Revenue Management Strategies For Hotels
Revenue Management has contributed millions to the bottom line, and it has educated our people to manage their business more effectively. When you focus on the bottom line, your company grows. — Bill Marriott Jr., Chairman and CEO, Marriott International
The standard definition simply has to be mentioned: Revenue management is selling “the right product to the right customer at the right time to the right price.” Furthermore I would like to add; through the right channel.
Hotel Revenue Management is about becoming the architect of your own fortune. A hotel room is a perishable product, since the number of hotel rooms is limited. As a result, customer satisfaction and pricing remain the most important dynamic variables, which are subject to Hotel Revenue Management. It is all about balancing demand and capacity by forecasting prices for the purpose of maximizing the effectiveness of hotels’ resources.
However, the rise of the internet during the 21st century (and with it the rise of Online Travel Agencies and Review Portals) has added another dimension to this field. This development has made traditional Hotel Revenue Management much more complex, while providing new ways to cheaply and objectively measure both customer satisfaction and pricing.
As there are many aspects that must be taken into consideration, it is impossible to effectively apply the concept of Hotel Revenue Management overnight. You need to carefully analyse and evaluate big data sets about your property and its business environment.
This includes information about basic factors like:
- · Past occupancy rates
- · General sales
- · Company target groups
- · Customer segmentation
- · Market(share) information
- · Customer satisfaction
But also about external influences, such as
- · Past weather conditions
- · Holiday and event information
- · Closing of nearby hotels
- · Competitor price information and
- · Similar circumstances that is likely to affect your business climate.
As a manager, it’s vital to understand the basic elements of managing revenue and demand so you can give informed directions to your teams. And to manage revenue and demand you need to employ a forecasting methodology. Once your forecasting is functioning, you can work with the three main levers -- price, yield, and marketing -- to optimise your revenue. For example: Increase price if demand is sufficiently high or decrease it if it isn't. Change the restrictions and channels if you need to fill certain types of rooms or need a specific segment of guests. And finally, improve the marketing actions to drive more demand.
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