The latest thinking is that in the current multichannel price-transparent world revenue management needs to consider availability in conjunction with rates.
NB: This is an analysis by Alex Dietz, Advisory Industry Consultant and Tugrul Sanli, Senior Director Advanced Analytics for SAS Institute Inc, on behalf of IDeaS Revenue Solutions.
The hospitality industry has been following revenue management practices for decades now. Today, dynamic transient pricing is considered the industry standard for pricing guest rooms.
Now, as rate transparency and channel complexity has increased, we hear hotels asking, “Can I manage my property’s revenue just by adjusting rates?” and “Why do I still need to manage rate availability?”
It is clear that there is confusion in the hospitality industry regarding dynamic pricing and its role in maximizing profitability.
The confusion around pricing approaches has paved the way for vendors to claim to have complete revenue strategy solutions, even though the solution may address only the pricing aspect of revenue management, and ignore rate availability management and its benefits.
Simply put, hotels cannot maximize their revenue or profitability solely by managing rate prices.
Daily Pricing and the Limitations of “Pricing-only” Decisions
To articulate the limitations of “pricing-only” approaches, let’s work on an example:
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