As we welcome a new year and a whole new decade, very few of us can predict what may be around the corner… but sometimes a new year can be a great time to re-focus on the fundamentals – the stuff that makes our business great. So maybe today, it’s time to take a look at what makes Revenue great!

NB: This is an article from RightRevenue

Several decades ago Philip Kotler introduced the world to what we now know as the 4 P’s of Marketing in his book “Marketing Management” – Product, Price, Place and Promotion and these have become the marketing basics for any industry.

In hospitality, they are just as important with Product traditionally referring to rooms; Price to rates charged; Place to distribution and Promotion to marketing and PR. However, recently we have seen further versions with experts citing even more P’s, but these core components are always included and have always been the cornerstones of any good Revenue Management strategy.

Recently a fifth P has been wiggling itself into the mix and that is the P for Profit. You may well say; “profit has always been important, hasn’t it?” and you are correct, but Revenue Management measured in Occupancy, ADR and RevPAR alone doesn’t effectively show you how profitable you are.

More and more hoteliers are starting to look at NetRevPAR or GOPPAR, using Net revenue of Gross Operating Profit to calculate their performance. This of course means that not only room revenue is scrutinised, but all sources of income are taken into account. Go back to that ‘revenue sandwich’ with the filling as your rate; then deduct your costs from the bottom and add back in your nett incremental spend – there you have it!

Although it is true that room revenue is usually the most profitable area of your business, other revenue sources have a role to play and we see that more and more hoteliers are turning to Revenue Management to come up with a magic solution in order to optimise all departments. This is where the 6th P comes in, the P for People. People, in this case not meaning your team, but your guests. As your guests are the ones influencing demand and paying the cheque, they are instrumental to your profitability.

Traditionally we have used Market Segments to divide our guests into categories, so it is something that is far from new to us. However, you often see that market segments have become attributes that are only really used in budgets and forecasts, or in our sales and revenue meetings. In some cases we even see segments that are completely irrelevant to the hotel. Perhaps now is the time to ask yourself if your segments are actually relevant and are they an active reflection of your business currently.

Perhaps this where we should evaluate our business by not only the 4 P’s but let’s throw some more into the mix….


Which products, services and facilities do your guests use? What do your guests buy and what do they rave about on review sites? Superior or Deluxe rooms? Do you mainly have double occupancy or families? Do your guests love your restaurant, bar & Spa? Does your product actually suit your customer base? You would be surprised how many hotels don’t take their customer’s needs into even the basics such as room design or facilities.


How resistant are your guests to price changes or how likely is a public price or competitor price change likely to influence them? Price, as we know isn’t about what you want to charge but what your guests are willing to pay. Is price really the deciding factor? In most cases, small price changes make almost zero difference to demand. So ask yourself, if you really need to drop that rate to match the market? My guess is that you don’t. And how about your packages? What works and why and do you actually understand your profitability when you sell each package?


How do your guests book? Do they use an OTA or the GDS? Could you convert them to book direct? Don’t forget that those hefty commission fees make a huge impact on your bottom line. Do you need to advertise on voucher discount sites such as Groupon, Travelzoo or Wowcher? Are you managing these sites and not opening the flood gates?


How do your guests respond to promotions and advertising and what media would they respond to? When was the last time you reviewed your digital marketing strategy? Is your PPC budget campaign actually bringing you qualified guests? What mediums are your guests using to communicate? The SnapChat phase is over, Facebook is dying a death for anyone under 40… so where are your guests hanging out and how do you reach them?


How do these guests contribute to your profitability? So in other words, how eager are you to have these guests in your hotel? We all know that certain guest types (age, gender, segment or even country demographic) have a higher or lower spending potential, so who makes you the most and who costs you the least to obtain?


What kind of guest do you have and more importantly, want? So in other words, where do these guests come from, what drives them, what are they looking for? Tourist Boards all over the world have spent thousands on understanding new demographics and therefore behaviour. So are your guests: Time Poor Urbanities who are all about convenience and taking shortcuts. Or a Social Media Nudger who is demanding and likes to ask questions – publicly! Or maybe a Sleep Deprived Traveller who likes late check-outs, extras in their rooms and an inspirational website. Maybe an Energised Baby Boomer who has money and wants to spend it on a cultural experience. Or perhaps a Spending Single who has few commitments and likes to spend big. Or lastly, an Explorer who craves adventure and wants suggestions on new things to explore.

Ask yourself which guests you have now, which type of guest you wish to attract and how on earth you service their requirements. Oh and for goodness sake, don’t try and be all of the above, that would be a race to madness!

Like I have said many times ‘Revenue Managers Rule The World’ so they of course influence each part of your marketing strategy. Get your teams talking. Allow your Revenue Manager to run the numbers and analyse your data. You might find you add another P or two! Good luck!

Read more articles from RightRevenue