Hotel Revenue Management: a successful strategy

Revenue Management seeks to optimize financial results. It is very popular in sectors such as hospitality, which has to cope with very high fixed costs and a perishable inventory. In the case of hotels, which have a certain number of rooms and fixed costs that must be taken into account, Revenue Management is used to try to predict demand and optimize the availability of inventories and prices. Below we explain in detail what Hotel Revenue Management is and we give you some strategies to apply as a hotel manager.

What is hotel revenue management?

Revenue Management is a popular concept within the hotel industry and is used to optimize a hotel’s financial results and maximize revenue. The central idea of this strategy is to sell the right hotel room, to the right customer, at the right time, at the right price, through the right channel, with the best profitability.

In general terms, it is the analysis of data to predict customer behavior, so that the availability and price of rooms and services can be optimized to generate as many reservations as possible. In other words, match offer and demand.

Ideas for hotel revenue management strategies

• Understanding the market: Knowing where demand comes from and the different local factors that can affect seasonal demand. Know the target audience, their needs, desires and expectations. With this, prices and offers can be set according to demand.

• Segmentation and price optimization: To sell the right room to the right person at the right price, hotel guests must be segmented by behaviors such as: when they book hotel rooms and how they do it. This allows you to optimize prices for each segment.

• Working with other departments: It is important to achieve close collaboration between the different departments of the hotel, such as sales and marketing, to ensure that strategies are aligned.

• Forecast strategies: Anticipate future demand and revenue to make the necessary adjustments. Within the hotel industry, high-quality forecasts are based on employment trends, room rates, and revenue. Forecasting also requires knowledge of current reserves, competitor performance, local events, and broader industry trends.

• Search Engine Positioning: Being in the top results when people search for a hotel on Google is vital to getting new bookings. The hotel website has to be optimized for SEO, i.e. search engine optimization.

• Correct pricing strategy: Depending on what you have to offer, who you are trying to attract and what strategy your competitors are using. A competitive pricing strategy, in which prices are set based on the prices of other hotels, puts the business in direct competition and is good when the hotel has more to offer than rivals. However, in low seasons, a discount strategy might be better, because a low-paying customer is better than an empty room.

• Incentives for direct bookings: It is important to attend to all distribution channels and reach customers wherever they are. However, it is also important to try to increase the number of direct bookings, because these do not require commissions to be paid to third parties, which means they are ideal for maximizing revenue. One option is to offer exclusive incentives, such as loyalty points or giveaways, to customers who book directly through the website itself.

• Mobile optimization: The website must be responsive, that is, it must be optimized for mobile devices: fast loading, pages are displayed correctly, all buttons are fully functional and the booking process can be done through of the mobile.

You already have a clearer idea of what hotel revenue management is and all the possibilities it has for increasing a hotel’s profits. If you have any questions or want to deepen your knowledge in hospitality management, look at our Master Degree and contact us.