Interested in using a revenue management strategy to maximize your profit? Learn more about revenue management, the history of it, and some implementation tips in our Benefits of Revenue Management webinar.
Watch the webinar below, or jump down to the highlights and key takeaways for a high level overview of the presentation.
- What is revenue management? It’s selling the right room, at the right price, at the right time.
- Maximizing your profit by applying knowledge about markets and trends.
- Revenue management began with the airlines when they looked at their fixed number of seats, perishable inventory, and scheduled flight times to adjust prices with “fenced pricing.”
- They found that seasonality, day of the week, time of day, and destination factors had an impact on pricing strategies.
- Hotel revenue management should factor in: Fixed number of rooms, perishable rooms, guests willing to pay a different price for the same room, and using data to predict future demand.
- Events, weather, and transportation projects are external factors that should be considered when working on your strategy.
- A room is a perishable product since the number of rooms is limited. It’s imperative that you are proactive in selling those rooms instead of reactive.
- Keep in mind: If you lower room revenue to aim for higher occupancy, you will lose the opportunity to earn more for each booked room.
- Tip #1: Tracking and reviewing your historical data can help you set your prices. Items to track:
- Rooms sold
- Average rate
- Pace vs. same time prior year
- Tip #2: The goal is to maximize the price you can obtain for your room at the right time. Pricing strategies include:
- Differentiate pricing between your offerings (rooms with bigger beds or better views should be priced higher than standard rooms)
- Set an occupancy ceiling and floor (ceiling could be 90% - that way if you raise rates and don’t book those rooms, you won’t be hurting)
- Raise rates above your ceiling or when demand is high
- Lower rates below your floor or when demand is low
- Look at booking date to understand when pricing needs to be adjusted (for example, if people are booking 14 days out or 60 days out you know when to adjust your rates or set your yield management rules to accommodate typical booking dates to maximize revenue)
- Don’t be afraid to change your rates or feel like by raising your rates you’ll alienate your repeat guests. They know your value and service and will continue to pay for it.
- Rates should never be a set it and forget it thing. You are leaving money on the table if you’re not levering the data you have to adjust your rates.
- Tip #3: Inventory management is a crucial part of your revenue management strategy. Utilize inventory management tactics by:
- Playing Tetris with reservations
- High occupancy = closed channels
- Adjusting minimum night stay requirements
By combining your historical data and your own intuition about your property’s expected business, you can develop a strong revenue management strategy.
Watch the webinar recording and view the presentation for a deeper dive into this topic.