10 Key Trends for Modern Revenue Management
The past few years have given birth to a wide variety of revenue management ‘best practices’ and tools. What’s the equation for success? Two of the major factors affecting a modern revenue manager’s success are the tools they are using, and how well RMs are integrating their knowledge with the ‘big picture’.
Today, we’re going to take you through 10 key trends in revenue management today. We won’t be looking at the timeless fundamentals, like pricing strategies, but rather at current trends and strategies. These are the ones that we think are vital to strong revenue growth and growing your direct bookings, and they are the ones you should take advantage of if you want your profits to do more than just hold steady.
Here are the trends and techniques we’ll be covering:
- Increasing Profitability
- Seizing the Moment with Book Direct
- Planning Ahead
- Better Data (Tools)
- Cost per Acquisition
- Embracing Collaboration
- Sharing the Knowledge
- Keeping In the Loop
Increasing profitability is ultimately what we’re all trying to do. However, after challenging years where ‘heads in beds’ was almost the entire strategy, the focus today is shifting to ways to maximise your return on each channel in use. This includes both online and offline strategies.
What are the most important steps to achieving this? Start by evaluating the true value and cost for each channel, and developing a clear strategy for your approach to each channel. Without accurate cost of acquisition insights for each channel, you cannot know if the pricing strategy in use is actually the right and ultimately most profitable one.
For evaluating your online channels, try a hotel OTA spend calculator – it can be a good starting point to evaluate the cost of online channels, and show you the potential savings of increase direct bookings: here’s a good one to check out.
We compiled a list of the KPIs we recommend you monitor for your online channels in order to build direct bookings:
- Hotel Website Traffic
- Measure traffic per source
- Measure traffic per device
- Measure ratio of New v Returning visitors to the website
- Measure traffic per location
- Hotel Website Conversion rate
- The conversion rate of visitors to bookers
- The conversion rate of searches to bookers
- Don’t forget – Look at the drop off points in the sale funnel
- Identify the key pages at the start of the search funnel
- Bookings per channel:
- Set a target for direct bookings especially on key demand dates
- Maximum bookings through each other channel
- Profit per channel
- Net ABV per channel
- Net ARR per channel
- Max commission you are willing to pay daily – link these to rate bands if possible
Evaluating offline channels like phones and walk-ins is, in some ways, a bigger undertaking than evaluating your online channels. When it comes to the non-digital world, it’s not as simple as taking account of commission alone and you don’t always have access to the advanced data that is available online today.
Here are some relevant, insightful sources to get you started:
- Here’s a good explanation of Adjusted RevPAR (ARPAR) from Ira Vouk, cofounder of Irates. It explains that ARPAR is a clearer reflection of bottom line profit than RevPAR alone, and why.
- This article details the methods you can use to calculate the distribution costs per channel.
- Ira Vouk gives a short, insightful interview here, with 3 clear tips for revenue management tactics:
- Dynamic pricing: Truly flexible prices, based on current demand
- Non-pricing strategies: This involves managing items like sale restrictions, channels, and over booking
- Automated Revenue Management Tool: these tools are data analytics and decision-making tools to assist you in your day to day
Seizing the Moment with the Book Direct Movement
With heavy hitters like Marriott, Hyatt and Hilton putting their book direct campaigns front and centre, the book direct message has been pushed to the forefront.
There is momentum in the book direct movement, and a higher awareness of the message with consumers. However, what exactly constitutes a solid book direct strategy?