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Proven hotel revenue management strategies

Most hoteliers would dream of having predictable numbers of guests booking at the established rack rate, and knowing for months in advance how their business was going to do. However that really is a dream, and in reality the dynamics of the hospitality industry mean that predicting and responding to changes is a case of trying to hit a constantly moving target. One of the most important tools to help hotel managers optimise profitability is revenue management, a methodology to effectively control pricing, inventory and demand. Revenue management helps forecast, and make informed decisions about room rates and availability, ensuring that the hotel maximises income while meeting market demand.

The importance of hotel revenue management

Effective hotel revenue management results in:

  • Maximising revenue - By adjusting room rates based on demand, hotels can increase their overall revenue.
  • Optimising occupancy rates - Helping to balance room occupancy to ensure that rooms of different types are filled at the best possible rate.
  • Finding competitive advantage - Effective revenue management allows hotels to stay competitive by offering the right prices at the right times.
  • Creating customer satisfaction - By anticipating demand and adjusting pricing and availability, hotels can better meet customer needs and expectations.
  • Improving financial planning - Accurate revenue forecasting aids better financial planning and resource allocation.
  • Managing staffing levels - Staffing can be planned more efficiently if demand can be predicted and properly understood. 

Any of these points are worth pursuing in themselves, but when put together in an overall strategy, hotels gain ‘muscle’ to be more effective in a highly competitive market. 

Key elements of revenue management for hotels:

Knowing your customer

This is fundamental for all businesses, but is especially true in the customer-facing hospitality industry. Guests come in all shapes and sizes, with different needs and wants. Understanding the primary market that your hotel serves goes a long way to being able to identify the messages you need to convey. For instance, are your guests ‘Bleisure’ travellers, or families? Are they most interested in low prices and convenience, or luxury ‘experience’ stays? Know your market and then you can more clearly appeal to the key demographics that will return the highest revenue. Once you are sure of who you are communicating with, then make special offers, discounts or packages tailored to your chosen segment. By understanding revenue management it’s possible to see how much different customer segments are willing to pay. Even with a clearly defined target audience, this can still change according to different market factors, such as seasonal demand. What’s more, different room types will support different spending patterns on ancillary services, and revenue management measures what different segments will pay. This is done by regularly monitoring the supply and demand of hotel rooms, and all associated billing.

Looking for feedback, and using it 

How do you get to know your customer? - By being aware of the feedback that is available online through social media, and reviews on the Online Travel Agent sites. This is not a one-way passive experience of waiting for people to say nice (or sometimes not nice) things about your hotel. Communication is a two-way street, so you have to actively engage with social media, posting regular updates and offers. Naturally your website must be smooth, attractive and up to date, and your profile on the OTA sites should be regularly refreshed. Post online news-and-views frequently, respond to guest reviews, and try out different offers to your core market to see what works best

A marketing initiative doesn’t have to involve huge effort. For example, if you’re targeting family stays, offer a ‘Second child stays free’ or similar discount and monitor how that goes. Do bookings increase, and how is the bottom line impacted? This is data which can easily be measured with modern technologies designed to support the hospitality industry. Online Travel Agents have been able to study guest responses in granular detail for many years, but now every hotel can analyse the figures just as easily

As you collate and analyse feedback, and get to know your customer in ever greater detail, this gives the opportunity to create tailored loyalty programmes to encourage repeat bookings. Even smaller, independent hotels can create and promote a loyalty programme because it will be based on real information about guests’ interests and taste. Rather than attempting to reach ‘everyone’, you can concentrate with greater focus on a narrower market segment, leading to more rewarding results.

Mining the data

By deep diving into the data available through a modern Property Management System, it’s easy to see peaks and troughs of demand, what sort of guests have stayed, and what seasonal variations there are. What percentage of guests took the option of upgrades, and how well did restaurant and leisure services perform? Data analytics tell the truth about how your hotel bookings shape up. A very experienced manager might be able to base decisions on their recall of previous years, and make predictions about upcoming demand, based on major events in the pipeline, or seasonal attractions. 

Now data analytics allow anyone on the management team to access and understand trends. Mining the data provides an open book that everyone on the team can read, giving clarity about customer behaviour and market conditions. Utilising data from previous weeks and months shows market trends and enables the forecasting of future demand. That in turn provides the ability to set optimal pricing.

Monitoring the competition

Just as a constant scanning of social media and other channels is essential to know your market, it’s also vital to be aware of what’s happening with direct local competitors. What is their rack rate, and what discounts are they offering? Do they have any special deals or initiatives on the go? What comments are their guests posting? Gaining intelligence about the competition has never been easier - it’s all there on social media, through the OTA sites, and on the hotels’ own websites - so become very aware of what others are doing. Your hotel’s reputation is one of the greatest assets you have, so ensure that it outshines the competition, and constantly seek ways to burnish it. Positive reviews can drive higher demand and make it possible to go for premium pricing.

Pricing dynamically

Knowing what’s happening in the market, especially with local direct competitors, means that pricing can be adjusted to counter other marketing initiatives. Modern hotel management systems partnered up with intelligent pricing tools can scan the market and update information on pricing, automatically adjusting room prices (within set parameters) many times during a single day. 

Using software to automate pricing enables room rate adjustment in real-time based on current demand, competitor’s rates, and other market factors. Conditions ‘out there’ are highly fluid, so the hotel that can anticipate and respond swiftly to external parameters will gain a strong competitive advantage. Dynamic pricing isn’t just about downward adjustments to room rates either - it can also spot upswings when market demand is high and an enhanced room rate is justified. Effective revenue management comes from predicting guest demand and behaviour, to sell rooms and other services at the most optimal price, every day.


Choosing the channel

Until recent times, the OTAs held all the cards when it came to market intelligence, and acted on that by adjusting prices and looking ahead to times of peak demand, or alternatively to slack times. Now that hotels have similar forecasting and data analytic capabilities available to them, it might seem that the OTAs are not really needed any more. While on the face of it that might be true, looking at things from the channel perspective reveals other details of revenue management. Of course the OTAs take an often hefty slice of the room rate in commission, but there are times when OTA channels can deliver results quickly, and are therefore a valuable ally to hotels. For example, if a major sporting or cultural event is taking place and room demand is high, potential guests may not risk ‘shopping around’ directly to hotels, but instead opt for a trusted OTA route. This means that hotels should be ready to optimise the mix of third party booking channels, and wherever possible negotiate favourable deals for OTA commissions. After decades of dominance of the OTA model (and the Hotel Global Distribution System or GDS), hotels can now access the technology to balance these channels with their own direct booking systems, and update their rates and availability in real time across all connected channels. Your hotel’s rates are therefore perceived as consistent by guests searching for a room.

Hotel revenue management is about more than just rooms

The core aim of hotel revenue management is to optimise room occupancy, along with getting the best rate per room, but rooms are not the only source of revenue for a hotel:

  • Food and beverage services can provide a significant contribution to the bottom line, both for in-room dining, and café, bars and restaurant services. Making these attractive to guests can really boost revenue growth. So how can you make F&B more attractive than it already is? As with offers for rooms, think about special deals such as themed restaurant nights, wine-tasting evenings, upgrades and upsells. Be creative about what will persuade guests to try new experiences, or return for a second or third night to your restaurant during their stay.

  • Hotel amenities are a sure-fire way to increase revenue, particularly in the health and beauty areas. If you have the space for spa activities, then bring in masseurs, therapists, gym instructors and beauticians. It’s all add-add and win-win. You tap into a local talent pool of individuals, and take your share of the income.

  • Special events and promotions also score highly with guests, and can often be set-up and run by others from your hotel’s local ecosystem: Walking tours, historical visits, cycling trips - there is so much that you can make available to your guests through local contacts and societies, and every special event and promotion provides the opportunity to increase your revenue. It also increases guest loyalty, and further enhances your reputation.

As with room sales, such initiatives can easily be measured and evaluated, because the data is readily available within your hotel’s Property Management System. Find out what worked in terms of revenue, then make any necessary adjustments, and do it again, only better! The more you can get to understand guest behaviour and their needs and wants, the better you can track and satisfy your market


Getting smarter with your technology

Understanding your guests and responding swiftly to market changes is easier than ever with modern hotel solutions . Uprating your hotel’s technology will play an important part in your revenue management story. Check that any tech solutions you may be looking at offer the following:

  • A contemporary Property Management System which manages and collates every detail about a guest and their stay. The PMS can hold granular guest details, including - of course - name, address, age, nationality, language, payment method and so on. Every piece of data can be of help in inviting that particular guest back for subsequent stays, and will also assist creating an overall picture of the niche demographic you wish to grow and encourage.

  • A vital feature is to have a Booking Engine within the hotel’s system, so that once a potential guest is engaging with the hotel’s website, there is little reason for them to return to an OTA channel, as they can just as easily make their booking directly with you, safely and securely.

  • However, having a Channel Manager facility helps streamline the process when guests do book through third party providers, and in particular ensures consistency in rates, whatever channel a guest is querying.

  • A Revenue Management System should either be part of the PMS offering, or be an integrated add-on, enabling clear analysis of data on spend per guest, plus market data for specific times. Clear ‘snapshots’ of periods can be provided to indicate what the market drivers and demand were at any particular time.

  • Additional applications such as GuestAdvisor help create a personalised approach which guests value, and which helps promote the bottom line by automatically offering upsells and additional services in-stay.

The SabeeApp solution

We know about all of these features - and many more - that make the job of the modern hotelier easier and more effective when it comes to revenue management. That’s because our cloud-based software has been supporting hotels worldwide for over eleven years, with an ever-expanding range of Smart Solutions which enhance and extend the already awesome capabilities of our core Property Management System. We know how important crisp revenue management software for hotels is, and we make it super functional and remarkably easy to use. We also know that the dream of predictable and consistent guest bookings will never quite come true - because uncertainty is baked-in to the hospitality market. However, book a free no obligation demo of our solutions, you’ll see that with our technology, and by employing a mix of knowing your customer, dynamic pricing, data analytics, and creative marketing, you can enhance your hotel revenue management strategies to achieve sustainable growth.

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