Top 10 Revenue Management Tips for Winning in 2020
Hotel occupancy rate statistics can be deceptive. Consider that global rates for 2019 have averaged between 80% and 64%, depending upon the region.
NB: This is an article from Hotelogix
And yet, in many areas, those averages do not align with the general figures. As one statistics service noted, though Africa and the Middle East report average in the mid-to-high sixtieth percentiles, there were periods when they dipped well below 50%.
These, however, are percentages and do not supply the actual number of rooms booked in the various segments (small or boutique, mid-sized, and large or chain properties). Smaller hotels, as an example, may have from less than 20 rooms to more than 150. Yet, even at the higher end of the spectrum, they may never be as competitive as the chains with at least 200 in every property.
Such figures also do not supply the value of each individual guest, and while hotel revenue management looks at capturing that data, it must operate on the reality that (especially today) hotel pricing is changeable from day to day and even hour to hour.
In other words, any hotel hoping to be successful over the long term must take a huge array of data into consideration when doing everything — from marketing to pricing, and at the heart of it, all is a revenue management system.
Quite simply, this is “the strategic distribution and pricing tactics” used to book and/or sell a hotel’s inventory to the most appropriate guests and at the ideal time in order to improve the bottom line, i.e. boost revenue. While “inventory” means rooms, it can also mean ancillary items such as foods and drinks, activities, experiences, and more.
Revenue management focuses on the amounts that customers from the varied segments will pay, and this “can only be done by measuring and monitoring the supply and demand of your hotel rooms.”
Inventory, Disruption, and Revenue Management Systems
Bigger hotels have bigger inventory, and this translates to more opportunities to offer up discounted stock and improve revenues — even at the most challenging times. Smaller to mid-sized hotels are often limited at such times by their lack of discountable inventory. Still, advances in revenue management practices have led to a much higher degree of competitiveness in the hands of what were once smaller players.
There are several resources that suggest that analytics is starting to play a vital in inventory control and demand forecasting. In fact, there are hotels that have already adopted analytics-driven inventory control systems and are now witnessing a significant improvement in their revenue.
However, as the internet kept advancing, services like OTA and other metasearch came into the picture and allowed people to quickly shop and compare fare options before purchasing.
Folks in the modern hotel industry already understand how these new services could act as a double-edged sword.
It is still an issue that needs to be addressed through various tactics, including revenue management. And it’s mostly the smaller players that suffer at such hurdles, though, because they may not have the inventory suitable to the same deeper discounts and bulk offerings that larger hotels manage. Or they may not be as nimble as the bigger hotels.
And many smaller hotels have yet to use the most recent innovations in the hospitality industry, including:
- Management Systems or Software
- Online Booking Engines and Channels
- Social Media, AI and Chatbots
- Customization and Customer-Centric Experiences
In the absence of these technologies and innovations, in addition to the competition from larger players, many small to mid-sized properties are left behind. Because of this, most hotel owners seek hotel revenue management tips and effective hotel revenue management systems to help them restore earnings or boost growth while remaining markedly competitive.
Revenue Management Matters Now More Than Ever
While many feel that conducting research or using tools that report comparable pricing may be enough to remain competitive, there is more to the story. For one thing, a look at hotel distribution strategies would show that wholesalers and some OTAs can cause difficulties with pricing.
While hotels with larger inventories might recoup or recover quickly, the smaller players have a nearly impossible challenge to overcome. The good news is that there are RM resources that can help, and they do not demand a lot of manual research, data entry, analytics, and price changing across channels.
Using RM Tools and Tactics to Gain an Edge
Ten of the most common hotel revenue management tips include:
#1: Developing a hospitality revenue management strategy
Understanding the market is always crucial to monetizing leads and building the customer base. However, a modern hospitality revenue management strategy needs more data and analytics to predict demand (or shortfalls). A Property Management System, or PMS is emerging as a key area of any hospitality revenue management strategy for its real-time data and updating capabilities.
#2: Adoption of AI
From automated messages on platforms like Facebook to systems that can make global rate updates automatically, the use of artificial intelligence is another key to strategic success. Why use outdated spreadsheets with days or weeks-old data? AI can gather and evaluate, helping even a small hotel remain competitive and timely.
#3: Seeking out cloud-based solutions
Talking about cloud-based systems in the hospitality industry, it not only brings flexibility into the software development process but also accelerates the pace of new features. And having a shorter cycle, software becomes accurate in meeting the evolving needs of hoteliers. Remaining stuck with outdated software and tech is no longer required when affordable and easy to execute cloud-based PMS solutions are available.
#4: Relying on integration
A Web Booking Engine, a channel manager, and a PMS are all optimal tools for the modern hotel operator. If they are not integrated, they are of little value since they will not save any time, and will instead demand laborious amounts of updating across the platforms.
Integration prevents overbooking, provides maintenance and housekeeping management, tracks and helps keep pricing competitive, and more.
#5: Using resources that allow real-time pricing shifts
An RMS integrated with other tools can take real-time data and dynamically price a hotel’s inventor. Rather than old-fashioned guesswork, data-driven pricing ranks as a must in hotel revenue management.
#6: Developing a hotel distribution strategy
The wider the net the more business your hotel will gather, and a distribution strategy is a real-world net. If it is limited to the website alone, it will never generate the bookings and revenue necessary to succeed. A hotel distribution strategy has to involve a web booking engine and channel manager, at the most fundamental level.
Fortunately, these solutions can be integrated to streamline the strategy and cast the widest net.
#7: Analyzing distribution channel data
There is always a distinct need to evaluate the data from the channels and this is where a PMS with such capabilities comes into the picture. Taking all of the data from channels and then analyzing it for real-time trends and other factors is a specialist’s job.
With a good PMS in place, and a distribution strategy at work, analysis can be automated and pricing updated rapidly.
#8: Using tools for customization and personalization
Hotel trends point more and more towards guests experiences as a key to success. The ability to keep easy to read notes about guest preferences, and offering them personalized services is possible through a PMS. This will lead to repeat bookings and improved bottom lines.
#9: Using strategies to improve direct booking
Enabling booking through Facebook, optimizing your website and enticing visitors with freebies or upgrades if they book through the site’s WBE, and creating a loyalty program will all work to improve direct bookings.
Optimizing your website and incorporating that WBE into it, as well as establishing a solid presence on metasearch engines are also proven methods of boosting website visits and bookings.
#10: Using RM integrated into a PMS
Revenue management is considered to be an imperative integration and the major reason behind it is the good pricing algorithms. Having the most competitive rates in real-time, your hotel would witness a boost in revenue as well as occupancy.
These, initially, seem like complex hotel revenue management solutions, but they are capable of being streamlined through the use of a PMS (property management system) with revenue management capabilities (Tip #10, above).
After all, that same industry report mentioned earlier also stated this of any revenue management software for small hotels:
“Revenue Management Systems are not standalone products and require constant data flow in order to operate efficiently and offer valid pricing and non-pricing recommendations. In order to truly empower hoteliers to make dynamic and timely decisions, RMS companies need to support real-time seamless data exchange with PMS providers.”
Integrations with PMS, then, is an optimal approach to managing hotel revenue.
How a PMS Can Support Hotel Revenue Management
There are many options for revenue management software for small hotels, but in order to make the most of these hotel revenue management tips, it is important to know which factors add up to the optimal hotel revenue management systems, too.
When considering a strategy for hospitality revenue management, owners and operators can begin by narrowing down options to only those that integrate a PMS and revenue management. Why limit the options? As noted, it was only when an RM used intense scrutiny of data that the right kinds of changes were made. Imagine seeing 50% increases just by using an RM? That is possible!
As a simple illustration: The hotel that uses a PMS can take market data around rack prices, seasonal discounting, or average room rates and adjust their own rates unilaterally through the channel manager in the PMS. This updates its inventory and pricing across the entire internet and makes them hyper-competitive.
It does not do so in days but in minutes. There is no clunky spreadsheet and no need for someone to spend hours manually adjusting prices. The right PMS can make these adjustments instantly, boosting the competitive edge of even the smallest player.
PMS Integrated with RM Solutions
Integration of this kind is not limited to pricing changes, alone, though. And a well-designed PMS makes the entire scenario an “all in one” solution. Just consider the benefits gleaned from hotel revenue management systems offer:
- Third-party integration that addresses credit card processing, back office, apps, and more
- Easy user interface
- Mobile app to ensure that changes and reporting can be done anywhere
- Full reservations functions
- Guest profiles that enable personalization and one-on-one marketing (One of the newest concepts in RM is personalized pricing that is a reflection of a guests’ prior spending, habits, and even their choices in ancillary products or services)
- Multi-device booking engines
- Third-party integration with OTAs
- Multilingual capability
- Financial software integration (such as integration with Xero or Quickbooks)
- Cloud hosting for on the go access
- Housekeeping integration
What would those approaches to hospitality revenue management say about a hotel? It would say that it is shifting away from the old-fashioned “reactive” model of revenue management and adjusting into a more proactive approach. Taking analytics and the complete revenue-generating capabilities of a property, hotel revenue management solutions of this kind can provide even small and boutique properties with a much more competitive stance.