Staying profitable is essential for all businesses. In competitive industries, such as the hospitality industry, getting the one-up on your competitors can make all the difference. Revenue management is important in every industry but has some unique challenges in regards to the hospitality industry. An effective revenue management strategy in the hotel sector allows owners to foresee demand, optimize room availability, and adjust their pricing to achieve higher revenue.
What is Revenue Management?
Long-time industry professionals define revenue management as "selling the right room, to the right client, at the right moment, for the right price, through the right channel, with the best cost efficiency.” That sounds like quite a mouthful, but essentially they're right. To accomplish those goals today, a hotel must dive deeply into data and certain analytics to predict trends. The trend in the data then allows them to make informed decisions about costing, which, in turn, can help increase revenue and profit.
Revenue management is not a new concept; it was first used in the commercial airline industry where companies found ways to change their pricing to shift with customer demand. Revenue management can be used in businesses where customers often pay different rates or prices for the same product (for example, rooms in a hotel or seats on a plane), and where that product must sell by a specific time (e.g., before the flight takes off).
Why is Revenue Management important?
Prudent revenue management allows decision-makers to make informed, data-driven choices, rather than relying on guesswork. Hotels, like most businesses, have set overhead costs which they need to pay regardless of the expected revenue. An effective customized revenue management strategy can help owners ensure that these costs are not just met, but minimized, in return, increasing their revenue.
Booking trends are a significant but shifting factor that can change the revenue of a hotel dramatically. Another one of the contributing factors to revenue management in a hotel setting is the occupancy rate of the hotel. Occupancy rates are dependent on a multitude of factors, including the economy of the region, season, traveler demographics, etc. As a result, the best room rate today might be different from the best rate tomorrow. The data used to help predict the possible occupancy rate could be a combination of past booking history, weather forecasts, as well as event and holiday information, such as school holidays.
Having a revenue management strategy in place can assist with these uncertainties and help determine the best rate to retain a consistently high occupancy rate. A customized revenue management strategy also enables the hotel to plan ahead and adjust staff levels to match anticipated demand. This helps avoid over-staffing (and overspend on wages) during quiet periods. By effectively managing their overheads, owners can lower costs and avoid unnecessary expenses.
How can NextGen help?
Finding an experienced and reliable revenue manager can be costly and time-consuming. With our leading-edge tools, methodologies, and industry experience, we at NextGen can help your business produce a customized revenue management strategy that helps your business realize its full potential and gain a competitive advantage over its peers.
Look at our service as an extension of your operational team. We take the weight off your shoulders by taking care of the data so that you can spend more time on what you do best--serving your customers.
Our team will ensure that your hotels are priced competitively but at a rate that provides you excellent revenue return. We will use analytics, data, and historical performance to maximize your RevPAR. Best of all, our revenue management strategy is customized to your business.
Although revenue management may seem complicated, it’s something we’re ready to handle on your behalf. At NextGen Hospitality Consultants, we help large and small hotels alike. To discuss our services further, call 650-409-1025, and one of our sales support team members will speak with you.
