WHAT IS REVENUE MANAGEMENT?
Revenue management is an extremely important concept within the hospitality industry, because it allows hotels to anticipate demand and optimize availability and pricing, in order to achieve the best possible financial results.
Within the hotel industry, the widely accepted definition is: “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”.
It involves the use of performance data and analytics, which serve to help hotels to more accurately predict demand and other consumer behaviors. This, in turn, allows them to make more sensible decisions regarding pricing and distribution, in order to maximize revenue and, therefore, profit.
As a concept, revenue management actually began in the airline industry, where companies found ways to anticipate consumer demand in order to introduce dynamic pricing. However, it is applicable in any industry where different customers are willing to pay different prices for the same product, where there are only a certain amount of that product to be sold, and where that product must be sold before a certain point in time.
To carry out effective revenue management, a business must also have some way of forecasting demand and consumer spending habits, so that informed adjustments can be made. For instance, hotels can use past data, existing bookings, weather forecasts, and other industry data to inform their revenue management strategy.
WHY IS REVENUE MANAGEMENT IMPORTANT?
Hotel revenue management provides the ability to make the most out of a perishable inventory of hotel rooms, allowing them to maximize the amount of money the business generates. Essentially, it allows decision makers to make informed, data-driven choices, rather than relying on instincts or guesswork.
Hotels, like many other businesses, have fixed costs, which need to be paid regardless of how many rooms are sold and regardless of how much money is generated from guests. Therefore, through a revenue management strategy, hotels can ensure their costs are met and their prices and services are dynamically optimized.
WHAT MAKES HOTELS SUITABLE TO BE ABLE TO APPLY REVENUE MANAGEMENT?
- Fixed capacity
- Perishable product
- High fixed costs and low variable costs
- Product can be priced differently
- Demand evolves
- Product can be sold in advance
- Market can be segmented
Have a look at our standard revenue management offer: OUTSOURCED REVENUE MANAGEMENT.
Alternatively, you can tell us exactly what is important to you and we will tailor the offer to your needs