Revenue Management, how to increase the revenue of your hotel

But what is revenue management?

It is the strategic use of performance data, local market data, competitor pricing and other analytics to help us predict consumer demand at any given time in order to optimise the pricing and distribution of a hotel's assets to maximise profits.

There are different strategies and tools designed to carry out a good revenue management. GuestPro has a service that offers the hotel to deepen this type of strategy to increase the performance of its bookings.

A priori it seems very simple, we follow the rates of our competitors to set our prices and compete in the best conditions. But it is not that easy, there are more things to take into account, it is important to be able to plan and forecast future demand, as well as being flexible to make changes if necessary.

Let's start by knowing the metrics that will help you get closer to revenue management:

Occupancy: is the % of rooms that are occupied = number of occupied rooms between total available rooms

ADR (average daily rate): average daily rate = revenue per room between number of rooms sold

RevPAR (revenue per available room): revenue per available room = ADR per occupancy or total revenue per guest between total available rooms.

Let's take a closer look at the most important revenue management strategies :

The a priori most complex strategy is dynamic pricing, i.e. the use of flexible demand-driven pricing that is often used to achieve a higher price as demand grows. In this sense, it is essential to forecast what may happen throughout the year, to know when we will have more demand and to adjust prices according to these predictions. Indeed, it is not an easy task, but it is worth the effort, as knowledge of the market and of our hotel in particular will help us to be more and more efficient.

Updating our prices can even be done on a daily basis, the more flexible we are and the more responsive we are to market changes, the more revenue potential we will have. Knowing what the competition is doing at all times is one of the aspects to take into account in order to react and offer a better option to our potential customer.

But how can we be aware of what our competitors are doing?

There are tools to do so, such as GuestPro 's revenue report that collects and displays market data (Booking, Expedia,...) in real time and allows you to adjust your rates from the same tool. GuestPro also has a specialised revenue management team that can be hired to directly manage dynamic pricing.

There are other options that will also help you increase revenue and profits such as restrictions on stay: minimum length of stay(MinLOS) in periods of high demand or applying discounts for longer stays when there is less demand.

MinLOS can also be applied at discounted rates. For example, guests may have to pay fixed rates for shorter stays, but may enjoy a discount on longer stays.

Closed on Arrival (CTA). This restriction prevents guests from arriving on a specific date, for example, to reduce the burden on the front desk when a large group is scheduled to arrive.

MinLos and CTAs help you manage customers profitably on different demand dates.

Another option to optimise revenue is with the management of our Channel Manager, i.e. managing our booking channels, grouping rates according to profitability level or closing channels when demand increases and the rate of bookings is high.

The famous overbooking or overbooking is a technique that, if well managed, can be very beneficial for the hotelier. Compensating for future cancellations and no-shows by selling more rooms than we have available is an optimal strategy to maximise revenue. It is important to do it with knowledge and not to abuse it.

Group bookings can also be beneficial, as long as they have a previous work of evaluation of the profitability of this type of business. It is essential to analyse and compare the benefits that the group request will give us with the occupancy/price forecast for the same number of rooms in a non-group way. What a priori may seem like a good deal for the hotelier may end up meaning a great loss of money if, for example, the group cancels the booking. Hence the need for a good business analysis.

Finally, the use of technology will always be beneficial to add revenue. In this sense, we find that it is usually the large hotels that incorporate a revenue manager to their staff, they can afford it and it is essential to increase their revenue. In independent hotels the situation is different, lack of budget and time sometimes complicates this type of task, but the basic concepts described here can serve as a starting point to work on certain strategies. The great ally in these cases is undoubtedly technology, which provides this type of hotels and all hotels in general with tools that analyse data and make price changes based on established triggers. Technology helps to monitor what the competition is doing, tracks the market and, in general, provides information with which to make decisions.

Data to make decisions. These systems are integrated into the PMS, such as GuestPro, which provides essential data for revenue management and also has a specialised support team that guarantees the hotel continuous monitoring of market data to optimise revenue management.

A final piece of advice on this topic is that "we are all essential to carry out a good revenue management strategy", all the experience and knowledge of employees and technology partners contributes to the strategies that can be taken to increase revenue.

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