This is the third part of a three-part series that examines the value of revenue management from the perspective of different leadership roles within a hotel’s operational structure. This first article examines how revenue management is important for Hotel/General Managers and the second examines its importance for the Front Desk Manager.
NB: This is an article from RoomPriceGenie, one of our Expert Partners
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Revenue management is a very important strategy for hotel owners and operators, as one of their primary concerns is the financial profitability of the hotel, both in the short- and long-term.
What is revenue management?
The process of revenue management involves analyzing vast amounts of data to forecast demand, segment customers and determine the optimal price for each room, based on real-time market conditions, among other factors. By leveraging data analytics and market insights, hotels can automate the process of anticipating market changes, adjusting pricing and inventory across all online channels in real-time and maximize occupancy rates, without compromising ADR.
The benefits of revenue management
There are many benefits of implementing a data-based revenue management practice at a property, especially for the owners/operators who are responsible for ensuring that the hotel remains financially viable. To effectively implement revenue management, a hotel owner/operator must invest in a sophisticated revenue management system (RMS), as it enables the automated collection, and analysis of huge amounts of data, which then provides accurate pricing recommendations in real-time.
In addition, when it’s connected with a channel manager, the new prices can be automatically updated across all online distribution channels, making it a completely hands-off process.
Improved decision-making
Revenue management-based pricing decisions are based on data, not intuition (eliminating the potential risk of human error). Implementing dynamic pricing using RMS gives hotel owners and operators a wealth of data – including past performance data, real-time market conditions, competitor pricing and more – which is analyzed to discern patterns, predict future behavior and make automated pricing recommendations, as the market changes.
Better understanding of guests’ needs
By analysing booking patterns, cancellation rates, stay durations, and even the type of amenities that guests prefer, hotel owners and operators can more effectively tailor their offerings to meet customer expectations. Understanding customer behavior also helps in creating personalized commercial and marketing strategies, which can lead to higher conversion rates and increased customer loyalty.
Remain competitive
Revenue management systems provide benchmarking data that allows hoteliers to compare their performance against their direct competitors within their destination (known as the property’s comp set). Benchmarking is crucial for identifying competitive advantages and areas that need improvement in a property’s operations and pricing strategy.
Improved guest satisfaction
By finding the proper balance between price, market demand and guest expectations, hotels can increase online bookings and improve the guest experience. It has been proven that increased guest satisfaction can lead to repeat business and more positive reviews, which are shown to increase the property’s perceived value, enabling the property to increase their ADR over time.
Enables better strategic leadership decisions
Revenue management can also inform broader strategic leadership decisions, such as hotel expansions, renovations, service offerings and staff training programs. By relying on accurate market and benchmarking data, owners and operators can ensure that their strategic initiatives are appropriately aligned with market opportunities, guests’ preferences and always focused on improving operational efficiencies to maximize guest satisfaction.
Boost the bottom line
By analysing demand patterns, a hotel’s RMS can update prices to fill more rooms at the highest possible rate, enhancing both occupancy and ADR. Data-driven strategies assist owners and operators improve their resource allocation, ensuring that the hotel’s investments are yielding the best possible returns over the short- and long-term.
But here’s an important caveat… an RMS is absolutely critical to a property’s success in today’s highly competitive landscape. But there’s another important factor to consider, which is integral for optimal revenue management: the human element.
A hotel’s staff plays a crucial role in interpreting, contextualizing and executing the insights generated by RMS. To be most effective, training staff in revenue management principles goes beyond the operational elements.
Hotel owners and operators must create a revenue management-first culture.
When all team members understand and embrace the importance of RM, they can collectively contribute to the hotel’s revenue optimization goals and maximize the ROI on the property’s revenue management activities.
Today, hotel owners and operators must embrace revenue management to remain competitive and profitable in our highly dynamic and unpredictable market. By embracing data analytics to create a strategic approach to pricing and distribution, hotels can improve their financial performance and enhance the guest experience – but only if the owners/operators are on-board with implementing the RMS technology, but also in training their employees to prioritize RM as an operational imperative in all departments.
