Revenue management is one of the most important tools for operating a successful and profitable hotel. By tracking and analysing data, numerous new opportunities arise for your business to increase its profitability. Let’s take a closer look at what revenue management is and why it’s worth getting acquainted with.

The Meaning of Revenue

By definition, revenue management is the practice of applying data and analyses to forecast demand and adjust pricing to maximise revenue. Revenue management is essentially the science of selling the right product to the right customer at the right price, meaning it’s a method of selling a product or service in a way that aligns with the constantly changing demands of guests. Industries with high fixed costs and low marginal costs, such as tourism and hospitality businesses, can greatly benefit from the opportunities offered by revenue management in setting sales prices.

Revenue Management in the Hotel Industry

In the hotel industry, revenue management helps accommodations track supply and demand using data and analyses to make forecasts about consumer behaviour. It allows for more informed decisions regarding which accommodations to promote to the right customer, at the right time, with the right pricing, through the most appropriate sales channel. Revenue management is a cost-effective business technique that allows for the optimisation of supply while helping to maximise profits, all while ensuring guest satisfaction.

Revenue Management Strategies in Practice

In practice, the success of revenue management depends on gathering and analysing quality information. A good Revenue Manager must have detailed information about their supply, customers, calendar, and competitive market to apply dynamic pricing.

Understanding the Market and Segmentation

• To implement a successful revenue management strategy, it’s crucial to understand the market, demand, and various local factors that might influence seasonal traffic. Additionally, knowing your audience, including their needs, preferences, and expectations, is essential.
• You need to understand what type of guests stay at your hotel and how much they are willing to pay for your services. Business travellers, for example, differ from leisure travellers and respond differently to promotions, events, seasons, and even days of the week. It’s important to be aware of peak times during the season, and also consider which days of the week are busier and which are less so.
• For example, a hotel that primarily caters to business travellers might see higher traffic during the week, while a beachfront resort might experience higher demand on weekends. The same beachfront resort might have higher demand in the summer than in winter, but experience a peak again during holidays.
• The most important task is to figure out what you can offer to be attractive to a specific type of customer, and how you can reach them more effectively than your competitors. This information can help not only in setting prices but also when considering certain tactical moves. For instance, before a major weekend event, it might not be worth selling all hotel rooms early, as experience shows that some guests are willing to pay much more at the last minute.

Forecasting Strategies

One of the key aspects of revenue management is forecasting, which allows for predicting future demand and revenue with necessary adjustments. In hospitality, quality forecasting relies on keeping accurate records, including occupancy, room rates, and revenues.

Most forecasting strategies heavily rely on past data to identify trends. For example, if a surge in business was observed over the last three Julys, it’s reasonable to assume that this might happen again in the coming year. However, accurate forecasting also requires knowledge of current bookings, competitors’ performance, local events, and broader industry trends.

Effective Accommodation Management with Everguest

Running a business comes with many tasks, among which continuously monitoring supply-demand and your competitors, and dynamically pricing your rooms, can easily fall to the bottom of the list. With Everguest Revenue Management, we’ll partner with you to sell the right room type at the best possible price at any given moment, helping you maximise profits.

How Dynamic Pricing Contributes to Increasing Revenue

Dynamic pricing is an effective method for tracking market changes. By continuously monitoring the supply side and leveraging demand opportunities, we can accurately determine the ideal room rates for different periods. This allows us to set the maximum prices that your guests are still willing to pay while optimising your revenue.

Effective revenue management also involves optimising your presence on OTA platforms. Our main goal is to increase the proportion of direct bookings, which requires a user-friendly and efficient booking interface to secure as many commission-free reservations as possible. Our expert team can provide support in website development and optimisation as well.

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