How to overcome the flaw in hotel revenue management

NB: This is an article by Mike Ford, Managing Director of SiteMinder

Revenue managers have a tough gig.

Being responsible for the pricing decisions of a hotel is not a responsibility many would envy, and of course hoteliers who can’t afford a revenue manager have it even tougher.

Nevertheless, revenue management is essential for any hotel today. Without it, hotels forfeit the ability to boost their bookings, revenue and profit; offer competitive rates and promotions; and forecast the upcoming booking season. However, successful revenue management requires full visibility of all revenue streams for a hotel – from the online booking websites where the hotel chooses to advertise its properties, to its marketing and sales – in order to provide meaningful decisions that are based on one of the most fundamental principles of economics: supply and demand.

For support, many hotels turn to a revenue management system (RMS) – and there are some brilliant RMSs out there. At its most basic level, an RMS uses data to determine, primarily, a hotel’s supply and demand, and recommend the optimal price at which hoteliers should sell their rooms.

An RMS is clean and efficient for business. But to be effective, it first needs to know – with certainty – a hotel’s room supply, as it is impossible to make optimised rate recommendations without it.

The keyword being: certainty. And not many hoteliers have it, which leads to issues such as over-bookings, increased costs and missed opportunities to offer the most competitive room rates.

Why determining a hotel’s supply isn’t as simple as counting rooms

It would be easy to assume that a 300-room hotel, with 150 confirmed bookings, for example, still has a remaining supply of 150 rooms available. But the truth is, if that hotel has advertised its property on online booking websites, has its own website, has tour operators, deals with walk-in guests and takes direct calls, its supply has changed from the time you started reading this article. In fact, it’s probably changed more than once – and it’s still fluctuating now.

Hence, the importance of dynamic pricing, which Vishwas Bhatia, VP of revenue optimisation for Aston Hotels & Resorts, summed up perfectly in 2014 as “time-based pricing” or, in other words, hotel room pricing that meets real-time demand.

As with any business, a hotel’s pricing should be directly linked to live market conditions and availability. Yet, too few hoteliers can accurately determine what their availability is when the point-of-sale comes, making that availability impossible to manage at the same rapid pace that room bookings – and cancellations – occur in today’s dynamic online environment.

When the absence of real-time reservations means uninformed pricing decisions

One of the greatest opportunities for hoteliers today is in the sheer volume of channels available for them to select from in order to achieve their revenue goals. Today these channels not only include online travel agents, but metasearch sites, global distribution systems and wholesalers, as well a hotel’s own website.

Read rest of the article at: eHotelier