You may be the smartest revenue managers with the expertise in revenue management and pricing strategies. You may have a sizeable stock of inventory to play with and you may have access to an umpteen number of online channels to reach your consumer. Nevertheless, certainly, this is not enough to ensure high RevPAR and ADR.
Despite having all checks and systems in place your hotel’s bottom line can suffer because of revenue leakages, which usually go unnoticed. Hence, we need to understand these hitches in detail.
What are revenue leakages?
Revenue leakages occur when certain actions lead to loss of revenue, eventually leading to a decline in your planned revenue. To explain it in simple language assume you fix the price of your rooms and estimating your revenue based on it, but if one or more of your distribution channels sell it at a lower price, you face Rate Disparity accompanied by Revenue Leakages. With the increased popularity of online booking channels, the complexities of distributing your inventory have also increased. Hence, offer more chances of revenue leakages. Industries with perishable product and services like travel and hospitality frequently face this challenge.
Following are some common grounds of revenue leakages:
- Deliberate attempts of price discrepancy like undercutting
- Errors in your revenue management software
- Leakages due to lack of communication between departments
While you cannot eradicate all of them, you must focus on the major ones because controlling them will substantially lift your bottom line.
OTAs —Friend or Foe?
Hotels and Online Travel Agents are interdependent on each other. While hotels have always fancied getting rid of the high commissions they have to shell out for the online bookings OTAs get them, they do not want to miss the market penetration, reach and promotional paybacks OTAs provide them. No doubt, OTA popularity, and enormous customer reach remain unmatched to that of any big hotel’s online presence. However, OTAs often undercut hoteliers, making them a major contributor to hotel revenue leakages.
