Hotel revenue management consulting

For those operating in the hotel industry, revenue management is a key concept, as it enables hotel owners to predict levels of demand and optimise things like distribution and pricing, in order to maximise financial results. In this article, you will find out more about hotel revenue management, the reasons it is so valuable to hotel owners, and the necessary conditions for implementing a hotel revenue management strategy.

What is Hotel Revenue Management?

So, what is hotel revenue management? Hotel revenue management is a process of using analytics, performance data and other information to anticipate customer demand, so that pricing, distribution and availability can all be optimized. In the process, those within the hotel industry can maximize the amount of revenue they generate, improving their overall financial results.

In many ways, hotel revenue management is about achieving the best possible balance between supply and demand, while understanding customer habits. Crucially, it is more concerned with revenue than occupancy.

Typically, hotels use analytics, past data and external information to gain a clearer understanding of demand levels. This then allows them to identify patterns, to understand when hotel rooms need to be sold at a discount, and to anticipate periods of high demand, at which point rooms can be sold for a much higher price.

A simple way to think of hotel revenue management is:

Selling the right room, to the right customer, at the right time, for the right price, via the right distribution channel, with optimal cost efficiency

It is essentially nothing different from what is called business analytics and pricing strategies in other industries. The concept of revenue management boils down to the optimization of financial results. By analyzing sales trends and forecasting results, using historical scenarios, price strategies are adjusted to maximize revenues.

It originated in the airline industry in the 1980’s, as they were trying to optimize their financial results. Dynamic pricing was introduced to grow revenue potential and financial results, through anticipating and influencing consumer behavior and applying price discrimination.

Some of the definitions used to describe revenue management are:

  • Selling the Right Room to the Right Client at the Right Moment at the Right Price 
  • The art of turning away business
  • Matching supply and demand
  • Growth through innovation/creativity:
    Rather than be constrained by ideas for new products, services and new markets coming from just a few people, a Thinking Corporation can tap into the employees.
  • Increased profits:
    The corporation will experience an increase in profits due to savings in operating costs as well as sales from new products, services and ventures.
  • Higher business values:
    The link between profits and business value means that the moment a corporation creates a new sustainable level of profit, the business value is adjusted accordingly.
  • Lower staff turnover:
    This, combined with the culture that must exist for innovation and creativity to flourish, means that new employees will be attracted to the organization.
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