Revenue management discipline was non-existent until a few years ago. Started in the 1980s from the airline industry, the techniques are now adopted across industries and businesses are growing exponentially ever since.
5 Basics of Hotel Revenue Management
The hotel sector today is more competitive than ever. With increased global competition, hoteliers and property owners are now seeking an analytical overview and strategic knowledge of customers and markets, to make informed decisions that only revenue management can provide.
What is revenue management in hotels?
Revenue management refers to the strategies the hotelier needs to frame to sell the inventory to the right guests at the right time and through the right channel to boost revenue growth.
Modern travellers with increased purchasing intelligence, are pressurizing the hoteliers to make accurate forecasts relative to booking demand, room pricing, and promotions. Thus, hotel revenue management is crucial to success for any property, irrespective of its size.
Here are some tips to help understand the basics of Revenue Management and incorporate them for your property:
1) Pricing in accordance with Perceived Value
We have in our earlier article highlighted the need for value-based pricing, and we reiterate. When managing a revenue management strategy, one must understand that the offering should revolve around the perceived value. If your guests feel like they are getting maximum value for their money, they’ll likely be willing to spend more. To increase this value, managers can make improvements to various touchpoints in the customers’ journey.
Revenue management helps monitor and measure what customers from different segments are willing to pay and capturing as much of this value as you possibly can.
2) Right Mix of Distribution Channels
While it is important to determine the best distribution strategy for your hotel, it is equally important to analyse several different channels and utilize them, as all channels bring value in terms of their marketing capacity.
It is also a good idea to check what your competitors in the area are doing, and if they’re targeting the same markets as you, for the same segments and at the same time. If you can anticipate their strategies, making your own adjustments becomes much easier.
3) Focus on Direct Bookings & Website Experience
It is easy for OTAs and other external partners to lure your guests away as they offer competitive pricing and various reward and loyalty programs. While you might be content with the fact that the booking is finally coming to you, it is important to realise the downside of this arrangement. You are letting your guests become loyal to your partners instead of you!
Address this issue by developing a direct booking strategy, that provides an additional level of service to the guests who book directly with you. The main goal of this strategy would be to attract, engage, and convert visitors to bookers, directly through your official website. Offering loyalty programs are another great way to rope in customers for life and ensure repeat visits. Rewarding direct booking guests, with discount vouchers on food and drinks, spa and pool usage, free upgrades, etc., are also encouraging ways to build loyalty and increase revenue.
4) Forecasting
Forecasting is important for both rate setting and budgeting. Accurate mapping helps the hotel to strategise future pricing and planning, as it gives out metrics such as average customer spending, location, the origin of booking, type of reservation, average customer stay per chosen category, etc. By budgeting and forecasting in advance, you’ll have plenty of time and opportunity to make strategy adjustments that can help increase your hotel’s revenue.
5) Knowledge-based Decision Making
With a raft of information available at their fingertips, hotel revenue managers should always make their decisions based on the most recent and accurate data. Feeling based decisions or outdated data influx can only cause confusion and invalid observations.
Having access to relevant data helps keep a tab on customer behaviour and market trends. The detailed analytics and insights derived from STAAH’s Channel Manager, makes this process seamlessly easy and critical to success, as it helps in informed decision making. STAAH Channel Manager for its ease of use and real-time data has won much love and is one of the favourite tools for hoteliers.
No matter your property size, Revenue Management has become crucial to be successful. We have highlighted just five of the many factors that form the core of successful revenue management. Reach us at marketing@staah.com with your suggestions and inputs.