For hotel owners looking to grow their business, a robust revenue management strategy is of the utmost importance, helping to optimize business results. However, under the broader revenue management umbrella, many smaller strategies can help to facilitate growth. In this article, you find nine revenue management strategies that those in the hotel industry can employ to achieve this ultimate objective.
What is Revenue Management?
Revenue management is a popular concept within the hotel industry, and is used to optimize a hotel or resort’s financial results by maximizing revenue. The accepted definition is: selling the right hotel room, to the right customer, at the right time, for the right price, via the right channel, with the best cost efficiency.
Typically, it requires businesses to effectively use performance data and analytics to predict demand, establish a dynamic pricing model, and maximize the revenue the company brings in.
Although revenue management applies to other industries, it has significance in the hospitality industry because hotels deal with a perishable inventory, fixed costs, and varied levels of demand. Revenue management is important because it takes the guesswork out of key pricing decisions. You can read more extended information about revenue management in the article “What is revenue management?”.
9 Revenue Management Strategies
Below is a list of nine revenue management strategies you can use to grow your hotel business.
1. Understand Your Market
To implement a successful revenue management strategy, you must clearly understand your market, where demand comes from, and the local factors that might affect seasonal demand. You must also know your audience’s needs, wants, and expectations.
Moreover, you need to understand the competition that exists within the market and make strategic decisions regarding price, discounts, and advertising with this competition in mind. Remember, this competition may not always be obvious, and may not always be in the same location as your hotel.
2. Segmentation and Price Optimization
Selling the right room to the right person at the right price requires you to segment your customer base appropriately. To do this, you need to identify different ‘types’ of the customer and then look at these different segments and evaluate when they book hotel rooms or hotel facilities, how they book them, and other habits.
When this is carried out, it allows you to optimize prices for those different segments. One of the key advantages of this is that once prices are optimized for a particular segment, price changes can be minimized. This, in turn, can help generate customer loyalty from those who appreciate your price consistency.
3. Work Closely With Other Departments
Next, it is important to achieve close collaboration between the different hotel departments, such as sales and marketing, to ensure that your revenue management strategies and their departmental strategies are in alignment with one another, and so that you can address challenges collectively.
Identify key departmental decision-makers and bring them on board. Work with them to adjust your revenue management strategies, rather than imposing your will, which might be met with resistance. Close collaboration will also help ensure you always present consistent messages to customers and clients.
4. Forecasting Strategies
One of the most important aspects of revenue management is forecasting, which allows you to anticipate future demand and revenue, enabling necessary adjustments to be made. Within the hospitality industry, high-quality forecasting relies on accurate records, including occupancy, room rates, and revenue.
Most forecasting strategies rely heavily on using historical data to spot trends. For example, if you notice an upturn in business in the past three Julys, assuming the same may occur next time is sensible. However, forecasting also requires an awareness of current bookings, competitors’ performance, local events, and wider industry trends.
5. Embrace Search Engine Optimisation
Search engines offer one of the single biggest opportunities for those operating in the hotel industry to attract customers, which makes search engine optimization an important part of a robust revenue management strategy. Through SEO, hotel owners can improve the visibility of their website on search engine results pages.
Consequently, you can improve the chances of attracting business from customers who are not specifically searching for your hotel, but who are searching for a hotel in your location. To achieve this, it is best to operate a solid content marketing strategy, and ensure your website’s design is optimized for SEO purposes.
6. Choose the Right Pricing Strategy
There are many different pricing strategies, and no one strategy will guarantee success. Instead, those in the hospitality sector need to consider the best strategy for their particular hotel, based on what they have to offer, who they are trying to attract, and what strategy their competitors are employing.
A competitive pricing strategy, where prices are set based on other hotels’ prices, puts your business in direct competition and is good when your hotel has more to offer than your rivals do. Yet, a discount strategy might be best in slow seasons because a low-paying customer is better than an empty room. Another option is the value-added approach, where rates are higher, but additional value is provided through extras and freebies.
7. Incentives For Direct Bookings
While it is certainly important to cater to all distribution channels and meet customers where they are rather than where you want them to be, maximizing the number of direct bookings made is also sensible.
The primary reason is that direct bookings do not require the commission to be paid to third parties, which means they are ideal for maximizing revenue. One option is to offer exclusive incentives, such as loyalty points or freebies, for customers who book directly through your website.
8. Focus on Mobile Optimisation
For those in the hotel industry, mobile has become one of the single most important revenue streams. As a result, any hotel or resort operating without prioritizing mobile optimization is already operating at a distinct disadvantage compared to its competitors.
Make sure your website is optimized for mobile viewing, meaning it loads quickly, the pages display properly on mobile devices, and all buttons are fully functional. In addition, you need to ensure your booking process is also optimized so that customers can book rooms from their mobile devices without needing to switch to a desktop.
9. Work With a Freelance Revenue Manager
Finally, in many cases, it can be beneficial to enlist the help of a freelance revenue manager, who can bring knowledge, expertise, and experience to your organization. Freelancers are used to coming into hotels and getting to work quickly, and can work as and when needed.
Appointing a full-time revenue manager internally means employing them full-time, but a freelancer will only need to be paid for their work, meaning less of their time will be wasted. Moreover, because of their established expertise, you can save money on costs associated with training them.
What is Total Revenue Management?
Within hotels, revenue management is typically seen as selling the right hotel rooms to the right customers at the right price and channel to optimize financial results. Total revenue management expands on this, with the same principles being applied across all revenue sources, including food, drinks, and leisure.
Take a look at the “Total Revenue Management: How Hotels Can Maximise Their Revenue” article to learn more about what total revenue management is, what it looks like, how it can be beneficial, and when it should be used. You can also find some valuable tips that can assist you with implementing this approach in your hotel.
The concept of selling the right hotel room, to the right customer, at the right moment, for the right price, via the right channel is important for maximizing revenue and facilitating growth. By following the nine revenue management strategies above, owners in the hospitality industry can improve their chances of achieving this.
Article by Revfine.com