What is Revenue Management and how can it be applied within tourism marketing strategies?

Published June 16, 2020


What is Revenue Management and how can it be applied within tourism marketing strategies?


Revenue Management is that system that aims to maximize occupancy rate, optimize pricing to increase turnover even and especially in the low season.

But you find this written everywhere!

To understand what Revenue Management is, first of all you need to understand what it is not: it is not changing the rates based on competitors, it is not “fiddling” with the portals, it is certainly not lowering the prices (normally they rise), it is not strictly linked to the pricing policy (dynamic or static whatever it is) which is only one of the many levers to develop the hotel's Revenue, it is not closing the portals or reopening them based on temporary employment needs without any strategy set.

All these activities taken individually are definitely NOT Revenue Management, but the set of these and many other variables, connected together as if they were a huge puzzle, give results, I can assure you, incredible.

Revenue means "earnings". So Revenue Management is the set of all those levers to optimize a company's earnings.


What should be the goal of a Revenue Management strategy?

The main objective is to make the most of the characteristics of a structure, as well as the territory in which it is located, to create an “ad hoc” product. The aim is to influence demand by combining the basic elements of RM together: we talk about price, marketing and distribution. One of the elements of fundamental importance for correct Revenue management is the knowledge of your market, to be analyzed before venturing into the dynamic management of tariffs. Otherwise, you would risk "playing downward" without obtaining any effect.

There are certainly different schools of thought, but all of them carefully avoid " jumps" between rates.


So how does a "Revenue oriented" tariff come about?

We start with the creation of the Bottom Rate, based on hotel costs, we analyze the history of previous years to identify areas for improvement and to create the starting rate on all days of the year, paying attention to all event dates (leisure and business), an analysis of competitors is carried out (we are talking about benchmarking), a study on positioning and also a SWOT analysis (strengths, weaknesses, opportunities and threats) which is always useful for our purpose.

Knowing your market, as already underlined, is essential to predict the different needs of potential customers, in doing so dynamic pricing also becomes aimed at satisfying different market segments and the right target audience.

But we're not done!

One cannot speak of Revenue Management without developing Product Marketing. It is necessary to understand which products are most suitable for the targets of the various segments: the types of rooms on sale and the products marketed by the hotel which may be too many or too few. The history and the analysis of the market will give us feedback. Understanding what the habits and needs of our typical customer are will allow us to develop targeted campaigns and promotions, but above all to know when and how to position them throughout the year, thanks to the study of our "inseparable friend" Historian (“historical data”).

Knowing our customer and his "habits" well, we could research and select operators specialized in specific markets and for specific targets, thus developing the market that interests us.

Creative and alternative distribution is an important lever to be exploited: there are different channels than normal online and offline, but there are many others, all very important sales tools, which if properly calibrated can give us what we need, when we need it. A careful eye on Social Media Marketing will also be important.

Obviously we cannot forget a fundamental part of the activities of a hotel, the one dedicated to the Corporate customer. Our Middle Week customer, who is to be pampered, loyal and also indulged, but which unfortunately we allow ourselves to escape easily.

The analysis of the Top Accounts, understanding which convention rate is more correct and for whom. Never ever ask for a minimum of guaranteed nights or the countersigned agreement. Trying to prevent our rate displayed during the Middle Week from falling below the Corporate rate, to avoid unpleasant surprises such as corporate customer bookings from Booking.com. What a tragedy…

An integral part of a good Revenue Management activity is certainly the training of Front Office staff as well as Managerial. The Front Office operators form the department responsible for the development of the "direct sales" that can make the "economic" happiness of the hotel, with high levels of Brand Reputation and above all with the development of a strong disintermediation, the real one that arrives by phone and email. All thanks to a high standard of "Quality of hospitality".

 We have summarized what is the first phase of the "method" that is used, that is what is usually done at the beginning of each consultation, and then move on to daily management through appropriate tools. All this work is aimed at achieving three primary objectives, because the very foundation of RM: reduction of costs, optimization of daily occupancy and maximization of turnover for all hotel departments.


And if all this were not enough, try to ask a Revenue Manager what he does during his day ... it will be a pleasant and long chat!


Fabio Morandin

CEO at MoreHotelier, Outsourced Revenue Management