Hotel Revenue management is a data-driven technique consisting of three interdependent components: customer, product, and price. In order to maximize the hotel revenue in the hospitality sector, it is important to sell the right space at the right price and at the right time. This is the selling mantra of the hospitality sector.
The four ingredients of the recipe to maximize revenue are Segmentation, Forecasting, Pricing, Distribution.
The traditional hotel revenue management model that was in practice until a few years ago focused only on keeping the maximum number of rooms occupied by the guests. With developments in technology and customer behavior now, the focus has shifted to demand-based pricing or dynamic pricing. This concept has moved to not just hotels but also other hospitality establishments also like amusement parks, theatre, etc. and across travel sectors like airlines, cruises, car rental, etc. They charge a surged price for the tickets during peak hours or high demand. This helps them ensure more profit when the demands are high and cover up for the losses during low demand.
A revenue manager must take many factors into consideration, such as changes in consumer buying behavior, the roles of various online distribution channels, and the activities of the competitive set.
A modern revenue manager’s job now is not limited to monitoring room rates, it has stretched beyond this extending to revenue strategy to analyze all available data to determine the tactics that will produce the greatest revenue and optimize room inventory.
We are now at a stage where big data is quickly generated and collected. Additionally, data has become increasingly sophisticated in terms of variety, volume, and type. But while revenue management relies on huge piles of data, data alone is not enough.Revenue managers also need to churn that data and provide required insights and actions to be taken.
For profitability to increase in the hospitality sector, forecasting the demand much ahead is really important. Next, gather competition price intelligence; advance level price intelligence tools support tracking price based on geography, booking device and member-only rates. Then set the price of the rooms in the hotel accordingly.
You also need to consider the fact that products like a hotel room and a flight ticket are perishable items, which means that if they are not sold within a stipulated time period, they lose their usefulness and any profitability that will come from them. If a room remains unoccupied for a night, the revenue for that night is lost.
Therefore, it is utmost important that the price of the room or flight tickets etc. is set dynamically based on real-time updates from market and competition behavior.
Guest segmentation is one of the key factors that are at the core of hotel revenue management. From marketing and sales to loyalty management, the segmentation approach lets you support all these efforts.
Segmentation of guests based on their demography, geographic placement, privileged membership status and the device they have used for booking the hotel, makes it possible to target them better for price sensitivity. Segmentation of the guests is also done on the basis of the purpose of the travel, like business or leisure. Business travelers have different requirements as compared to leisure travelers. There is a rise of a new segment also called “Bleisure”, making it challenging for hotels to meet the expectation of this category of travelers. This segment majorly includes Millennials.
A hotel room tariff is fixed based on different factors, including the advance reservation period of the hotels as well as the price charged by the competitors, etc. Length of Stay (LoS) or the duration of the guests’ stay is also an important factor that affects the price decision by revenue managers.
Apart from this, hoteliers are increasingly focusing on ways to increase revenue from guests while they stay on your property. For example, the hotels are devising strategies like enhancing their revenue by encouraging the guests to utilize services like spa, clubs, games, business conference rooms, restaurants, and other activities in the hotel premise. A smart and holistic revenue management approach takes into account every service that the hotel offers in addition to the room and also the auxiliary revenue streams that contribute to the profits. All these assets contribute largely to the overall revenue of the hotel from each guest.
The revenue management of a hotel is no longer possible by estimating all the factors in an unplanned manner. Current market dynamics need the accuracy of data and real-time insights and hence new generation and advanced revenue management solutions are now increasingly used to help the hoteliers understand the market pattern, anticipate the demand and regulate the price accordingly.
From the ROI perspective, it is imperative that a hotel business relies on a robust and automated revenue management system for all daily mundane manual jobs.
An efficient and a cutting-edge Hotel Revenue Management Solution not only increase the revenue and profitability, but also ups the efficiency of sales and marketing efforts. This directly leads to improvement of market insight, demography of the guests and current trends in the occupancy of the hotel inventory. In this day and age, where competition is quite intense in the hospitality sector and the customer very demanding, it is the time that you must manage your revenue smartly to ensure success.
Founded in 2007, LiveBean is a leading hospitality consulting firm marked by dynamism and constant innovation and specializes in providing the hospitality, leisure, tourism & real estate industry with solutions geared towards service excellence and growth of shareholders profitability. With over a 150 years of hospitality management experience the team at LiveBean offers hospitality related concepts, efficiencies and performances, whilst providing practical and simplistic strategies, solutions and services that focus on Revenue Generation and Profitability for our clients.