Hotel revenue management made simple
The basics of hotel revenue management
Hotel owners seeking success and striving to grow their business will know too well the challenges associated with revenue management. It’s often the thing managers need most help with, and the thing hotels find most challenging overall, yet hotel revenue management is the key to a successful business.
Whilst it is of course key to any kind of business, hotels deal with a greater challenge when it comes to this tricky part of business strategy. With a great deal of perishable inventory on site, high fixed costs (such as wages and maintenance) and varied levels of demand (annually, seasonally, and even within the week) it’s no easy feat to implement hotel revenue management successfully.
So in simple terms, what is it? Hotel revenue management is a process of analysing demand and then configuring the very best rates in order to maximise hotel revenue. Put much more simply, hotel revenue management is:
- selling the right room
- to the right guest
- at the right time
- and at the right price
- on the right platform
Resultantly, the process is key for all departments in a hotel business; from accountants to managers and the marketing team, since they all have an integral part to play in the system. When a hotel is able to implement a successful strategy, they will find that they are able to:
- understand and predict a guest’s demands
- win against competition
- apply room rates with confidence
- and generally expand their business.
Some hotel revenue management tips from 1834 Hotels
As complicated as it may seem, hotel revenue management is central and absolutely vital to the success of your hotel. Whether you already have a strategy in place, you’re seeking some extra help, or you’re looking for some advice regarding where to start, 1834 Hotels can give you a hand. With the right strategy and enough consistency, there is nothing stopping your hotel from achieving seamless revenue management.
The following information in this short and simple article, will help you to not only refresh your knowledge of hotel revenue management, but it will provide you with some tips and tricks to improve your strategy.
Learn about your market
Hotel revenue management strategy starts with taking time to understand and analyse your market. Learning about who your guests are, when they visit, why they visit and what they do is all useful information. It’s also key to understand seasonality and the different factors that impact your occupancy. Having this kind of data available allows for you to predict changes as well as be aware of certain needs, wants and expectations of guests. This feeds into not only marketing strategy, but also the financial side of things.
Yet understanding your market is not only about understanding your guests. Taking time to learn about the competition around you is also vital to a successful revenue management strategy. A good understanding of your competition can feed into your decision making when it comes to advertising, marketing, pricing and discounts. Avoid learning only about the obvious competition in your surroundings and branch out further for a more thorough grasp of your market.
Consider the different ‘types’ of customers you receive
A big part of hotel revenue management success comes from truly understanding the ‘types’ of guests booking rooms at your hotel. Identifying certain demographics and travel behaviours of guests and their habits results in vital information for your business. Perhaps you’re a hotel in a busy town, with proximity to a famous zoo and beautiful beaches. During the week you may find that your clientele are business people, whilst the weekend brings families seeking active getaways. Grasping this kind of information allows for confident pricing decisions, with pricing optimised for certain ‘types’ of guests. If excellent pricing results in minimal price changes, this can also result in customer trust, loyalty and repeat visits.
Work closely with those in other roles
One of the most important things to consider when it comes to hotel revenue management is collaboration and communication. Bringing the whole hotel team together to work on hotel revenue management is key, since it’s a hotel-wide task. Sales and marketing staff should absolutely be working together to promote your hotel and achieve great sales numbers. Meanwhile, management should have great oversight of accounting teams and the wealth of information they offer. Bringing your hotel team together to work on a common revenue management strategy, and encouraging a collaborative and communicative work environment is absolutely priceless in a business as vulnerable to exterior conditions as a hotel.
Start forecasting and keeping track of trends
Using your data to predict future fluctuations and patterns is another important aspect of successful hotel revenue management. Understanding general patterns of demand and revenue allows your hotel to make necessary adjustments. Ensure that you record and maintain data regarding occupancy, room rates and revenue. If you’ve recorded a peak in occupancy during the month of March at your Adelaide hotel for the past six years, it’s likely you will experience the same phenomena again. Other factors you might also want to record might include event dates, wider industry trends and the success of competitors.
Implement SEO in marketing strategy
Whilst you might feel SEO is somewhat out of place in an article about hotel revenue management, you’d be misinformed to ignore it in a world where search engines rule. Search engines offer hotels an excellent opportunity to attract organic traffic and future clientele. By implementing some basic SEO strategy into your hotel revenue management plan, you could see occupancy rates increase. For example, rather than only appearing in search engines when someone searches for your hotel name, you could try to start ranking in Google for certain nearby events, certain activities or attractions, or even when someone searches for hotels in your region more broadly.
One way to immediately increase your website’s SEO is to ensure that it is optimised for mobile phone use. Increasing numbers of people today are using their phones to book hotel rooms. If your website is user-unfriendly, potential guests can be deterred. To learn a little more about the importance of SEO, click here to watch a short video.
Rethink your pricing strategy
Your hotel pricing strategy should be fitted to suit your hotel. There is no simple or correct way to price your hotel rooms, but deciding on a strategy is important. Consider what you have to offer, what your competition is doing and who you are trying to attract to your venue. Whilst there are a number of ways to price your rooms, you might like to consider the following as food for thought. Increasing the price of your rooms to promote your hotel as having a high quality, whilst adding in a number of extras and freebies and therefore proving additional value is great way to attract guests. Alternatively, in low season, decreasing room prices to increase occupancy is also common and can attract low-paying guests which is ultimately much better than having an empty room. Finally, keeping an eye on your competition and pricing accordingly is always recommended, whatever your strategy. Understanding what your rivals are doing puts your business in direct competition with other hotels.
Encourage direct bookings
Finally, whilst there are a number of ways for guests to book rooms online today, as a hotel you should always encourage they book directly with you. Direct bookings result in no commission for third parties. By no means should you forget other distribution channels, however make sure you put extra effort into your own channel. Perhaps offer freebies or exclusive offers and incentives for those looking to book a room. You might like to set up a loyalty program, or otherwise simply offer a free drink for those booking on your site. It is the small, personalised things that attract guests to stay with you and support your business.
Revenue management is crucial to your hotel business. 1834 Hotels can extract maximum profitably out of your hotel, partnering with Key Revenue Management software providers. We provide management support to your hotel and Manager, offering the tools, data and systems to effectively revenue manage your hotel with educated decisions. For more information, please click here.