Revenue Management Strategies

The Art of Selling the Right Room at the Right Price - By Maansi Sanghi

The art of selling the right room at the right price or in other words Revenue Management or Yield Management will help in improving the overall profitability of room sales. The art here lies in not relying on guesswork but having an actionable strategy after gathering enough information and knowledge, using it to anticipate occupancy and market demand and determining how it affects hotel revenue.

HTrends The art of selling the right room at the right price or in other words Revenue Management or Yield Management will help in improving the overall profitability of room sales. The art here lies in not relying on guesswork but having an actionable strategy after gathering enough information and knowledge, using it to anticipate occupancy and market demand and determining how it affects hotel revenue.

The hotel room is a highly perishable commodity, we have only a limited amount of hotel rooms to sell and nowadays travellers who shops around for rooms in this internet age are willing to look at different prices for rooms to decide which one to buy. In other words, revenue management is of extremely high relevance to a hotelier.

….To the right customer

To have an optimum revenue management system for hotels we need to sell the right room at the right price and sell it to the right customer. So the first step towards achieving this goal is to have the correct market segmentation like business traveller, families, backpackers, couples, conference etc. Business travellers are willing to pay more and are internet savvy, families may require special prices for children, backpackers may spend more time exploring than in hotel. Depending on the type of hotel you have, different type of rooms may cater to different segments and each segment will require a separate rate strategy.

Discounted Rate vs. Profitable Rate

One of the most common mistakes that hoteliers make is to assume that the best mantra to achieve profitability is to reduce rates. This is not always true. While looking at deciding the price of rooms one has to look at increasing both the occupancy as well as the overall profitability of room sales. Getting high occupancy by discounted rates may not achieve the best revenue. Rates need to be adjusted as occupancy increases.

Proactive Rate Planning

A smart hotelier will analyse all history data and plan rates based on anticipated demand in the future. Highly skilled revenue managers plan special rates, packages etc. for up to 6 months in advance or in some cases even a year. Based on the advanced booking received, rates are then adjusted to achieve maximum profitability

Reactive Rate Planning

While revenue management requires strategies for future, the art is in strategizing the pricing for the time being as well. The consumer trends and competition pricing need to be analysed in real time and react by presenting the guest with the right perceived value which will compel them to make a booking.

The art of selling the right room at the right price has been adapted by way of revenue management software in hotels. Importance of technology in hospitality industry cannot be overlooked. While earlier, bigger hotels and chains were able to achieve revenue management by hiring expensive and skilled revenue management experts or with complicated off the shelf hotel revenue management software, revenue management hotel software for small hotels in market today are easy to implement, operate and do not require any specialized staff. Aided by the right technology and the understanding of the basics of revenue management, hotels can now achieve the right rate positioning and optimum average rates for maximizing profit.

About the Author

Maansi Sanghi is a Communications Consultant at Hotelogix. She loves reading about the latest trends in the hospitality technology industry and connecting with like-minded people. Say hi to her @maansisanghi or drop her a line at maansi@hotelogix.com.



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