests are making the industry more and more competitive. As a result, hotels are resorting to customer analysis in order to offer better products adapted to each segment.

The revenue management concept was devised thirty years ago and is effectively employed today by most hotels and airlines. However, even though hotel managers often talk about revenue management, the definition of the concept differs depending on the individual… One thing is for certain – revenue managers are faced with the most important challenge in running a hotel, namely selling the right rooms to the right customers at the right time and rate through the right sales channel.

What is Revenue Management?

The revenue management concept was devised thirty years ago and is effectively employed today by most hotels and airlines. However, even though hotel managers often talk about revenue management, the definition of the concept differs depending on the individual… One thing is for certain – revenue managers are faced with the most important challenge in running a hotel, namely selling the right rooms to the right customers at the right time and rate through the right sales channel.

This article is aimed at broadening your understanding of hotel revenue management. Using my experience, I will try to familiarize you with the concept of revenue management and to present you with a ten-point list of the best practices of its implementation.

Let us start with some history.

A short history of revenue management

Revenue management emerged when the US federal government made the move to deregulate airlines at the beginning of the eighties. A few years on, sales performance strategy planning became a commonplace practice among the biggest carriers. Revenue management even has its unofficial birthday – 17 January 1985 – the day on which American Airlines launched its “Ultimate Super Saver” special offer aimed at weakening their competitor, the low-cost PEOPLExpress airline.

The hotel industry was quick to notice the benefits that airlines gained from embracing revenue management. However, it was initially slow to spread across hotel chains as they lacked adequate data processing technology and often had little guest data to process. What is more, the main obstacle that had to be overcome was managing the length of stay – a variable that was not present in airline revenue management.

The economic roots of revenue management

Understanding the close ties between economics and revenue management is essential if one wishes to understand the philosophy behind the latter. The process of devising hotel rate strategies is directly tied to economic concepts: both revenue management and economics emphasize the meaning of supply and demand as well as the price elasticity of demand. These concepts, combined with methods of determining the associated indicators, are crucial for successful revenue management.

Integrating revenue management into hotel operations

Revenue management is not an independent process in hotel operations. Its full potential becomes apparent only when it is integrated into the remaining hotel management processes. Employees should be familiarized with it and it should become an inherent part of hotel operations. The revenue management culture should be introduced with strong support from the management and be based on a strong conviction in the positive outcomes that the associated practices will bring. Hotel management should set sales goals for each department and for the hotel as a whole. Introducing additional salary bonuses, especially at the departmental level, is also a good solution. When team members are motivated, they focus on doing that which is best for the hotel and not for themselves personally.

Revenue management should not be perceived solely as a manner of conducting business as a hotel, but encompass all of the hotel’s activities with a common commitment from all individuals involved.

Research your market

Below are several questions that will test your knowledge of the market:

• What is your market penetration?
• What is the market share of the individual segments of your business?
• What is your hotel’s position in the market?

Business intelligence reports covering the hotel industry may prove very helpful in obtaining the above information. A good revenue manager is well aware of the influence that external and internal factors have on the local market and on the hotel’s position within it. As a revenue manager, you may carry out a SWOT analysis of the above factors. Do not forget to also carry out a thorough comparative analysis.

Ask yourself the following simple questions to determine your position in the market:

• • Does your hotel set or follow price trends?
  • If your hotel sets price trends, then have you compiled an accurate

list of your competitors? Do you know what factors should be taken into account when doing so? Is your list of competitors based on the number of bookings or only the room rates?

• • How is your hotel positioned with regard to its business mix?
  • What is your RGI (Revenue Generation Index)?

The next article in this series elaborates on the subjects of market segmentation, revenue strategy, forecasting and setting rates. Read PART 2: The basic ingredients of the revenue management recipe.

About the Author 

Zak Ali, the Global Revenue Development Director at YieldPlanet, has over 12 years of experience in Revenue Management and hotel distribution. Zak has managed hotels of various sizes in many of the world’s key markets, including London, Dubai and Singapore. He has also taken part in creating a global rate application which has been implemented in 3000 hotels. Zak is a Certified Revenue Management Executive (CRME), a title awarded by the Hospitality Sales and Marketing Association International (HSMAI).

Running a 21st century hotel requires processing a staggering amount of data, including rates, types of rooms, booking details and the competition’s activity on booking portals. The growing importance of the Internet forces hotel operators to search for tools that will help them manage the massive flow of data and analyze it with the aim of making key business decisions.

Due to a rapid development of the Internet the hotel industry, just like any other industry in the world – has been undergoing some big changes. The World Wide Web holds a gigantic amount of data with terabytes of information flowing among servers. The development of Internet shopping, social media, tourist websites, etc. requires data to be arranged in ways that will allow the businesses to grow further. This is where big data comes in.

Big data – what exactly is it and how can it apply to your business?

It is a concept used to define enormous collections of data that are hard to process and analyze, but further information leading to new business opportunities may be extracted from them. Using user data makes it possible to carry out successful advertising on the Internet. Tracking the behavior of users visiting hotel websites provides information on what exactly they are interested in. This allows hoteliers to carry out personalized advertising campaigns, both through email, as well as through displaying banners, for example using Google’s advertising network. Big data informs hoteliers on the number of prospective guests who visit the website through smartphones and traditional computers. It is big data that makes it possible to form target groups used in Google Adwords and Facebook campaigns. There are currently several thousand websites through which hotels sell their services. Some of them are large and well-known, such as Booking.com and Expedia, but there are also numerous small local OTAs and those that offer only a selection of hotel services, e.g. wedding receptions. Hotels currently rent their rooms through an average of 5-10 OTAs, whereas big hotel chains sometimes use as many as 25 OTAs at once. Effectively managing such a big number of channels, including full sales analyses and competition monitoring, is extremely time-consuming and, at a certain point, becomes a huge burden for hoteliers. This is where professional multichannel selling tools come to your rescue. They centralize all sales in a single account and, thus, hotel operators are not required to log into all of the websites one by one.

Channel Manager: a tool to process big data

YieldPlanet’s Channel Manager is one such tool. It uses SaaS technology (which means that you are not required to install it on your computer) and because it is connected to more than 500 most popular OTAs, GDS, wholesalers, etc. it provides you with a wide range of distribution channels to choose from. Channel Manager is also integrated with most popular PMS systems and, therefore, provides a trouble-free and quick transfer of data from partner websites to the hotel’s website.

Central processing of large amounts of data, and in the case of tools meant to manage room reservations this includes mainly rates, restrictions, bookings, types of rooms, etc., become easier thanks to the principles of automatic sales. You only need to define the basic room type and rate plan after which the system will recalculate all of the plans for all types of rooms within a specified time period. This allows you to plan sales months in advance without worrying that your employees will forget to take care of it while they are preoccupied with their other duties. Another example is the central allotment function that allows you to manage all bookings and cancellations through an automatic system that updates room availability across all channels.

Use big data to monitor your competitors

Big data also makes it possible to follow what the competition is doing. A single OTA website hosts offer from thousands of hotels. Each of them has a number of room types and various special offers. Such large amounts of data may only be processed in a short time by using an algorithm. Sales channel management tools are able to monitor the rates of selected hotels in a given time period. Users are provided with a report that will prove helpful in planning short-term sales strategies and making key decisions regarding rates. A revenue manager who is keeping up with the times will use management tools to not only supervise sales channels but also manage rates. The available tools identify and recommend rate strategies that correspond with the hotel’s general strategy based on an in-depth analysis of customer habits. Revenue management systems use big data to analyze historical data, but also forecast rates up to a year in advance. YieldPlanet has recently teamed up with academics from across the world to work on a new rate management tool. This will be a new generation tool using algorithms that mimic the artificial intelligence of a virtual revenue manager.

Many would probably wonder why you should invest in such solutions. However, the annual growth of the world hotel market in essence forces you to use increasingly modern tools, which will do complex data analyses for you and streamlinedecision-makingg processes. Are you ready for the new dimension of hotel operations?