Hotel Revenue Management: Defining the concept
A general and widely accepted definition of Hotel Revenue Management goes as follows: Selling the Right Room to the Right Client at the Right Moment at the Right Price on the Right Distribution Channel with the best commission efficiency (Landman, 2011).
Hotel Revenue Management is about becoming the architect of your own fortune. The 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 within the 21st century added another dimension to this field, namely Online Travel Agencies and Review Portals. This development increased complexity of traditional Hotel Revenue Management approaches while it also provided new ways to cheaply and objectively measure both customer satisfaction and pricing.
Arising from airlines’ yield management
Originating from a mathematical sales model within airline industry, the concept also found its way into hospitality industry as Hotel Revenue Management in the 1990s. Marriott International was one of the first major player that drew large earnings by introducing that concept into their business strategies. Hotel Revenue Management has grown in importance ever since.
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A new approach to Hotel Revenue Management
As today’s markets fundamentally changed both in demand patterns and purchase behaviour, most existing Hotel Revenue Management approaches seem to be outdated.
Hotel Revenue Management has become quite a complex field since consumer demands are very distinctive nowadays while weak points of a hotel are quickly discovered and spreat out in real time. Long lasting satisfaction is much harder to achieve while the market of potential guests is basically unlimited. However, online review portals and review analytic softwares ( as Customer Alliance provides) offer new and cheap ways to effectively measure customer satisfaction.
Next to Revenue Management software, effective review management can provide a good opportunity to formulate and eventually achieve business goals more straightforward. By the use of professional review analytic solutions, the gathering of feedbacks will help hoteliers in order to determine correct pricing for the whole range of their products and services as well as for diverging customer groups.
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A case study provided by SAS
The American analysis institute, SAS (statistical analysis system), conducted a scenario-based, online study in order to investigate general booking behaviour of people searching for accommodation via online channels. The result was that “driving revenue and share in the hospitality industry is no longer just about competing on price. Consumers are clearly turning to user-generated content to inform their purchase decisions, in particular, reviews. Therefore, hoteliers must not only keep an eye on how they are priced relative to the market, but also on how they are positioned in terms of reputation” (McGuire, 2014).
Call to action for hoteliers
If ever a general conclusion can be drawn for the complex and labyrinthine field of Hotel Revenue Management, it should be a simpleone like the customer is always right!
In order to maximize revenue for you as a hotelier, it is more crucial than ever to accurately hit the demands of hotel guests. While this was important in earlier days too, Hotel Revenue Management has to become more dynamic and flexible in terms of price structure nowadays.
Due to the rise of online travel research and online bookings, user generated content as reviews and feedback grew to a – if not the – major decision factor for customers. Thus, the correct combination of pricing and online reputation might be the key factor to drive demand to your property and eventually renovate the traditional concept of Hotel Revenue Management.
Learn more about how to measure customer satisfaction effectively with our software-solution review analytics in a >> FREE DEMONSTRATION
Learn how user generated content shifted the concept & download the >> complete Whitepaper here
About Customer Alliance
360° Review Management for hotel business
More direct bookings and safety from fake reviews
Customer Alliance is a young, Berlin-based company offering smart cloudbased solutions for hotels. Our 360° Review Management Software Review Analytics helps you to get more real reviews, to improve your online reputation and increase your sales, for example by generating more commission-free bookings through your own distribution channels. With Review Analytics you also have full view on your competitors.
Since officially started in 2009, we grew up to a 70-people-international-team while more than 2500 hotels in 35 countries are improving their workflow with our solutions.
Learn more about our software solution! We will be pleased to show you the advantages of our software in a FREE DEMONSTRATION
CA Customer Alliance GmbH
Ullsteinstr. 118 Turm B
12109 Berlin, Deutschland
+49 30 762 89 00-0
Simone Verweyen (Content Manager & Copywriter)
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