Revenue Management - What is it?

Revenue Management is all about balancing demand, inventory and pricing. It’s most common definition is:

Selling the Right Product to the Right Client at the Right Moment at the Right Price

 via the Right Distribution Channel with the best cost efficiency

To breakdown this definition, Revenue Management is a mix of analytics, that helps predict the behaviour of customers, forecasting occupancy and ensuring the price can be optimised in order to generate the maximum revenue possible.

What this means for Hotels and Guesthouses, the main purpose is to increase revenue while selling the same number of rooms. It is all about matching supply and demand of your rooms. To be success you must understand how customers think and what their perceptions of value are. This could mean, not selling a room today so that you can sell it for a higher rate tomorrow or not taking that lower rate booking with a lead time of 6 months out because the demand isn’t there at that moment in time. The flip side to that is knowing when to sell at a low rate today if you do not expect higher demand.

How can you put Revenue Management into practice?

** Hotel Revenue Management is not something that will happen overnight **

There are so many different aspects that need to be considered when implementing revenue management, you need to analyse and evaluate large data sets about your property and its business environment.

Analyse and Evaluate the following factors:

·       Historical Occupancy

·       General Sales

·       Customer Segmentation - dividing your customer base into distinct groups who might differ in travel styles, booking behaviour and group size

·       Customer Satisfaction

While also taking into account:

·       Competitor Pricing

·       Events in the area / nearby

·       Peak Dates and Holidays

·       Closing of nearby Accommodation

Practice of Revenue Management may be implemented faster with technology: does your PMS allow Flex Prices, have Reports such as occupancy reporting, year on year comparison reports and does it allow you Segment your reservations?

Revenue Management has contributed millions to the bottom line, and it has educated our people to manage their business more effectively. When you focus on the bottom line, your company grows.

Bill Marriott Jr., Chairman & CEO, Marriott International