Revenue Management is one important sector that is involved with hospitality. It is used by many hotel owners who seek to optimize their best possible financial results. It is used to anticipate various hotel demands and help with the pricing. Revenue Management is something that is not new in the hospitality world we have today. It has been known to make hotel owners make a more precise decision, work on the pricing, and provide better ways to make more profit.
What Is Revenue Management?
Before we can fully grasp the concept of revenue management, we need to give it a definition. There is a popular definition widely accepted in the hospitality industry: “Selling the right room, to the right client, at the right moment, for the right price, through the right distribution channel, with the best cost efficiency.” This simply means using various performance analytics to help hotel owners precisely and accurately make predictions of the demands of customers and other consumers’ attitudes and behavior. This allows the hotel owners with their decision-making process regarding the following;
- Pricing
- Distribution
Hospitality industry owners need revenue management to maximize the profit they realize and revenue that comes into the hotel’s pocket. The revenue management started off in a different industry but has found a way to make a mark in virtually all industries.
Revenue management was developed to anticipate consumer demands and introduce dynamic pricing for each demand; that is, it is applicable in situations where different kinds of customers are willing to fork out their money for the same type of product but at a different price. But other conditions like the following may be considered:
- There is a limit to the number of the product that will be sold
- There is a time frame for which a particular product can be sold.
Some facts about revenue management have some sense of truth in it. For one, it is the least understood part of any independent property’s operation. Most hotel owners do know the extent of how good it can be to their business, but they don’t see it as something crucially needed for their business.
As said earlier in this article, revenue management is not a new practice to the industry, but we have noticed that hotel owners and managers do not appreciate it. It takes some convincing to get them on board with this measure. But this modern society requires a robust revenue management strategy that will help hotel owners a lot.
Importance of Revenue Management
You must be wondering why you need to use revenue management to take your hospitality business to greater heights. Well, we will be throwing more lights on this skepticism in this section of the article. We will show you why it is imperative you make use of revenue management.
Read more: Understanding Revenue Per Available Room (RevPAR) For Hotel Success
1. Revenue management aids hotel in lowering expenditures
Booking a room in a hotel today depends on quite a number of factors like the region where it is situated, the average age of travelers, season, economy, and so much more. These factors so affect the pricing and rate at which you sell your room. This is the junction where revenue management comes in handy to ensure the following:
- It helps hotel owners to determine what price and rate will be the best
- Optimization of the workforce available for a period of very high demands
- Prevents over staffing of employees
- Management of available resources, thereby lowering the cost of various unnecessary expenditures.
2. Building up an attractive hotel for your ideal guest
You must have it at the back of your mind that not all guests a hotel receives are profitable. By ensuring you have maximal occupancy in the hotel. You need to make sure you have lots of repeat customers because they are more lucrative for business. You tend to avoid spending much on attracting a new set of customers every time.
Having a full hotel does not mean it is profitable. The question you should ask yourself is, are they the ideal customers to get more profit or is the rooms’ pricing too low, or you are probably paying for massive commissions during the maximal occupancy? This is one of the reasons the revenue management is needed by every hotel business that is looking to make Hugh profit in the industry.
With the introduction of Automated Revenue Managers, the market has changed. It has been made to help hotel owners with profiling of the right consumers who are lucrative and have long term value for your hotel.
3. Revenue management improves your hotel brand
With the proper and correct use of the various revenue management strategies, a hotel owner can play a pivotal role in the hotel’s growth. With better pricing and management of resources, there should be a significant increase in property occupancy, which ensures enough profit.
The 4Ps of Revenue Management
What are the 4 Ps of revenue management? These are elements that show the effectiveness of revenue management and how it will help various hotel owners. These 4Ps are
- Pricing
- Positioning
- Pace
- Performance
We would talk about the main component of all the 4Ps “Pricing.” Pricing is a deciding factor for most of the listed P. It is solely responsible for the value of an asset and can help hotel owners bridge gaps in its revenue plans. As a hotel owner, you should always look to increase your rooms’ rates for high demands days. This is to maximize the revenue generated, and while you decrease the rate on days where there are low demands to maximize occupancy.
Final Thoughts
As revenue management is a pricing tactic that should be employed by all hospitality industries to not only retain their customers but also realize more returns. To make this a success, keeping an eye on competitors’ pricing rates is highly essential. This will help you make your price fair and ensure the competition is fair
Furthermore, keep monitoring the hotel ranking and visibility online while making sure it gets adequate visibility. Be bookable everywhere; this is just one of the ways to make the most out of your guests.
Tip: The Booking Ninjas system is thorough on revenue management. We have just the right features in place to ensure you get a better experience than anywhere else. Enough said, take a look for yourself.
