Hotel Revenue Management

Revenue Management - An Art or a Science?

Competition in hospitality has skyrocketed and it’s getting increasingly difficult for independent businesses to stake their claim in today’s highly congested marketplace. The battle is no longer just between hotels and OTAs – new players like Airbnb, Google and even TripAdvisor are have begun knocking on the door.

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Competition in hospitality has skyrocketed and it’s getting increasingly difficult for independent businesses to stake their claim in today’s highly congested marketplace. The battle is no longer just between hotels and OTAs – new players like Airbnb, Google and even TripAdvisor are have begun knocking on the door.

In such a competitive scenario, it’s no surprise that revenue management strategies have become the primary tools in an independent hotel’s arsenal.

Hotel Revenue Management Concept with graphs etc.

However, when it comes to actually planning and implementing a revenue management strategy, most hoteliers simply go with what’s popular in the market without actually measuring the strategy’s compatibility for their property and region. Hospitality is a diverse industry with many variables influencing bookings so it’s not surprising that rarely works – there’s no universal solution to optimizing profitability.

Put figuratively, there are two dimensions to every revenue management solution – the art, and the science.
Art is subjective, while science is objective. The science essentially remains the same throughout the industry during a given period, or until the next breakthrough. However, the art involves transducing the scientific knowledge to design an effective, innovative approach that’s relevant to the given hotel.
Let’s explore this further.

The science: Crunching numbers to measure performance
Revenue managers begin by gathering the ‘facts’ – objective data about the hotel’s occupancy, room revenue, POS revenue, turnover, costs and so on. There’s no estimation involved here. Once the numbers have been compiled, revenue managers can use deeper metrics like the RevPAR, ADR, and GOPPAR etc. to calculate the performance of the front desk, various booking channels, POS terminals and even overall profitability.
These indexes enable the revenue manager to establish how successful the hotel has been during that given period.

The art: Segmenting data and forecasting demand
Contrary to popular belief, ideal forecasting involves very little ‘guesswork’. Revenue managers first segment their data into relevant groups. These groups can be made based on the booking source, the type of traveler, spending behavior; the possibilities are virtually limitless. It’s up to the revenue manager to put together the right data and extract effective segments.

This is an art – managers need to decrypt patterns and uncover trends that may be hard to notice. Beyond intuition, revenue managers need to think creatively in order to establish these relationships between numbers.
Even when it comes to forecasting demand, no matter how much data the hotelier has, making an accurate prediction is tricky. Managers need to factor in subjective details that may be important to travelers such as economic situations, global weather, flight prices and so on.

Theoretically, the science is fairly straightforward while it is the art where innovation is key. In practice however, there are so many variables to be accounted for that gathering all the information manually can be quite challenging. Even when it comes to non-scientific aspects like forecasting, suggestions made by software may help provide revenue managers with some starting ground. Automation has entered various facets of the revenue management process.
While it’s always great to have an extra opinion, don’t expect any revenue management tool to project the perfect rates for your property. Machines simply don’t do art!

Revenue management is a complex, multi-layered process that may take multiple attempts to get right. There’s no doubt that there’s a learning curve involved. Constant tweaking of prices and distribution channels may appear counter-intuitive, but it’s a tried and tested strategy that significantly improves hotel profitability.
Be patient, experiment with different strategies, and most importantly, don’t stop because you don’t see results in a few weeks or months!

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About Hotelogix

Hotelogix is a unique, cloud-based, end-to-end, hospitality technology solution, built to seamlessly manage hotels, resorts, serviced apartments or multi-location hotel chains, by providing a single window to manage all hotel operations and bookings (online and offline). Hotelogix is currently used by properties in 100+ countries.



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